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.

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

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

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

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

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

☒ 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” 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$” are to the Brazilian real, the official currency of Brazil. All references to “U.S. dollars,” “dollars” or “U.S.$” 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 from reais 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, ~~2020,~~2021, which was R$~~5.1967~~5.5805 to U.S.$1.00, or on the indicated dates (subject, on any applicable date, to rounding adjustments). We make no representation that the real 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 in reais, our functional currency and the presentation currency for our consolidated financial statements.

This annual report contains our consolidated financial statements ~~as of December 31, 2020, 2019 and 2018, and~~ for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018.~~2019. Such consolidated financial statements have been prepared in accordance with ~~International Financial Reporting Standards, or “IFRS”,~~IFRS, as issued by the ~~International Accounting Standards Board, or “IASB”~~IASB and interpretations issued by the IFRS Interpretation ~~Committee, or “IFRIC”.~~Committee. Our consolidated financial statements ~~as of and~~ for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019 have been audited by PricewaterhouseCoopers Auditores Independentes 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, 2021, 2020 ~~2019~~ and ~~2018,~~2019, included herein, contains information relating to certain differences between IFRS and Brazilian GAAP.

As required by the Brazilian Central Bank and Brazilian law, we must prepare consolidated financial statements in accordance with IFRS. However, we also continue to prepare statutory financial statements in accordance with ~~accounting practices and standards~~the Brazilian GAAP, as established by: (i) ~~Law No. 6,404 of December 15, 1976, as amended by Law 11,638 (“~~Brazilian Corporate ~~Law”);~~Law; (ii) the National Monetary Council ((CMN - Conselho Monetário ~~Nacional),~~ Nacional~~or “CMN”~~); (iii) the Brazilian Central Bank including the regulatory reports set forth in the Standard Chart of Accounts for Brazilian Financial Institutions (Plano Contábil das Instituições do Sistema Financeiro Nacional), (iv) the Brazilian Securities and Exchange Commission ((CVM - Comissão de Valores Mobiliá~~rios), or~~ rios~~“CVM”~~), to the extent that such practices do not conflict with the rules of the Brazilian Central 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; (vi) the National Council of Private Insurance (Conselho Nacional de Seguros Privados); and (vii) the Superintendence of Private Insurance ((SUSEP -Superintendência de Seguros Privados~~“SUSEP”~~), which is ~~the insurance commissioner,~~ responsible for the supervision and control of the insurance, open private pension funds and capitalization markets in Brazil. ~~We refer to such Brazilian accounting practices as “Brazilian GAAP.”~~ See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Auditing 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 on the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.

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 of Financial and 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 (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 (Federação Brasileira de Bancos), or “FEBRABAN”; the National Federation of Private Retirement and 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:

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

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

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

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

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

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

“Brazilian 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 ~~Contents~~each month and annually) for the given year.

~~FORWARD-LOOKING STATEMENTS~~“CMN” means the National Monetary Council (Conselho Monetário Nacional).

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

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

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

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

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

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

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

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

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

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

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

“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.

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

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

“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,” 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.

The following tables set forth the selected financial information of Santander Brasil ~~as of and~~ for the years ended December 31, 2021, 2020 ~~2019, 2018, 2017~~ and ~~2016~~2019 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 “Item 5. Operating and Financial Review and ~~Prospects”,~~Prospects,” as well as our audited consolidated financial statements and the related notes thereto included within this annual report.

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

* 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, 2021, for reais into U.S. dollars of R$5.5805 to U.S.$1.00.

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

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

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

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

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

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

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

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

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

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

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

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—~~4A.~~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 financial assets and liabilities (net) plus exchange differences (net) line item which is offset by excluding a portion in the ~~Income~~income tax line item. Accordingly, while we believe that the non-GAAP financial measures presented are useful to investors and support their analysis, the non-GAAP financial measures have important limitations as analytical tools, and investors should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP measures including under IFRS.

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

Since 1999, the Brazilian Central Bank has allowed the real/U.S. dollar exchange rate to float freely, which resulted in exchange rate volatility. However, the Brazilian Central Bank has intervened occasionally to moderate exchange rate volatility. We cannot predict whether the Brazilian Central Bank or the Brazilian government will continue to permit the real to float freely or will intervene in the exchange rate market through the return of a currency band system or otherwise. In the future, the real 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 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 in reais 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 in reais. 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 in reais 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, ~~2020,~~2021, the exchange rate for euro to real was R$ ~~6.3779~~6.3210 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~~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

Summary of Risks Relating to the Brazilian Financial Services Industry and Our Business

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

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

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

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

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

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

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

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

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

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, there exists substantial uncertainty regarding future economic policies and we cannot predict what policies will be adopted by the Brazilian government and whether these policies will negatively affect the economy or our business or financial performance. Any changes in regulatory capital requirements for lending, reserve requirements, or product and service regulations, among others, or continued political uncertainty may materially adversely affect our business.

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

Brazil’s political environment has historically influenced, and continues to influence, the performance of ~~Brazil’s~~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.

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

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

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

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

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

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

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~~term. According to data from the IBGE, the Brazilian economy’s gross domestic product, or “GDP,” contracted by 3.3% in 2016, then increased by 1.3% in 2017, 1.8% in 2018 and ~~2018, 1.1%~~1.2% in ~~2019 and it~~2019. In 2020, Brazilian GDP contracted by 3.9% as a result of the adverse macroeconomic effects of COVID-19 pandemic. In 2021, Brazilian GDP is estimated to have ~~contracted~~increased by ~~4.1% in 2020)~~4.6%. 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 SStandard & Poor's, or “S&P,” in September 2015, by Fitch Ratings, or “Fitch,” in December 2015, by Moody’s Investor Service, or “Moody’s,” in February 2016, and downgraded again by Fitch in May 2016. In addition, Brazil was further downgraded by S&P to BB- with a stable outlook in January 2018 as a result of the failure of the prior Brazilian government to approve certain ~~reforms.~~reforms, Brazil’s sovereign rating is currently rated by the three major risk- rating agencies as follows: BB- by S&P (stable outlook) and Fitch (negative outlook) and Ba2 by ~~Moody’s.~~Moody’s (stable outlook). Further downgrading of Brazil’s credit rating could reduce the trading price of units and ADRs. Various major Brazilian companies were also downgraded. Such downgrades have further worsened the conditions of the Brazilian economy and the condition of Brazilian companies, especially those relying on foreign investments. In addition, 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, 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.

~~Since mid-2016, the Brazilian base interest~~The SELIC rate ~~or SELIC, has~~had been on a downward ~~trend.~~trend since mid-2016. The SELIC rate reached a high as 14.25% as of October, 2016, before decreasing to 13.75% p.a. by the end of 2016. The SELIC rate fell further to 7.00% p.a. by the end of 2017, and to 6.50% p.a. in March 2018. The SELIC rate remained at this level until June 2019, when it resumed its downward trend, ending 2019 at 4.50% p.a. As a result of the negative economic impact of the COVID-19 pandemic, the SELIC rate continued to fall during 2020, and reached a historical low atof 2.00% p.a. by the end of the year and remained at that level until mid-March 2021, when it reached 2.75%. As a result of inflationary pressures that have arisen in ~~August 2020, which is~~Brazil and globally in late 2021 and early 2022, the ~~current level as~~Brazilian Central Bank started tightening monetary policy: the SELIC rate then reached 6.25% p.a. in late September 2021, 7.75% p.a. in late October 2021, 9.25% p.a. in December 2021, and reached 10.75% p.a. in February 2022. As of the date of this ~~report.~~

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 ~~2020,~~2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$~~432~~553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.

Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the ~~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 ~~2020,~~2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$9490 million and R$7783 million, respectively.

Inflation, ~~has increased slightly during~~as measured by the IPCA, reached 4.52% in 2020, ~~reaching 4.52% for the 12-month period ended December 31, 2020 (compared~~compared to 4.31% in ~~2019),~~2019, mainly as a result of temporary supply shocks affecting the prices of ~~foodstuffs.~~

foodstuff items. These inflationary pressures have persisted in 2021 and have also been compounded by additional ones, including climate events that hit electricity generation and led to an increase in energy prices, disruption in supply chains and the depreciation of the real, among others. As a result, inflation as measured by the IPCA reached 10.06% in 2021, significantly above the target of 3.75% set for the period.

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

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

We invest in Brazilian federal government bonds. As of December 31, ~~2020,~~2021, approximately ~~20.5%~~18.4% of our total assets, and ~~83.4%~~76.1% of our securities portfolio, consisted of debt securities issued by the Brazilian federal government. Any failure by the Brazilian Government to make timely payments under the terms of these securities, or a significant decrease in their market value, will have a material adverse effect on us.

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

We sponsor defined benefit pension plans and a healthcare plan 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 21 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 lifetime medical assistance plan. ~~However,~~Therefore, in ~~2020,~~2021, there were two factors that contributed to the reduction of our provisions when compared to ~~2019:~~2020: first, increases in interest rates, and secondly, the greater-than-average profitability of investments indexed to the ~~IGPM, and secondly, a reduction of medical expenses.~~IGP-M.

As of December 31, ~~2020,~~2021, our provisions for pensions and ~~other~~similar obligations totaled R$~~14 million.~~2.7 billion (out of total provisions for legal and administrative proceedings, commitments, pensions and other matters of R$11.6 billion). For additional information, see note 21 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 the realis generally linked to the rate of inflation in Brazil, depreciation of the realoccurring over shorter periods of time has resulted in significant variations in the exchange rate among the real,, the U.S. dollar and other currencies. 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 realhas weakened over the last few years. After having ended 2013 with an exchange rate of R$2.34 per U.S.$1.00, the ~~real~~/real/U.S. dollar exchange rate was R$2.65 per U.S.$1.00 on December 31, 2014, depreciating further to R$3.91 per U.S.$1.00 on December 31, 2015. Despite the instability caused by a change in ~~Brazil’s~~the country’s presidency, the realappreciated 17.0% ~~year-on-year~~year-over-year against the U.S. dollar as of December 31, 2016 to R$3.26 per U.S.$1.00. In 2017, the realremained relatively stable against the U.S. dollar, with an exchange rate of R$3.31 per U.S.$1.00 as of December 31, 2017, but continued to depreciate in the following years, reaching R$~~3.88~~3.87 per U.S.$1.00 as of December 31, 2018, and R$4.03 per U.S.$1.00 as of December 31, 2019. In ~~May~~ 2020, in response to the turbulence and uncertainty caused by the COVID-19 pandemic, the ~~exchange rate almost surpassed~~real depreciated significantly against the ~~level of R$6.00 per~~ U.S.$~~1.00,~~ 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$5.58 per U.S.$1.00. There can be no assurance that the real will not substantially depreciate or appreciate further against the U.S. dollar.

In the year ended December 31, ~~2020,~~2021, a variation of 1.0% in the exchange rate of reais 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$~~2.55~~1.17 million.

Past episodes of depreciation of the real relative to the U.S. dollar created additional inflationary pressures in Brazil, which led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets and prompted the adoption of recessionary policies by the Brazilian government. Depreciation of the realmay 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 realcould 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 realrelative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian balance of payments, as well as hinder export-driven growth. Depending on the circumstances, either a depreciation or appreciation of the realcould materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.

Infrastructure, ~~labor force~~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 ~~being~~ followed by a three-year streak of growth in 2017 ~~(1.0%~~(1.3%), 2018 ~~(1.1%~~(1.8%) and 2019 ~~(1.0%~~(1.2%). ~~For~~In 2020, ~~based on our internal estimates, we expect that~~the Brazilian GDP ~~declined~~contracted by ~~4.1%~~3.9% as a result of the ~~impacts~~effects of the COVID-19 ~~pandemic.~~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).We estimate that Brazilian GDP increased by 4.6% in 2021 due to the extension of income supports programs and the relaxation of certain mobility restrictions that allowed some businesses to resume their activities (e.g., after having contracted by 3.9% in 2020, we estimate that the services sector increased by 4.8% in 2021). Growth has been limited by the lack of private and public investments, resulting in potential energy shortages and deficient transportation, declining logistics and telecommunication sectors, and a lack of a qualified labor force. In addition, the growth and performance of the Brazilian economy may be impacted by other factors such as nationwide strikes, natural disasters or other disruptive events. Additionally, travel restrictions or potential impacts on personnel due to the COVID-19 pandemic may disrupt our business and adversely affect the financial condition of our customers. Any of these factors could lead to labor market volatility and generally impact income, purchasing power and consumption levels, which could limit growth, increase delinquency rates and ultimately have a material adverse effect on us.

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

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

In 2021, 2020 ~~2019~~ and ~~2018,~~2019, there was an increase in volatility in all Brazilian markets due to, among other factors, uncertainties about how monetary policy adjustments in the United States would affect the international financial markets and the increasing risk aversion to emerging market countries. In 2021 and 2020, the fallout of the COVID-19 pandemic has also affected the performance of Brazilian markets. These uncertainties adversely affected us and the market value of our securities.

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

The global macroeconomic environment is facing challenges, including ~~the economic slowdown in China and the Eurozone, the end of funding by the U.S. Federal Reserve, the uncertain impact of the UK’s withdrawal from the European Union and, more recently,~~ the economic setbacks derived from the COVID-19 pandemic. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States.

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

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

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

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

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

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

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

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

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

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

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

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

On January 31, 2020 the UK ceased to be a member of the EU, on withdrawal terms which established a transition period until December 31, 2020, during which 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. The trade deal, however, did not include agreements on certain areas, such as financial services and data adequacy. Hence, some uncertainty remains around the terms of the UK's relationship with the EU and the lack of a fully comprehensive trade agreement may negatively impact the economic growth of both regions. By the same token, an adverse effect on the UK and the EU may hit 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.

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

The ~~current~~ 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.

~~Since December 2019, a disease caused by a new strain of coronavirus, or COVID-19, spread~~Health and safety restrictions adopted in ~~the People’s Republic of China~~2020 and progressively to the rest of the world, mainly to Europe, Latin America (including Brazil) and the United States, among others. The outbreak was declared a public health emergency of international concern and a global pandemic by the World Health Organization.

~~Countries around the world have responded to the COVID-19 pandemic by adopting a variety of measures in an attempt~~2021 to contain the ~~spread and~~ impact of the COVID-19 pandemic, including imposing mass quarantines, ~~or other containment measures,~~ shelter-in-place orders, ~~and~~ medical screenings, ~~restricting~~ travel restrictions and limiting public gatherings, resulted and ~~suspending most economic activities. These measures have resulted~~many continue to result in a severe decrease of global economic activity and ~~falls~~decreases in production and demand, which ~~has~~ led to sharp declines in the GDP of those countries that ~~are~~were most affected by the pandemic, ~~and is expected to continue to have an overall negative impact on global GDP~~including Brazil. Some of these measures remained in ~~2020 and 2021.~~force as of the date of this annual report. Other consequences ~~include~~included increased unemployment levels, sharp decreases and high volatility in the stock markets, disruption of global supply chains, exchange rate volatility, steady customer draws on lines of credit, decline in real estate prices, and uncertainty in relation to the future impact in regional and global economies in the medium and long term. These measures have also negatively impacted, and could continue to negatively impact, businesses, market participants, our counterparties and customers, and the global economy for a prolonged period of time. Furthermore, it is unclear how the macroeconomic business environment or societal norms may be impacted after the pandemic. The post-COVID-19 environment may undergo unexpected developments or changes in the financial markets, fiscal, tax and regulatory environments as well as customer and corporate client behavior which could have an adverse impact on our business.

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

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

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

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

Additionally, unprecedented movement in economic and market drivers related to the COVID-19 pandemic 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 the COVID-19 pandemic. 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. The effectiveness of our models will depend in large part on the depth and length of the economic downturn.

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

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

We may also be adversely affected by measures taken by the Brazilian and other governments to mitigate the effects of the COVID-19 pandemic. For example, in 2020, a temporary suspension on dividends and other distributions was enacted in Brazil through Resolution No. 4,820, limiting the distributions to shareholders 30% of adjusted net profit (following amendments enacted on December 23, 2020). As a result, we only distributed R$3,837 million ~~as dividends and interest on equity~~ in 2020 compared to R$10,800 million in 2019.

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

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

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.

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

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

Volatile conditions in ~~the global~~ 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 the economic downturn and volatile conditions:

Any of the developments mentioned above 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, reduction in purchasing power and operating margins. The process we use to estimate losses inherent in our credit exposure requires complex ~~judgements,~~judgments, including forecasts of economic conditions and how these economic conditions might impair the ability of our borrowers to repay their loans. The degree of uncertainty concerning economic conditions may adversely affect the accuracy of our estimates, which may, in turn, impact the reliability of the process and the sufficiency of our loan loss allowances.

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

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

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

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

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

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

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

Non-traditional providers of banking services, such as internet-based e-commerce providers, mobile telephone companies and internet search engines, as well as payment services for block-chain technologies, may offer and/or increase their offerings of financial products and services directly to customers. These non-traditional providers of banking services currently have an advantage over traditional providers because they are not subject to banking regulation. Several of these competitors may have long operating histories, large customer bases, strong brand recognition and significant financial, marketing and other resources. They may adopt more aggressive 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 and ~~Supervision—Other Applicable Laws and Regulations—Regulation of New Financial Institutions That Operate in Online Lending.”~~Supervision”

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

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

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

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

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

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

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

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

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 regulations governing Brazilian financial institutions are 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. Regulations may be imposed on an ad hoc basis by governments and regulators in response to a crisis, and these may especially affect financial institutions such as those ~~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 applied to them, is likely to continue. Changes to current legislation and their implementation through regulation (including additional capital, leverage, funding, liquidity and tax requirements), policies (including fiscal and monetary policies established by central banks and financial regulators, and changes to global trade policies), and other legal and regulatory actions may impose additional 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, which are required to conduct banking and financial services business. These apply to business operations, affect financial returns, and include reserve and reporting requirements and conduct-of-business regulations.

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

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

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

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

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

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

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.

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—Basel III” and “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding—Capital Management.”

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

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

Financial crime ~~has become~~continues to be the subject of enhanced regulatory scrutiny and supervision by regulators globally. AML, anti-bribery, anti-corruption and sanctions laws and regulations are increasingly complex and detailed. ~~The Basel Committee is now introducing~~Key standard-setting and regulatory bodies continue to provide guidelines to strengthen the interaction and cooperation between prudential and Anti-Money Laundering/Combating the Financing of Terrorism (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 activities. However, emerging technologies, such as cryptocurrencies and ~~blockchain,~~innovative payment methods, could limit our ability to track the movement of funds and therefore, present a risk to our Company. Our ability to comply with the legal requirements depends on our ability to improve detection and reporting capabilities and reduce variation in control processes and oversight accountability. These require implementation and embedding within our business effective controls and monitoring, which in turn requires ongoing changes to systems and operational activities. Financial crime is continually evolving and, as noted, is subject to increasingly stringent regulatory oversight and focus. This requires proactive and adaptable responses from us so that we are able to deter threats and criminality effectively. Even known threats can never be fully eliminated, and there will be instances where we may be used by other parties to engage in money laundering and other illegal or improper activities. In addition, we rely heavily on our employees to assist us by spotting such activities and reporting them, and our employees have varying degrees of experience in recognizing criminal tactics and understanding the level of sophistication of criminal organizations. Where we outsource any of our customer due diligence, customer screening or anti-financial crime operations, we remain responsible and accountable for full compliance and any breaches. If we are unable to apply the necessary scrutiny and oversight of third parties to whom we outsource certain tasks and processes, there remains a risk of regulatory breach.

Additionally, in 2015 and early 2016, pursuant to a new resolution issued by the United Nations Security Council, as well as recently enacted laws and regulations issued by the Brazilian Central Bank requiring the implementation of the aforementioned resolution in Brazil, additional compliance requirements were imposed on us and on other financial institutions operating in Brazil, which relate to the local enforcement of sanctions imposed by the United Nations Security Council resulting from certain resolutions. We believe we already have the control and compliance procedures in place to satisfy such additional compliance requirements. However, we continue to evaluate their impact on our control and compliance procedures and whether adjustments will need to be made to our control and compliance procedures as a result.

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

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

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) 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 are currently ~~in course.~~ongoing. We are not a party to these proceedings. We have voluntarily provided information to the Brazilian authorities and have relinquished the benefit of certain tax credits to which the allegations relate in order to show good faith.

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

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

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

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

In addition to the GDPR, we ~~will soon~~ face new regulations from Brazilian authorities. The ~~Brazilian General Data Protection Act (Law No. 13,709/2018), or “GDPA,” (~~~~Lei Geral de Proteção de Dados~~)LGPD was approved in the Federal Official Gazette on August 14, 2018 and, as amended by the Law No. 13,853/2019, took effect in September ~~2020.~~2020, with the exception of its Articles 52, 53 and 54, which address administrative penalties, which entered into force on August 1, 2021. Law No. 13,853/2019 also set up the National Data Protection Authority for purposes of monitoring, implementing and supervising compliance with the ~~GDPA~~LGPD in Brazil. The ~~GDPA~~LGPD also brings about deep changes in the conditions for personal data processing, with a set of rules to be observed in activities such as collection, processing, storage, use, transfer, sharing and erasure of information concerning identified or identifiable natural ~~persons in Brazil.~~persons.

Although a number of basic existing principles have remained the same, the ~~GDPR~~LGPD has introduced extensive new obligations on data controllers and rights for data subjects. The ~~GDPA~~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 ~~GDPA~~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 2% of annual worldwide turnover or €10 million (whichever is highest) for other specific infringements. The ~~GDPA~~LGPD similarly 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.

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

For more information on the rules implementing ~~GDPA,~~LGPD, 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, we cannot state 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, ~~2020,~~2021, we had provisions for taxes, other legal contingencies and other provisions of R$~~9,887~~8,876 million.

See more information in note 22 to our audited consolidated financial statements included in this annual ~~report.~~

report and in “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”

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

On November 16, 2020, the Brazilian Central Bank instituted its instant payment scheme ~~(“PIX”)~~, or “PIX,” as well as the Instant Payment System ~~(“SPI”~~(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.

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

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

For more information related to the PIX and the SPI, see “Item 4. Information on the Company—B.—Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Brazilian Payment and Settlement ~~System.~~System.” ~~For more information related to Santander SX, see “Item 4. Information on the Company—B. Business Overview—Our Portfolio of Products and Services—Customer Solutions—Santander SX.”~~

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

Disclosure controls and procedures, including internal controls over financial reporting, are designed to provide reasonable assurance that information required to be disclosed by 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 forms.

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

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

The preparation of our tax returns requires the use of estimates and interpretations of complex tax laws and regulations and is subject to review by 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 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 tax authorities are unpredictable and frequently involve litigation, which introduces further uncertainty and risk as to tax expense.

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

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”), which used to be charged at 1.0% per day over the notional value of increased foreign exchange exposure, but has currently been reduced to zero with respect to foreign exchange. The IOF Tax rates applicable to local loans of individuals and legal entities have been frequently adjusted (both increases and decreases) in recent years. ~~The currently applicable IOF Tax rates applicable to local loans are approximately 1.5% for legal entities and 3.0% for individuals but could change in the future.~~ We cannot estimate the impact that a change in tax laws or tax policy could have on our operations. For example, the IOF Tax is a tool used by the Brazilian government to regulate economic activity, which does not directly impact our results of operations, though changes in the IOF Tax can impact our business volumes generally.

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

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

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

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

Risks arising from changes in credit quality and the recoverability of loans and amounts due from counterparties are inherent to a wide range of our businesses. Non-performing or low credit quality loans can negatively impact our results of operations as the amount of our reported non-performing loans may increase in the future as a result of growth in our total loan portfolio, including as a result of loan portfolios that we may acquire in the future (the credit quality of which may turn out to be worse than we had anticipated), or other factors, including factors beyond our control, such as adverse changes in the credit quality of our borrowers and counterparties or a general deterioration in economic conditions in Brazil and globally, including as a result of the COVID-19 pandemic. In 2021, as a response to the macroeconomic shock of the COVID-19 ~~with the purpose~~pandemic, we used a part of helping our customers from the credit perspective and foster their economic resilience, we have implemented several actions, including (i) providing liquidity and credit facilities to customers facing hardship; (ii) granting payment deferrals in outstanding loans; (iii) focus credit risk management on those economic sectors more affected by the pandemic; (iv) focus on collections and recoveries readiness; and (v) quantifying the provision overlay on ~~the~~ expected credit losses ~~as a result of the macroeconomic shock.~~created in 2020. If we ~~were~~are unable to control the level of our non-performing or poor credit quality loans, this could have a material adverse effect on us.

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

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

On December 31, ~~2020,~~2021, our credit risk (which includes gross loans and advances to customers, guarantees and documentary credits) amounted to R$~~466,104~~540,873 million (compared to R$~~391,569~~466,104 million as of December 31, ~~2019)~~2020).

The ~~recent~~ slow growth rate of the Brazilian economy in 2021, 2020, 2019 and 2018, 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 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 overreliance on a particular source of funding, changes in credit ratings or market-wide phenomena such as market dislocation, including as a result of the COVID-19 ~~pandemic.~~pandemic, Constraints in the supply of liquidity, including in interbank lending, can materially and adversely affect the cost of funding of our business, and extreme liquidity constraints may affect our current operations, our growth potential and our ability to fulfill regulatory liquidity requirements.

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

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

We rely primarily on retail deposits as our main source of funding. As of December 31, ~~2020, 82.0%~~2021, 87% of our customer deposits had remaining maturities of one year or less, or were payable on demand, while ~~48.9%~~55% of our assets had maturities of one year or more, resulting in a mismatch between the maturities of liabilities and the maturities of ~~assets.~~assets, The ongoing availability of this type of funding is sensitive to a variety of factors beyond our control, including: general economic conditions, the confidence of retail depositors in the economy and in the financial services industry, the availability and extent of deposit guarantees, as well as competition for deposits between banks or with other products. Any of these factors could significantly increase the amount of retail deposit withdrawals in a short period of time, thereby reducing our ability to access retail deposit funding on economically appropriate and reasonable terms, or at all, in the future. If these circumstances arise, this could have a material adverse effect on our operating results, financial condition and prospects.

Central banks around the world have taken extraordinary measures to increase liquidity in the financial markets as a response to the financial crisis and the COVID-19 crisis. As a result of inflationary pressures in late 2021 and early 2022 central banks have begun to reduce or discontinue these measures. If current credit facilities are 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. For the observations in this disclosure (exercised with daily balances for October, November and December ~~2020)~~2021), ~~the institution~~Santander Brasil had an LCR of ~~170.7%~~148.5%, above the 100% minimum requirement. The Net Stable Funding Ratio, or “NSFR,” provides a sustainable maturity structure of assets and liabilities so that banks maintain a stable funding profile in relation to their activities. The NSFR, which must remain at a minimum of 100% beginning from October 1, 2018 according to CMN rules, stands at over ~~118.6%~~111.7% for us as of December 31, ~~2020.~~

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

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

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

Santander Spain’s long-term debt is currently rated investment grade by the major rating agencies: A2 stable outlook by Moody’s, A with a negative outlook by Standard & Poor’s Ratings Services, or “S&P,” and A- with a negative outlook by Fitch Ratings Ltd., or ~~“Fitch”.~~“Fitch.” In April 2018, following the upgrade of the Spanish sovereign debt rating, S&P and Moody’s upgraded their ratings of Santander Spain from A- to A and from A3 to A2, respectively, and in July 2018, Fitch confirmed its rating and outlook. In 2019, the agencies maintained their 2018 analysis, considering, in some cases, a positive rating depending Santander Spain’s performance in 2019. However, due to the crisis caused by the COVID-19 pandemic and the macroeconomic deterioration in 2020, S&P and Fitch revised the outlook to negative, while Moody’s maintained its rating and outlook.

Our long-term debt in foreign currency is currently rated BB- with a stable outlook by S&P and 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), 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 as to whether the Brazilian government will enact reforms in the 2016 federal budget to improve Brazil’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 Brazil. In February 2018, Fitch further downgraded Brazil to BB-. Moody’s lowered Brazil’s credit rating from Baa2 to Baa3 (the lowest investment grade rating) in August 2015, and then to Ba2 (a non-investment-grade rating). Brazil’s sovereign rating is currently rated by the three major risk rating agencies as follows: BB- (stable) by S&P and Fitch, and Ba2 (stable) by Moody’s. Any further downgrade in Brazil’s sovereign rating would likely increase our funding costs and adversely affect us, including our asset quality.

As a result of the lowering of Brazil’s sovereign credit rating, our long-term foreign currency credit rating was lowered during the course of 2015 and in early 2016. On August 12, 2015, Moody’s lowered our credit rating from Baa2 to Baa3, lowering it again on February 25, 2016 to Ba3, and in March and May 2017, it affirmed the rating of Ba1. On September 10, 2015, S&P lowered our credit rating from BBB- to BB+ (a non-investment-grade rating), lowering it again on February 17, 2016 to BB and maintaining the rating at BB in August 2017 while changing the outlook to negative. In January 2018, we were downgraded by S&P to BB- with a stable outlook from BB with a negative outlook. We are currently rated as follows: BB- by S&P and Ba1 by Moody’s, both with a stable outlook. Any further downgrade in our long-term debt in foreign currency would likely increase our funding costs and adversely affect our interest margins and results of operations.

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

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

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

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

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

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

The value of the collateral securing our loan portfolio may fluctuate or decline due to factors beyond our control, including ~~among others,~~as a result of a prolonged COVID-19 pandemic or a weaker than expected economic recovery after the COVID-19 pandemic and macroeconomic factors globally and in Brazil, as well as force 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 we are unable to recover sums owed to us under secured loans in default through extrajudicial measures 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 either have to enforce such collateral through the courts or through extrajudicial measures. However, even where the enforcement mechanism is duly established by the law, Brazilian law allows borrowers to challenge the enforcement in the courts, even if such challenge is unfounded, which can delay the realization of value from the collateral. In addition, our secured claims under Brazilian law will in certain cases rank below those of preferred creditors such as 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 of 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 ~~88.1%~~88.6% of our total assets as of December 31, ~~2020.~~2021. As of December 31, ~~2020,~~2021, the notional value of derivatives in our books amounted to R$~~2,752,683~~2,427,444 million (with a market value of R$~~28,871~~21,125 million of debit balance and R$~~31,980~~24,619 million of credit balance).

Any realized or unrealized future gains or losses from these investments or hedging strategies could have a significant impact on our income. These gains and losses, which we account for when we sell or mark to market investments in financial instruments, can vary considerably from one period to another. If, for example, we enter into derivatives transactions to protect ourselves against decreases in the value of the real or in interest rates and the real 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,” including those in widespread and long-standing use, have been the subject of ongoing international, national and other regulatory scrutiny and initiatives and proposals for reform. Some of these reforms are already effective while others are still to be implemented or are under consideration. These reforms have caused and may in the future cause benchmarks to perform differently than in the past, or to disappear entirely, or have other consequences, which cannot be fully anticipated.

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

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

Various regulators, industry bodies and other market participants in the U.S. and other countries have worked to develop, introduce and encourage the use of alternative rates to replace certain benchmarks. A transition away from the widespread use of ~~certain~~interest rate benchmarks to alternative rates has begun and will continue over the course of the next few years. ~~There is no assurance that these new~~While central bank-sponsored committees in various jurisdictions have recommended alternative rates ~~will be accepted or widely used by market participants, or that the characteristics of any of these new rates will be similar to, or produce the economic equivalent of, the~~for various important interest rate benchmarks, ~~that they seek to replace. If~~if a particular benchmark were to be discontinued and an alternative rate ~~has~~had not been successfully introduced to replace that benchmark, this could result in widespread dislocation in the financial markets, engender volatility in the pricing of securities, derivatives and other instruments, and suppress capital markets activities, all of which could have adverse effects on ~~Santander Brasil’s~~our results of operations. In addition, the transition of a particular benchmark to a replacement rate could affect hedge accounting relationships between financial instruments linked to that benchmark and any related derivatives, which could adversely affect ~~Santander Brasil’s~~our results.

On ~~July 27, 2017, the Chief Executive of~~5 March 2021, the U.K. Financial Conduct Authority, or the “FCA,” which regulates the London interbank offered rate ~~or “LIBOR,” announced that~~(LIBOR), published an announcement to confirm the ~~FCA~~dates immediately after which all LIBOR settings will either cease to be provided by any administrator or no longer ~~persuade or compel banks to submit rates~~be representative: December 31, 2021 for all EUR, GBP, JPY and CHF LIBOR tenors and 1-week and 2-month USD LIBOR tenors, and June 30, 2023 for the ~~calculation of the~~remaining USD LIBOR benchmark after 2021. This announcement indicated that the continuation of LIBOR on the current basis could not be guaranteed after 2021. On December 4, 2020, ICE Benchmark Administration Limited, which administers LIBOR, published a consultation on its intention to cease the publication oftenors (overnight, 1-, 3-, 6- and 12-month). Therefore, since January 1, 2022, most LIBOR settings ashave ceased to be available. While publication of the 1-, 3- and 6-month GBP and JPY tenors will continue at least until the end of ~~December 2021, except~~2022 on the basis of a “synthetic” methodology, these rates are solely available for ~~the publication~~use in legacy transactions. In addition, while certain USD LIBOR tenors are expected to continue to be published until June 30, 2023, U.S. regulators and the FCA have published guidance instructing banks to cease entering into new contracts referencing USD LIBOR no later than December 31, 2021, with limited exceptions.

In October 2020, the International Swaps and Derivatives Association, or “ISDA,” launched the 2020 IBOR Fallbacks Protocol, which amends the ISDA’s interest rate definitions used among protocol adherents, to incorporate new fallbacks for legacy non-cleared derivatives linked to LIBOR and certain other interest rate benchmarks. The protocol became effective as of ~~certain U.S. dollar~~January 25, 2021. We have adhered to this new protocol. Similarly, ISDA’s IBOR Fallbacks Supplement also amended ISDA’s standard definitions to incorporate these new fallbacks in new derivatives entered into on or after that same effective date. Following December 31, 2021, derivatives referencing non-USD LIBOR ~~settings. Therefore, after 2021 most LIBOR settings may cease~~that were amended through adherence to the 2020 IBOR Fallbacks Protocol or that incorporate the IBOR Fallbacks Supplement are or will be ~~calculated. The Bank~~valued using the adjusted version of ~~England is publishing a reformed Sterling Overnight Index Average, , comprised of a broader set of overnight Sterling money market transactions, which has been~~the applicable risk-free reference rate selected as an alternative to the applicable IBOR by the ~~Working Group~~appropriate national committee.

With respect to USD LIBOR-linked contracts that are governed by New York law, New York State has enacted legislation that will replace references to LIBOR in certain contracts with a benchmark based on ~~Sterling Risk-Free Reference Rates as~~ the ~~alternative rate to Sterling LIBOR. In addition,~~Secured Overnight Financing Rate (SOFR), including any spread adjustment, recommended by the Federal Reserve Board, the Federal Reserve Bank of New York ~~now~~or the Alternative Reference Rates Committee (the ARRC) convened by the Federal Reserve Board and the Federal Reserve Bank of New York. The Federal Reserve Bank of New York currently publishes ~~three reference rates~~the SOFR based on overnight U.S. Treasury repurchase agreement transactions, ~~including the Secured Overnight Financing Rate, or “SOFR,”~~ which has been recommended as the alternative to U.S. dollar LIBOR. Furthermore, the European Money Market Institute, or “EMMI,” announced the discontinuation of the EONIA after 3 January 2022 and that from 2 October 2019 until its total discontinuation it will be replacedUSD LIBOR by the ~~euro short-term rate, or “€STR” plus a spread~~ARRC.

Our exposure to LIBOR-linked contracts as of ~~8.5 basis points. Many unresolved issues remain, such~~December 31, 2021 was limited and related only to USD LIBOR. In 2021, we adopted the SOFR (Secured Overnight Finance Rate) as ~~the timing of the successor benchmarks’ introduction and the transition of a particular benchmark to~~ a replacement ~~rate, which could result in widespread dislocation in the financial markets, engender volatility in the pricing of securities, derivatives~~for USD LIBOR for new agreements and ~~other instruments, and suppress capital markets activities.~~ since January 1, 2022 we are no longer entering into new USD LIBOR transactions. We are communicating with our customers to amend existing agreements to include appropriate fallback clauses for when USD LIBOR ceases to be published.

These and other reforms have caused and may in the future cause benchmarks to perform differently than in the past, or to disappear entirely, or have other consequences, which cannot be fully anticipated, which ~~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 of a decrease in revenues of products linked to indices that will be 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; (vi) conduct risks arising from the potential impact of communication with customers and engagement during the transition period and inquiries, reviews or other actions from regulators regarding our preparation, readiness and transition plans and (vii) litigation risks and risks relating to other disputes and actions with clients, counterparties, investors and other parties regarding our existing products and services, which could adversely impact our profitability. The replacement benchmarks and their transition path have been defined, but, with respect to some benchmarks, the mechanisms for implementation are under development. Accordingly, it is not currently possible to determine whether, or to what extent, any such changes would affect us. However, the implementation of alternative benchmark rates may have a material adverse effect on our business, results of operations, financial condition and prospects. We may also be adversely affected if the change restricts our ability to provide products and services or if it necessitates the development of additional information technology systems.

The changes provided for in Phase 2 of the LIBOR reform address issues that may affect the financial statements during the reform of a reference interest rate, including the effects of changes in contractual cash flows or hedging relationships resulting from the replacement of a rate with an alternative reference rate (substitution issues). The effective date of application of this amendment is January 1, 2021. Our contracts linked to LIBOR are being reviewed between the parties and will be updated with the respective alternative rates disclosed, plus a spread. Management estimates that the updated cash flows will be economically equivalent to the original, and does not expect material impacts related to this replacement.

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

We use certain qualitative tools and metrics for managing market risk, including our use of value at risk, or “VaR,” and statistical modeling tools, which are based upon our use of observed historical market behavior. We apply statistical and other tools to these observations to arrive at quantifications of our risk exposures. These ~~qualitative~~ tools and metrics may fail to predict future risk exposures. These risk exposures could, for example, arise from factors we did not anticipate or correctly evaluate in our statistical models. This would limit our ability to manage our risks. ~~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. Our ~~more qualitative~~ approach to managing ~~those~~ risks could prove insufficient, exposing us to material unanticipated losses. We could face adverse consequences as a result of decisions, which may lead management to, based on models that are poorly developed, implemented or used, or as a result of the modeled outcome, misunderstand or misuse such information for purposes for which it was not designed. In addition, if existing or potential customers or counterparties believe our risk management is inadequate, they could take their business elsewhere or seek to limit their transactions with us. Any of these factors could have a material adverse effect on our reputation, as well as our revenues and profits. We also face risks from operational losses that may occur due to inadequate processes, people and systems failures or even from external events like natural disasters, terrorism, robbery and vandalism. Despite the operational risk management process supported by the Board and the internal audit tests, the internal controls and procedures effectiveness may not be fully adequate or sufficient to avoid all the known and unknown operational risks. We have suffered losses from operational risk in the past, including losses related to the migration of customer accounts in connection with acquisitions, phishing scams perpetuated by third parties, and information system platform upgrades. There can be no assurance that we will not suffer material losses from operational risk in the future, including losses related to security breaches.

As a retail bank, one of the main types of risks inherent in our business is credit risk. For example, an important feature of our credit risk management system is to employ an internal credit rating ~~system~~ to assess the particular risk profile of ~~a customer.~~individual customers and SMEs. As this process involves detailed analyses of the customer, taking into account both quantitative and qualitative factors, it is subject to human or IT systems errors. In exercising their judgment on current or future credit risk behavior of our customers, our employees may not always be able to assign an accurate credit rating, which may result in ~~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, may approve them with additional capital requirements, or we may be precluded from using them. Any of these potential situations could limit our ability to expand our businesses or have a material impact on our financial results.

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

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

We face various cybersecurity risks, including but not limited to: penetration of our information technology systems and platforms by ill-intentioned third parties, infiltration of malware (such as computer viruses) into our systems, contamination (whether intentional or accidental) of our networks and systems by third parties with whom we exchange data, unauthorized access to confidential customer and/or proprietary data by persons inside or outside our organization, ransomware affecting our services and ~~cyber-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. We have seen in recent years computer systems of companies and organizations being increasingly targeted, and the techniques used to obtain unauthorized, improper or illegal access to information technology systems have become increasingly complex and sophisticated. Furthermore, such techniques change frequently and are often not recognized or detected until after they have been launched and can originate from a wide variety of sources, including not only cyber criminals, but also 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 disrupt our 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 4. Information on the ~~Company—~~Company��B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulations on ~~Cybersecurity”.~~Cybersecurity.” We could be adversely affected if new legislation or regulations are adopted or if existing legislation or regulations are modified such that we are required to alter our systems or require changes to our business practices or policies. A failure to implement all or some of these new global and local regulations, that in some cases have severe sanctions regimes, could also have a material adverse effect on us. If we fail to effectively manage our cybersecurity risk, for example, by failing to update our systems and processes in response to new threats, this could harm our reputation and adversely affect our operating results, financial condition and prospects through the payment of customer compensation or other damages, litigation expenses, regulatory penalties and fines and/or through the loss of assets. Furthermore, upon a failure to comply with applicable law and regulation, we may be ordered to change our business practices, policies or systems in a manner that adversely impacts our operating results.

In addition, we may also be subject to ~~cyber-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 or other financial intermediaries.

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

If these risks give rise to losses, this could materially and adversely affect us. We have a diversified loan portfolio, with no specific concentration exceeding 10% of total loans. Furthermore, currently, ~~1.3%~~1.2% of our loan portfolio is allocated to our largest debtor and ~~6.5%~~7.4% to our next 10 largest debtors. However, we cannot assure this will continue to be the case. If counterparty risks give rise to losses, this could materially and adversely affect our results of operations and financial condition.

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

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

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

Interest 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).

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 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.

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

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

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

Increases in interest rates may ~~be difficult~~reduce the value of our financial assets and may reduce gains or require us to ~~increase~~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 ~~income / (charges), which will impact our results.~~rates. This process may result in significant reductions in book values and to impairment losses.

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

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

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

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

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

Concentration risk is the risk associated with potential high financial losses triggered by significant exposure to particular component of risk, whether it be related to a particular counterparty, industry or geographic concentration. Examples of such risks include significant exposure to a single counterparty, to counterparties operating in the 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 this annual report. We recognize the importance of this risk and the potential impacts that may affect our portfolio and results of operations.

~~Market~~Potential market turmoil and economic recession could materially and adversely affect the liquidity, credit ratings, businesses and/or financial conditions of our borrowers, which could in turn increase our nonperforming loan ratios, impair our loan and other financial assets, and result in decreased demand for borrowings in general. We have credit exposure to borrowers 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 basis.

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

The accounting standard setters and other regulatory bodies periodically change the financial accounting and reporting standards that govern the preparation of our consolidated financial statements. These changes can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. For further information about developments in financial accounting and reporting standards see note 1 to our audited consolidated financial statements included elsewhere in this annual report.

Our financial statements are based in part on assumptions and estimates ~~which~~that impact the results of our operations.

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts 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 financial assets measured at amortized cost, goodwill impairment, valuation of financial instruments, impairment of financial assets measured at fair value through other comprehensive income, deferred tax assets provision, and pension obligation for liabilities.

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

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

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

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

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

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

Although we have procedures and controls in place to safeguard personal and other confidential or sensitive information in our possession, unauthorized access or 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 with policies, misconduct, negligence or fraud, which could result in regulatory sanctions and serious reputational and 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, 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. If we cannot maintain effective and secure electronic data and information, management 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, asas a result of the COVID-19 pandemic, we have increased the number of employees working remotely, which may increase the vulnerability of our systems and impact our ability to conduct business.

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

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

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

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

We could suffer significant reputational harm if we fail to identify and manage potential conflicts of interest properly. The failure, or perceived failure, to adequately address conflicts of interest could affect the willingness of 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 could cause material harm to us.

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

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

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

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

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

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

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

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

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

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

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

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.

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~~arrange ments may be increased to the extent that we restructure such arrangements. Restructurings could involve significant expense to us and entail significant delivery and execution risk, which could have a material adverse effect on our business, operations and financial condition.

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

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

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

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

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

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

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

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

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

~~Climate risk~~There is ~~as a transversal risk that can be~~ an ~~aggravating factor for~~increasing concern over the ~~types of traditional~~ risks ~~managed by Santander: credit, market, operational (including reputational risk).~~

~~In order to identify the vulnerability of the Santander Group’s exposures to climate change, we have adopted the classifications used by TCFD (~~~~Task-Force on Climate-Related Financial Disclosures)~~~~, and we consider that there are two primary sources~~ of climate change and related environmental sustainability matters. Climate change may imply three primary drivers of financial ~~risks: physical and transition.~~

~~Physical risks resulting from climate change can be event-driven (acute) or long-term shifts (chronic) in climate patterns:~~

Transition risks refer to actions brought on to address mitigation and adaptation requirements related to climate change, and they can fall into various categories such as policy, technology, and market changes:

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

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

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

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

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

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

Santander Spain, our ultimate controlling shareholder, currently owns, directly and indirectly, approximately ~~89.5%~~89.53 % of our total capital. 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 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’ 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, ~~2020,~~2021, the aggregate market capitalization of the B3 was equivalent to approximately R$ ~~5.1~~4.5 trillion (U.S.$~~1.0 trillion)~~0.8 billion), and the top ten stocks in terms of trading volume accounted for approximately ~~34%~~43% of all shares traded on B3 in the year ended December 31, ~~2020.~~2021. In contrast, as of December 31, ~~2020,~~2021, the aggregate market capitalization of the NYSE was approximately ~~U.S.28.6~~U.S.$27.7 trillion. Although any of the outstanding shares of a listed company may trade on the B3, in most cases fewer than half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, government entities or a principal shareholder.

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

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

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

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

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

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

availability. We paid R$~~$3.3~~10.9 billion, R$3.8 billion and R$10.8 billion (R$2.94, R$1.03 and R$~~6.6 billion and R$6.3 billion (R$0.89, R$~~2.90 ~~R$1.77 and R$1.6877~~ per unit, respectively) as dividends and interest on stockholders’ equity (considering gross value) in 2021, 2020 ~~2019, 2018~~ and ~~2017,~~2019, respectively, in accordance with our dividend policy, but there can be no assurance that dividends and interest on stockholders’ equity will be paid in the future. We are also subject to Brazilian banking regulations that may limit the payment of dividends or interest on stockholders’ ~~equity, including, since April 2020,~~equity. These regulations have recently included a temporary restriction on dividend distributions and other payments as a result of measures taken by the Brazilian Central Bank to combat the COVID-19 pandemic’s effect on the Brazilian financial sector (see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19—Temporary Suspension of Dividend Distributions and Other ~~Payments.” Also, see~~Payments” and “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—History of Payment of Dividends and Interest Attributable to ~~Stockholders’~~Shareholders’ Equity.” Although this restriction has not been reinstated in 2021, we cannot assure you that it will not be reinstated in the future.

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

Holders of ADRs will not be our direct shareholders and will be unable to enforce directly the rights of shareholders under our By-Laws and Brazilian Corporate Law. Holders of ADRs may exercise voting rights with respect to the units represented by ADRs only in accordance with the deposit agreement governing the ADRs. Holders of ADRs will face practical limitations in exercising their voting rights because of the additional steps involved in our communications with ADR holders. For example, we are required to publish a notice of our stockholders’ meetings in specified newspapers in Brazil. Holders of our units will be able to exercise their voting rights by attending a stockholders’ meeting in person or voting by proxy. By contrast, holders of ADRs will receive notice of a stockholders’ meeting by mail from the ADRs depositary following our notice to the depositary requesting the depositary to do so. To exercise their voting rights, holders of ADRs must instruct the ADR depositary on a timely basis on how they wish to vote. This voting process necessarily will take longer for holders of ADRs than for holders of our units or shares. If the ADR depositary fails to receive timely voting instructions for all or part of the ADRs, the depositary will assume that the holders of those ADRs are instructing it to give a discretionary proxy to a person designated by us to vote their ADRs, except in limited circumstances.

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

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

Law No. 10,833 of December 29, 2003 provides that the disposal of assets located in Brazil by a nonresident to either a Brazilian resident or a nonresident is subject to taxation in Brazil, regardless of whether the disposal occurs outside or within Brazil. This provision results in the imposition of income tax on the gains arising from a disposal of our units by a nonresident of Brazil to another nonresident of Brazil. It is unclear whether ADRs representing our units, which are issued by the ADR depositary outside Brazil, will be deemed to be “property located in Brazil” for purposes of this law. We believe ADRs do not qualify as property located in Brazil and, thus, should not be subject to Brazilian income tax. Nevertheless, there is no judicial guidance as to the application of Law no. 10,833 of December 29, 2003 and, accordingly, we are unable to predict whether Brazilian courts may decide that it applies to dispositions of our ADRs between 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 not be able to credit any Brazilian tax imposed on the disposition of our units or ADRs against such person’s U.S. federal income tax liability, unless such credit can be applied (subject to applicable limitations) against tax due on other income of such person from foreign sources. See “Item 10. Additional Information—E. Taxation—Material U.S. Federal Income Tax Considerations for U.S. Holders.

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

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

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.

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 than reais. Under Brazilian exchange control limitations and according to Brazilian laws, an obligation in Brazil to pay amounts denominated in a currency other than reais 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 of ADRs, you will have different shareholders’ rights than do shareholders of companies incorporated in the United States and certain other jurisdictions.

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

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

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

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

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

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

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

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

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

We are a publicly held corporation (sociedade anônima) 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 and 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 privately-owned bank in Brazil, and the only international bank that operates countrywide. We operate in both the retail and wholesale segments with high-added value offers, which allows us to provide our products and services to individuals, small and medium enterprises, and large corporate customers.

We are part of the Santander Group, a financial institution founded in Spain in 1857, and that has expanded globally through numerous acquisitions. Under the Santander Group’s business model each major unit is autonomous and self-sufficient in terms of capital and liquidity. However, our relationship with the Santander Group allows us to:

Our history in the Brazilian banking industry goes back to the 1970s and is as 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.

Since the 1990s, the Santander Group established its presence in Latin America, particularly in Brazil, by capitalizing on organic growth 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 symbols: ~~“SANB11”,~~“SANB11,” “SANB3” and ~~“SANB4”,~~“SANB4,” respectively. Our ADRs have been registered with the SEC under the Securities Act and are listed and traded on the NYSE under the symbol ~~“BSBR”.~~“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 to ~~Note~~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,~~September 26, 2013, we ~~sold~~announced that, in order to optimize our ~~entire equity interest in Super Pagamentos e Administração de Meios Eletrônicos S.A., or “Superdigital,”~~capital structure, our board of directors submitted a proposal to ~~Superdigital Holding Company, S.L.,~~optimize the composition of our regulatory capital to our shareholders for their approval (“PR Optimization Plan”). The aim was to establish 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.~~

~~Put option~~more efficient capital structure, consistent with recent capital rules and aligned with our business strategy and asset growth plan. The PR Optimization Plan was composed of the ~~remaining~~following items: (i) an 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,~~distribution to sell its 40% equity interest in Banco Olé to Aymoré CFI, a controlled entity of Santander Brasil. On January 31, 2020, Santander Brasil and the shareholders of Bosan Participações S.A. (a holding company whose single asset is the shares representing 40% of the corporate capital of Banco Olé) entered into the definitive agreements and performed the closing acts related to the purchase and sale of all shares issued by Bosan, upon the transfer of Bosan’s shares to Santander Brasil and payment of the total price of R$1,608.8 million to the sellers. As a result, Santander Brasil became, both directly and indirectly, the holder of all shares issued by Banco Olé.

~~Following the acquisition of the remaining equity interest over Banco Olé Consignado S.A., through the holding company Bosan Participações S.A. (together referred to as “Olé Companies”),~~ the shareholders of Santander Brasil in the total amount of R$6 billion, with no reduction in the number of shares; (ii) the issuance abroad of capital instruments to compose Tier I and Tier II of our regulatory capital; and (iii) a bonus share program and an adjustment in the composition of the Units, followed by a reverse share split, with the purpose of eliminating trading in cents of reais.

On November 5, 2018, our board of directors approved the issuance, through our Cayman Islands branch, of debt instruments to form part of our Tier 1 and Tier 2 regulatory capital in the aggregate amount of U.S.$2.5 billion, pursuant to an offering made to non-U.S. Persons under Regulation S of the U.S. Securities Act of 1993, as amended, or the “Notes Offering.” In addition, our board of directors also approved the redemption of debt instruments issued to form part of our Tier 1 and Tier 2 regulatory capital, as set out in the board’s resolution of January 14, 2014. The proceeds from the Notes Offering were used to fund this redemption. On December 18, 2018, the Brazilian Central Bank authorized the transactions contemplated in the Notes Offering and the ~~Olé Companies approved~~redemption, which were completed on January 29, 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 ~~merger~~main terms and conditions of ~~Olé Companies into~~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 ~~Brasil,~~Spain and a group of private equity funds managed by Warburg Pincus. Following the sale, we will continue to act as ~~provide by~~ the ~~general meetings held~~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, ~~2020. As a result,~~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 ~~Olé Companies ceased to exist and were succeeded by Santander Brazil. The incorporation~~closing of the ~~Olé Companies is under~~transaction which generated gains of R$751 million before taxes recorded in the ~~process of ratification by the Brazilian Central Bank.~~

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 (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. has a 20% equity interest in the corporation.

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

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

Aymoré CFI owns a 50% equity interest in Banco Hyundai Capital Brasil S.A., and Hyundai Capital owns 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~~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 ~~equity stake~~lawsuits and administrative proceedings relating to corporate income tax and social security contributions for the periods from 1999 to 2005 in ~~Ipanema Empreendimentos e Participações S.A., currently named Return Capital Serviços de Recuperação de Créditos S.A. (“Return Credit Management”),~~a total amount of R$492 million in January 2018 (taking into account the reduction arising from our participation in the program). A payment of R$191.9 million was due in August 2017 and ~~Gestora de Investimentos Ipanema S.A., currently named Return Gestão de Recursos S.A. (“Return Asset” and, together with Return Credit Management,~~a further payment of R$299.7 million was due by January 2018, both of which we have made within the ~~“Return Entities”)~~

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

In October 2017, we joined the Incentive Payment Programs and Installments (Programas de Parcelamento Incentivado) created by the cities Rio de Janeiro and São Paulo. The program allows for certain tax debts to be repaid in installments. In connection with our participation in these programs, we are repaying in installments certain amounts due as a result of lawsuits and administrative proceedings relating to ISS for the periods from 2005 to 2016 in a total amount of R$293 million as of December 31, 2017. As we had made provisions for these losses, we registered income of R$435 million as a result of the ~~Return Entities’ issued and outstanding share capital. The Return Entities are active~~reversal of certain provisions, net of tax effects, in ~~the credit recovery intelligence sector, providing services such as credit portfolio evaluation and pricing, collection, management and recovery~~an amount 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 50% of the issued share capital of Santander Auto with the remaining 50% being held by HDI ~~Seguros.~~Seguros, Santander Auto will focus on offering motor insurance policies through a fully digital platform. The transaction closed on October 9, 2018 when the documentation to form Santander Auto S.A. was ~~executed.~~executed and we and HDI Seguros undertook a joint capital contribution of R$15 million into Santander Auto. On January 11, 2019, Santander Auto was granted regulatory authorization to begin operations by SUSEP and effectively started its operations ~~on October~~in the second half of 2019.

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

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

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

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

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

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

~~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 Gira (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.

On June 11, 2018, we incorporated BEN Beneficios, Benefícios e Serviços S.A. ~~(“Ben”)~~, 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 meals, transportation and cultural events) in the form of printed electronic and magnetic ~~cards.~~cards, BEN Beneficios began operating in the second quarter of 2019.

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

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

On December 19, 2018, the minority shareholders of Getnet ~~Adquirência e Serviços para Meios de Pagamentos S.A., or “Getnet,”~~ exercised their right to sell all of their shares to Santander Brasil, or the “Put ~~Option”,~~Option,” pursuant to the ~~Shares’~~Share Purchase and Sale Agreement and Other Covenants executed between the parties on April 4, 2014, or ~~“SPA”.~~“SPA.” On the exercise date of the Put Option, we entered into a binding amendment to the SPA, to acquire all of the Getnet shares owned by minority shareholders, corresponding to 11.5% of the entity’s equity interest, in the amount of R$~~1.431~~1.4 billion. The transaction was approved by the Brazilian Central Bank on February 18, 2019 and closed on February 25, 2019. We subsequently spun-off Getnet to our shareholders as a result of which Getnet is no longer a subsidiary of Santander Brasil, see “—A. History and Development of the Company—The Getnet Spin-Off.”

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

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

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

~~On February 25, 2021, further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, we announced that~~therefore Summer is included in our Board of Directors approved a separation from our merchant payment business, which is undertaken by our subsidiary, Getnet, in order to concentrate the technology and payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. Following the potential spin-off of our equity interest held in Getnet, or the “Spin-Off,” which will be resolved upon by our shareholders in an extraordinary shareholders’ meeting, our shareholders would become direct shareholders in Getnet on a pro rata basis. Accordingly, our shareholders immediately prior to the Spin-Off would hold a percentage of equity interest in Getnet in the same proportion as they held in Santander Brasil prior to the Spin-Off. After the approval of the Spin-off by our extraordinary shareholders’ meeting, our shares and units will be traded with the right to receive the shares and units issued by Getnet until the record date, which, once determined, will be disclosed to the market by means of a Notice to Shareholders.

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

~~Purchase~~Acquisition of ~~Equity Interest over Toro Controle~~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 ~~September 29, 2020~~October 16, 2017, Santander ~~Brasil’s~~Brasil, through its wholly-owned subsidiary ~~PI DTVM~~ Atual Companhia Securitizadora de Créditos Financeiros, or “Atual,” acquired a direct equity interest in Return Credit Management, and an indirect equity interest in Return Asset corresponding to 70% of Return Entities’ share capital.

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

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

On October 31, 2019, we approved a spin-off of Integry Tecnologia e Serviços AHU Ltda, or “Integry,” a then wholly-owned subsidiary of Getnet (which was itself a subsidiary of Santander Brasil until the completion of the Getnet Spin-Off). Subsequently on December 20, 2019, Getnet and Santander Merchant Platform Solutions, S.L., or “SMPS Global,” a company based in Spain and controlled by Santander Spain, entered into ~~an investment and other covenant~~a share purchase agreement ~~with the shareholders of Toro Controle e Participações S.A. , or “Toro Controle” to invest in Toro Controle. Toro Controle, an investment platform, operating~~ as a ~~securities broker focused on the retail market was founded~~result of which SMPS Global now holds 100% of Integry’s share capital. On December 23, 2019, Integry changed its name to Santander Merchant Platform Solutions Brasil Ltda.

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

On February 28, 2020, we sold our entire equity interest in ~~2010. Toro Controle is the holding company of Toro Corretora~~Super Pagamentos e Administração de ~~Títulos e Valores Mobiliários Ltda, or “Toro Corretora,” and Toro Investimentos~~Meios Eletrônicos S.A., or ~~“Toro Investimentos.~~“Superdigital,” ~~We refer~~ to ~~Toro Controle, Toro Corretora and Toro Investimentos as “Toro,” Upon completion of~~Superdigital Holding Company, S.L., a company indirectly controlled by Santander Spain, for the ~~transaction, PI DTVM will hold 60% of Toro Controle’s share capital.~~

In addition, PI DTVM and Toro Corretora will combine their market experiences to develop a complete platform of fixed and variable income products. This platform will be based on shared expertise, technology and operate in the growing Brazilian investment market. The completion of the transaction is subject to 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.

On February 2, 2021, our board of directors approved the continuation of the buyback program (previously set to expire on November 4, 2020) 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 will cover 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 is up to 18 months beginning on February 3, 2021 and expiring on August 2, 2022.

~~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~~R$270 million as consideration. As a result of ~~the U.S. Securities Act~~such transaction, we are no longer a shareholder of ~~1993, as amended, or the “Notes Offering”.~~Superdigital.

In addition, our board of directors also approved the redemption of debt instruments issued to form part of our Tier 1 and Tier 2 regulatory capital, as set out in the board’s resolution of January 14, 2014. The proceeds from the Notes Offering were used to fund this redemption.

~~On December 18, 2018, the Brazilian Central Bank authorized the transactions contemplated in the Notes Offering and the redemption, which were completed on January 29, 2019.~~

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

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

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

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

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

~~Our main~~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 ~~expenditures include investments~~reduction in ~~our information technology platform. Our information technology platform focuses on our customers and supports our business model. In 2020, 2019 and 2018, total investments~~the two Norchem Companies, in ~~information technology were~~the amounts of R$~~1,432 million, R$1,858~~14.7 million and R$~~1,276~~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 of Paytec Tecnologia em Payments Ltda, and Paytec Logística e Armazém EIRELI

On December 8, 2020, we entered into a quota purchase agreement with the owners of Paytec Tecnologia em Payments Ltda, and Paytec Logística e Armazém Eireli (jointly “Paytec”) for the acquisition of the entirety of Paytec’s issued share capital. Paytec is a logistics operator with Brazil-wide coverage which focuses on the payments market. The transaction closed on March 12, 2021.

On February 2, 2021, our board of directors approved, in continuity with the buyback program that expired on November 4, 2020, 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 36,956,402 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 is up to 18 months beginning on February 3, 2021 and expiring on August 2, 2022.

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

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

~~In 2020, 2019~~Acquisition of Equity Interest in Monetus Investimentos Ltda. and ~~2018, we continually improved in our technology platforms~~Monetus Corretora de Seguros Ltda.

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

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

On June 15, 2021, Pi DTVM, Toro Corretora and Toro Investimentos S.A. executed an investment agreement and other covenants with the partners of Mobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda (jointly “Mobills”), by which, once the transaction is concluded, Toro Investimentos will hold 100% of the capital stock of Mobills. Domiciled in Ceará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning. After the conditions precedent established in the investment agreement were fulfilled, the transaction closed on January 4, 2022.

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

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

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

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

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

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

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 with a subordination clause, to be used to compose our ~~digital applications, including through~~Tier 2 regulatory capital, in the total amount of R$5.5 billion. The Financial Bills have a term of ten years, and redemption and repurchase options in accordance with the applicable regulations. The Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.

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

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

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 the areas of artificial intelligence (machine learning, AIOPs), micro services, blockchain technology, cyber insurance, facial recognition and cloud-based technologies, among others. The application of these new technologies improved our interaction with our customers enabled usorder to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness, investments to better address client needs. We also continued to invest in our physical distribution network (branches, PABs and PAEs), including: biometric identification for corporate customers, digital purchase and payment of exchange, among other initiatives. For more details about ourconcentrate the technology and ~~infrastructure, see~~payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. On March 31, 2021, the ~~item “—~~shareholders of Santander Brasil approved the Spin-Off. As a result of the Spin-Off, each holder of our common shares, preferred shares and Santander Brasil units, including the custodian for the Santander Brasil ADS facility, received Getnet common shares, preferred shares and Getnet units, at the rate of 0.25 common share, preferred share or Getnet Unit, as the case may be, for each one common share, preferred share or Santander Brasil Unit issued by us held at close of trading on the B3 on the relevant record date. Additionally, each holder of Santander Brasil ADSs representing Santander Brasil units received Getnet ADSs, each representing two Getnet units, at a rate of 0.125 Getnet ADS for each Santander Brasil ADS held at the close of trading on the NYSE on the relevant ADS record date. The Getnet common shares, preferred shares and Getnet units are traded on B3, and Getnet ADSs are traded on Nasdaq under the symbol “GET.” The Spin-Off was completed on October 26, 2021.

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

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

~~Our ongoing capital expenditures consist primarily~~Corporate Structure After the Spin-Off

Corporate Structure After the Reorganization of ~~investments in information technology We expect to fund our ongoing capital expenditures principally from our cash flow from operations.~~the PagoNxt Group

~~Our major divestiture in the past three fiscal years and until the date of this annual report was the sale of Super Pagamentos.~~

~~For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Other Factors Affecting the Comparability of Our Results of Operations”.~~

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

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

Our main capital expenditures include investments in our information technology platform. Our information technology platform focuses on our customers and supports our business model. In 2021, 2020 and 2019, total investments in information technology were R$1,905 million, R$1,432 million, and R$1,858 million, respectively.

In 2021, 2020 and 2019, we continually improved in our technology platforms by means of investment in our digital applications, especially through the implementation of new solutions in the areas of artificial intelligence (machine learning, AIOPs), micro services, blockchain technology, cyber insurance, facial recognition and cloud-based technologies, among others. The application of these new technologies improved our interaction with our customers enabled us to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness, investments to better address client needs. We also continued to invest in our physical distribution network (branches, PABs and PAEs), including: biometric identification for corporate customers, digital purchase and payment of exchange, among other initiatives. For more details about our technology and infrastructure, see the item “—B. Business Overview—Technology and Infrastructure.”

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

Our major divestitures in the past three fiscal years and until the date of this annual report were the Spin-Off of Getnet and the sale of Super Pagamentos.

For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations.”

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

~~To achieve this goal,~~We recorded net income of R$15,559 million, R$13,451 millionand R$16,631 million in the years ended December 31, 2021, 2020 and 2019, an increase of 15.7% in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the years ended December 31, 2021, 2020 and 2019 we achieved capital adequacy ratios of 14.9%, 15.3% and 15.0% respectively. In the years ended December 31, 2021, 2020 and 2019, we have ~~been deeply focused on understanding how the Brazilian market works to address its demands effectively.~~achieved efficiency ratios of 27.1%, 35.5% and 28.8%, and adjusted efficiency ratios of 28.2%, 27.7% and 28.2%, respectively. In ~~line with this approach,~~addition, we have sought to identify our different types of customers and their specific needs. Accordingly, we adopted a strategy that is based on serving our customers wherever and whenever they want through multi-channel (digital and/or physical) solutions that provide a customized and innovative portfolio of services and products.

~~We endeavor to be pioneers and anticipate market trends to capture business opportunities over the years.~~

In 2016 we began our commercial transformation, which consisted of implementing new work models and simplifying and digitizing our processes, and introduced a culture of innovation, while also providing further vehicle loans at a time when the market was moving in the opposite direction. In 2017 we focused on the quality of the services we provide and placed customer satisfaction at the center of our strategy, which is reflected in the implementation of the net promoter score, or NPS, as a measure of customer satisfaction. In 2018, we were pioneers in bringingachieved an industrial approach to costs into the banking sector, covering three key fronts: organization, technology and culture. We believe this strategy has already yielded results and will allow us to further refine our productivity and customer experience. In 2019, we expanded our Santander ecosystem with new businesses and reduced our exposure to the card market, as we concentrated on lower-risk products. Finally, in 2020 we focused on supporting our customers through a challenging time period, by providing relevant products, while also focusing on efficiency and responding swiftly to market trends, as illustrated by the launch of SX, which set ourselves apart from the Brazilian Central Bank’s instant payment solution, PIX, by offering exclusive benefits to customers. We have also launched new disruptive products into the market such as Sim, emDia, Santander Auto and Ben. As a result of this strategic repositioning, we have been able to realize substantial growth in all our key business areas, as evidenced by the evolution of ouradjusted return on average stockholders’ equity ~~or ROE,~~of 20.2%, 18.4% and 24.6% in ~~recent years (for~~2021, 2020 and 2019, respectively. Adjusted return on average stockholders’ equity is a non-GAAP financial measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial ~~Measures—Reconciliation~~Measures.” We believe these metrics demonstrate our track record of ~~Non-GAAP Ratios~~consistent performance and the results of our constant efforts to ~~Their Most Directly Comparable IFRS Financial Measures—Return on average stockholders’ equity”).~~improve our productivity.

~~Similarly,~~In recent years, we ~~believe that our positioning, combined with a culture that values our people, promotes diversity, encourages speed in execution and fosters innovation, prepares us for this new cycle and allows~~have undergone significant transformations, thereby enabling us to ~~keep anticipating market trends.~~

identify and capitalize on business opportunities. We ~~believe~~have expanded our ~~core business has the potential~~platform to ~~grow through innovation and technology, and by delivering a higher service level to~~diversify our ~~customers. Our~~offering of products and businesses include, among others, payments (i.e. payment platforms), auto and consumer goods loans through Santander Financiamentos, mortgages, payroll and agribusiness loans, as well as investments, in addition to the products and services we offer through our wholesale segment.services:

In order to strengthen our ecosystem, we have launched new businesses which continue to mature, such as (i) Ben, which reached breakeven in May 2020 and expanded its customer base in 2020 to 217 thousand cards alongside 1.4 thousand human resources customers and 338 thousand partner merchants; (ii) Sim, which achieved positive net profit in 2020 after 15 months of operation and a loan portfolio of R$700 million as of December 31, 2020; (iii) emDia, which had four million customers as of December 31, 2020 and R$46 million in credit recovered volume in 2020, and (iv) Santander Auto, which reached a penetration rate of 16% of Santander Financiamentos’ contracts leading to the issuance of more than R$100 million in premiums during 2020. More recently, in September 2020, we announced the acquisition of Toro Corretora to complement our PI DTVM investment platform, thereby expanding our product offering. The completion of the transaction is subject to the execution of certain customary agreements between the parties, the fulfillment of customary conditions precedent and the receipt of certain regulatory approvals, including approval by the Brazilian Central Bank.

Our growth is based on a commitment to asset quality, which we believe is demonstrated by the performance of certain quality indicators such as our cost of risk, which we believe remains at controlled levels despite the current macroeconomic scenario. It is worth noting that since 2019, we have focused on expanding our lower-risk products, particularly those that are collateralized. As a result, we believe that our loan quality indicators are at appropriate levels. Similarly, collateralized loans represent a significant portion of our loan portfolio to individuals, accounting for approximately 76% of our loan portfolio as of December 31, 2020 (four percentage points higher than December 31, 2019). The collateralized loans includes payroll loans.

We believe that our business was able to adapt swiftly to the changing environment in 2020 in order to meet the needs of our customers. We offered a plan to defer loan repayment installments to customers who fulfilled certain requirements. We provided special lines of credit, including through government programs, for the corporate and small and medium enterprise, or SME, segments. We believe that all these initiatives strengthened our customers’ loyalty and helped us achieve better control of our risk indicators. As a result of our actions, we reached the highest NPS level in our history in 2020, recording an NPS score of 63 points in 2020 (compared to 56 points in 2019), which we believe is evidence of our commitment to customers.

We acknowledge our responsibility as a financial institution to support society and contribute to Brazil’s economic growth. This attitude is embedded into our culture and is transversal to our business. In 2020, we held two events focused on supporting society at the onset the pandemic through our “Amigo de Valor” program, one in the first half of the year, and another one in the second half, raising an aggregate of approximately R$23 million (including donations from employees, customers and Santander Brasil, with R$7 million raised in the first edition and R$15.7 million raised in the second edition). We also hosted a donation marathon for the “Mães da Favela” project with the participation of customers and employees, which generated positive results: R$7.2 million was raised (including donations from employees, customers and Santander Brasil) to support more than 20,000 families.

Additionally, we encouraged other initiatives, such as volunteering to provide remote assistance to the elderly under the “Parceiro do Idoso” program, and the offer of special products to healthcare professionals. Finally, together with our private bank peers, we donated 5 million rapid COVID-19 tests, 17.7 million face masks and R$20 million to purchase computerized tomography scanners. Finally, we also donated a total of R$100 million to contribute to the fight against COVID-19.

~~Below are the main commercial initiatives that we have undertaken in recent years:~~

~~Finally, aligned~~We have consolidated and improved our four service channels through which customers can select the product or solution that best meets their needs. Our digital channel averaged 442 million total visits per month in 2021, adding 554,000 new accounts in December 2021. Similarly, the physical channel, which consists of our branch network that is expanding into Brazil’s rural areas, recorded a monthly average of more than 15 million visits by customers and potential customers, serving as a crucial pillar for business origination. In the remote channel, with the ~~Santander Group’s sustainable growth strategy,~~implementation of SX Negócios, a new service model, we have ~~has made several public commitments~~redefined our model to ~~society, including: (i) having 30%~~move away from a call center and toward a business channel. We have built a platform to capture new business, processing over 25 million support requests per month in the year ended December 31, 2021, 4.6 million of which are handled by humans. The external channel is comprised of bank correspondents, which are entities allowed to provide specific services to customers, including customer services, on behalf of another financial institutions, and our business verticals, such as payroll-deductible loans, Prospera and Olé Consignado.

We believe that our digital platform enables us not only to offer our customers a comprehensive set of services but also to benefit from the business generation potential which arises from the ease with which customers are able to purchase our products and services through our digital sales channels. Sales of our ~~leadership positions held~~products and services through our digital channels increased by ~~women~~45% in the year ended December 31, 2021, compared to the year ended December 31, 2020, including an increase in the number of premium bonds (capitalização) contracts of 360% and 23% in premiums written in open insurance contracts (considering life insurance, personal accident insurance, home insurance, and other types of insurance) in each case in the year ended December 31, 2021 compared to the year ended December 31, 2020. GENT&, our artificial intelligence channel, recorded over 18.5 million interactions in December 2021 and is currently capable of answering more than 26,000 questions.

We believe that our business has the potential to grow by ~~2024 (today women account for 29%~~means of ~~leading roles at Santander Brasil) and; (ii) having 100%~~innovation and technology, in conjunction with user experience enhancements and steady evolution in the quality of our ~~operations powered~~services. Our products, services, and businesses form part of the daily lives of all our customers, whether businesses or individuals, and include, among others, payment solutions (i.e., payment platforms), investment and advisory services, vehicle and consumer goods financing, mortgage loans, payroll-deductible and agribusiness loans, as well as the products and services offered through our wholesale unit. We also endeavor to maintain sound risk management, which entails continuously improving our credit granting models to maintain our credit risk indicators at acceptable levels.

In order to strengthen our platform, we have launched new businesses that continue to evolve and support our customer loyalty strategy, such as (i) Ben, which grew its customer base to 565,000 cards as of December 31, 2021 along with 2,675 human resources customers and 365,432 partner establishments as of the same date; (ii) Sim, which surpassed the five million customer mark and reached a loan portfolio of R$1.6 billion as of December 31, 2021; (iii) emDia, which increased recovered credit volume by renewable energy by 2025. Furthermore, we committed to eliminating single-use plastics consumption within our organization. Another equally important component in fulfilling our responsibilities to society is the “Prospera” microcredit program, aimed at helping Brazilians in low-income communities to prosper by giving them access to credit and financial products. This program contributed to placing us12% in the ~~top spot among banks on Fortune magazine’s 2019 “Change the World” list.~~

~~In July 2020, along with two other private banks, we presented a plan~~year ended December 31, 2021 compared to the ~~Brazilian federal government dedicated~~year ended December 31, 2020, and (iv) Santander Auto, where the percentage of new consumer finance contract purchasers who also acquired insurance reached 20% in 2021, resulting in over R$210 million in written premiums in 2021. In 2020, we also announced the acquisition of securities brokerage firm Toro Corretora to ~~supporting sustainable development~~complement our investment platform and broaden our product offering. Finally, in 2021, we launched Auto Compara, a fully online auto insurance comparison and offering platform that is now also available to non-customers. Auto Compara had an average of 350,000 website visits in the ~~Amazon. This plan sets out 10 measures to protect~~year ended December 31, 2021 and we increased by 26% in premiums written during the environment and support the development of the local economy by investing in sustainable infrastructure and protecting the rights of the region's population. We also promoted sustainable enterprises by: (i) leading and structuring the issuance of decarbonization credits (CBIO), resulting in Brazil’s first CBIO deal; (ii) conducting the first green financingyear. Additionally, we reinforced our position in the ~~Brazilian market – in other words,~~automotive and real estate industries by completing acquisitions of businesses and solutions to expand our business and build a loan with interest rates tied to sustainable goals; (iii) coordinating the world’s second sustainable-linked bond transaction, amounting to US$ 750 million; (iv) launching a R$ 5 billion credit line for new investments in water and sanitation; (v) relaunching the Ethical Fund, managed by Santander Asset Management, which uses a proprietary methodology with local and global analysis of sustainability criteria; and (vi) launching the ESG-focused Santander Go fund in partnership with asset manager Robeco, which invests in global equities on the basis of sustainability criteria.

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

Our people are a key pillar of our strategy, supported by a culture that values employees, promotes diversity, encourages efficiency, and fosters innovation, while also preparing us for a new cycle and enabling us to continue anticipating market trends. Our performance is the embodiment of our culture, with our people serving as the catalyst for the transformation. Thus, we have built a diverse and engaged team. We value meritocracy, diversity, and inclusion, as evidenced by the fact that, as of December 31, 2021, 31% of our leadership positions were held by women, 27% of our employees were black employees, and 5% were held by people with disabilities. We also place a premium on proactive knowledge acquisition: in 2021, over 3,200 courses were held on the Santander Academy platform, with 78% of them being taught by employees. Close leadership and open communication are ingrained in our DNA. Our actions are backed by a culture that is increasingly centered on our people – 94% of whom are proud to work for Santander, according to the Great Place to Work, or “GPTW,” survey from 2021. As a result of our efforts, we ~~received~~have been named one of the top 10 best companies to work for in Brazil by GPTW 2021, appearing in the following ~~2020~~categories: Ethnic-Racial, Women, LGBTQI+, Early Childhood, 50+, and Healthy Management. Additionally, we were honored with the following awards: (i) Ethnic-Racial by Exame magazine’s Diversity Guide, (ii) Diversity and Inclusion by Euromoney’s Awards for Excellence, and (iii) Bloomberg’s Gender Equality Index. Finally, we were also included on the GPTW B3 index.

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

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

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

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

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

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

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·	~~Most Honored Company (Institutional Investor)~~

~~Best Bank In Latin America And The World For SMEs (Euromoney Awards for Excellence 2020)~~

~~Table of Contents~~

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~~Among~~Low Carbon CDB, we launched the Low Carbon CDB, a sustainable, low risk investment aimed at companies that want to have more sustainable investments in their portfolio capable of reducing their greenhouse gas emissions. The ~~Country’s Leading Companies On Climate Change (CDP)~~resources of the investments in CDB will be used to finance sustainable projects of companies that promote actions to reduce greenhouse gas emissions.

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~~Part Of B3’s Corporate Sustainability Index (ISE B3)~~Carbonômetro (Carbon meter), a tool that calculates the daily greenhouse gas emissions of our operations.

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~~Best Infrastructure Bank In The Country (Latin Finance 2020)~~Carbon Calculator, which encourages employees of Santander Brasil and affiliates to calculate their carbon footprint.

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~~One Of~~ "The ~~Best Companies To Work For (GPTW~~Future of the Carbon Market in Brazil” live video. We produced a live video to discuss the future of the carbon market in Brazil ~~2020)~~and the challenges and opportunities for the business sector.

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

In 2021, we inaugurated Brazil’s first sustainable train station in partnership with the State Government of São Paulo, maximizing on-site natural resource efficiency by means of solar energy panels and a water reuse system. Furthermore, in collaboration with the International Finance Corporation, a World Bank Group institution, and the State Government of São Paulo, we supported the Pinheiros River clean-up program.

We also use ESG as one of the criteria for evaluating our executives, evidencing how deeply embedded the subject is in our culture.

In recognition of our efforts, we have received several ESG accolades in 2021, including Exame magazine’s Best ESG Bank, the Eco Brazil Award, Época Negócios 360°’s Most Sustainable Company, in addition to being named to Fortune magazine’s Change the World list.

Our Business

We provide our complete portfolio of products and services to our ~~27.9~~30 million active customers as of December 31, ~~2020~~2021 through the following business segments:

·●

Commercial Banking: provides services and products to individuals and companies (except for global corporate customers who are managed by our Global Wholesale Banking). The revenue from this segment is derived from the banking and financial products and services available to our account and non-account holders.

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Global Wholesale Banking: offers a wide range of national and international tailored financial services and structured solutions for our global corporate customers, comprised mostly of local and multinational corporations.

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

Commercial Banking	~~Global Wholesale Banking~~
· ~~Retail Banking~~	· ~~Santander Corporate & Investment Banking (“SCIB”)~~
~~Individuals~~
~~SMEs~~
· ~~Consumer Finance~~
· ~~Corporate~~

For the Year Ended December 31,
2020 2019 2018 2020 2019 2018
Net interest income Operating profit before tax
(R$ millions)
Commercial Banking (1) 41,457 42,044 39,391 4,666 18,375 12,397
Global Wholesale Banking 2,985 2,277 2,531 4,998 3,898 3,512
Total 44,443 44,321 41,922 9,664 22,273 15,909

~~(1)~~

Profit before tax reported under commercial banking includes the effects of the hedge for investments held abroad (offset in the same amount in the “Income Tax” line). The effect of the hedge for investments held abroad in 2020, 2019 and 2018 amounted to loss of R$13.583 million, loss of R$1.264 million and loss of R$5,867 million, respectively.

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

As of December 31, Change between 2019 Change between 2018
2020 2019 2018 and 2020 and 2019
(R$ millions)
Individuals 174,042 156,177 133,603 11.4 % 16.9 %
Consumer Finance 51,637 48,421 40,964 6.6 % 18.2 %
SMEs 54,525 53,119 49,624 2.6 % 7.0 %
Corporate(1) 137,618 89,539 97,742 53.7 % -8.4 %
Total Credit Portfolio 417,822 347,257 321,933 20.3 % 7.9 %

~~(1)~~

~~For purposes of loan portfolio presentation, “corporate” includes companies with annual gross revenues exceeding R$200 million, including our Global Corporate Banking customers.~~

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~~Commercial Banking~~

~~Retail~~

~~Individuals~~

~~We have structured the individual customer service segment as follows:~~

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

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

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

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

~~Small and Medium Enterprises (SMEs)~~

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

~~Empresas 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 companies and other major corporations in order to meet their specific needs.

~~Empresas 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.~~

~~Negócios 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 (POS) terminal hosted by Getnet. Through this arrangement, our customers receive benefits for using the Getnet terminal to process their credit card sales, with receipts being posted to a Santander Brasil checking account.

~~Table of Contents~~

~~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.~~

In addition, for companies with annual revenues of up to R$300 thousand, we also offer Negócios Direct (Direct Business). Under this segment, customers have direct access to a relationship manager who is available during extended service hours and via remote channels, such as telephone, e-mail or chat, as well as access to digital channels that facilitate the client’s day to day needs.

~~Consumer Finance~~

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

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

As of December 31, Change between 2019 and Change between 2018 and
2020 2019 2018 2020 2019
Individual consumer finance loan portfolio market share (1) (%) 25.1% 25.0% 25.4% 0.1 p.p (0.4) p.p

~~(1)~~

~~Source: Brazilian Central Bank.~~

~~Corporate~~

Our corporate customer segment comprises large companies that have annual gross revenues greater than R$200 million (except for our Santander Corporate & Investment Banking customers). We focus on fostering a close relationship with our corporate customers through managers and specialists geographically distributed across Brazil, providing customer-tailored services with a complete portfolio of local and global products (products from Commercial Banking and SCIB).

Global Wholesale Banking

●Retail Banking●Santander Corporate & Investment Banking ~~(SCIB)~~(“SCIB”)●Individuals●SMEs●Consumer Finance●Corporate

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	For the Year Ended December 31,
	Net interest income						Operating income before tax
	2021		2020		2019		2021		2020		2019
	(R$ millions)
Commercial Banking(1)		46,236		41,457		42,044		19,491		4,666		18,375
Global Wholesale Banking		5,082		2,985		2,277		5,260		4,998		3,898
Total		51,318		44,443		44,321		24,750		9,664		22,273

(1)

Operating income before tax reported under commercial banking includes the effects of the hedge for investments held abroad (offset in the same amount in the “Income Tax” line). The effect of the hedge for investments held abroad in 2021, 2020 and 2019 amounted to loss of R$2,512 million, R$13,583 million and loss of R$1,264 million, respectively.

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

	As of December 31,						Change between 2020 and 2021			Change between 2019 and 2020
	2021		2020		2019
			(R$ millions)
Individuals		203,678		174,042		156,177		17.0	%		11.4	%
Consumer Finance		55,441		51,637		48,421		7.4	%		6.6	%
SMEs		59,602		54,525		53,119		9.3	%		2.6	%
Corporate(1)		174,634		137,618		89,539		26.9	%		53.7	%
Total Credit Portfolio		493,355		417,822		347,257		18.1	%		20.3	%

(1)

For purposes of loan portfolio presentation, “corporate” includes companies with annual gross revenues exceeding R$200 million, including our Global Corporate Banking customers.

Commercial Banking

Retail

Individuals

We have structured the individual customer service segment as follows:

~~SCIB~~
● Private Banking – is ~~the global business unit that serves~~responsible for customers ~~who, due to their size and complexity, require tailored services or high-value-added wholesale products.~~with at least R$5.0 million in assets available for investment. In this segment, we ~~provide~~offer a ~~wide range~~complete and tailored portfolio of ~~domestic~~financial products and ~~international financial~~ services, ~~to large Brazilian~~investment advice, loans and ~~multinational companies. Our customer portfolio comprises~~asset management through a ~~range of industries, including telecommunications, retail, aviation, real estate~~dedicated manager for investments and ~~logistics, power, construction and infrastructure, natural resources, food, agribusiness and financial institutions.~~
banking services.

~~Our~~
● Santander Select – is responsible for customers with a monthly income above R$10,000, and R$30,000 in ~~the SCIB segment benefit from Santander Group’s global structure~~investments, or more than R$100,000 in investments. The offer here consists of a value proposition with differentiated products and services, ~~which is supported by its worldwide-integrated wholesale banking network and global services solutions, as well as local market expertise and provision of integrated services.~~
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~~Our Portfolio of Products and Services~~
~~Payments~~
~~Credit and Debit Cards~~
We operate in the credit and debit card market by issuing these products to our customers (including both account and non-account holders), with the majority of customers being individuals. Our strategy is to offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.
~~In order to reach~~exclusive service spaces, relationship managers who serve a ~~greater~~small number of customers and remain competitive, we launched the SX card in November 2020, as part of the SX strategy detailed below. This product benefits highly engaged and transactional customers, facilitating the exemption from annual card fees. In addition, we also took the opportunity with the SX card to launch a more modern and ambitious card design for our customers.
~~We also improved our digital journey to~~ provide better customer self-service, which we believe is a key component for higher customer engagement and was especially important in this new cycle. A recent novelty is “Clique e Retire”, a new physical card delivery system that provides autonomy and agility by allowing customers to opt to collect their cards from self-service machines.
~~The following table sets forth certain key financial and operating data regarding our credit card business for the periods indicated.~~
As of and For the Year Ended December 31, Change between 2019 and Change between 2018 and
2020 2019 2018 2020 2019
Credit card portfolio market share(1) 13.4 % 12.9 % 13.3 % 0.5 p.p (0.37) p.p
Credit card portfolio (R$ billion) (2) 37.8 36.1 30.9 (100.0 %) 16.8 %
Total card turnover (R$ billion) (2) 242.0 236.4 201.6 2.4 % 17.3 %
Credit card turnover (R$ billion) (2) 158.7 161.0 137.1 (1.4 %) 17.4 %
Total card transactions (in millions) (2) 2,570.8 2,725.4 2,338.2 (5.7 %) 16.6 %
Credit card transactions (in millions) (2) 1,300.0 1,450.9 1,206.1 (10.4 %) 20.3 %
Participation of credit card in the household consumption – Market overview (2)(%) 24.3 % 24.5 % 23.1 % (0.24 p.p) 2.94 p.p
~~(1)~~ ~~Source: Brazilian Central Bank, as of December 31, 2020.~~asset management advisory services,
~~(2)~~ ~~Source ABECS – “Monitor bandeiras”. The data relating for the year ended December 31, 2018 has been revised as a consequence of the restatement of the methodology of monitoring issued by ABECS.~~
● Santander ~~Way~~
~~Santander Way~~Van Gogh – is ~~an app offered~~responsible for customers with a monthly income ranging from R$4,000 to R$10,000, or with investments above R$40,000. Our goal is to understand the needs of our ~~cardholders that allows~~customers at each stage of their lives and provide them to manage their Santander Brasil cards at any time. This complete payment platform also works as a digital wallet, enabling customers to conduct instant contactless payments. The app is frequently updated with new features. Some of the most notable features launched in 2020 included: (i) extra loan and installment offers, (ii) virtual cards, (iii) functions for safer online purchases without a physical card, (iv) prepaid mobile recharges, and (v) chatbots for customer service. In 2020, we had 9 million active customers using Santander Way.
~~Superdigital~~
~~Superdigital is a digital, pre-paid solution that allows customers to manage their daily~~ financial ~~activities and pre-paid accounts entirely online~~advice through a ~~user-friendly interface.~~multi-channel solution, including financial products and services, as well as financial advice,
● Santander Especial – is responsible for customers who earn up to R$4,000 per month. Our business model offers simple and efficient solutions with an attractive cost benefit to the customer, primarily through electronic channels.
Furthermore, we also support our Select and Van Gogh customers through our Santander Direct channel, Santander Direct is suited to customers who want more flexible service hours, from 8:00 a.m., to 10:00 p.m. and who prefer using a remote method, such as telephone, e-mail or chat, as well as access to digital channels. This service complements our offering and broadens our capillarity by catering to regions where we do not have a physical presence.
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We launched the following products or functionalities for retail customers in 2021:
~~Superdigital~~
● Santander Especial – New customers ~~can easily~~who opened their accounts on our digital channels have access to Santander Direct.
● New account digital process - We endeavor to simplify the account opening process using internal and ~~rapidly (i) make withdrawals~~external information and making the experience quick and simple for new customers.
Small and Medium Enterprises (SMEs)
We serve SMEs under the “Santander Negócios e Empresas” brand, with the following customer service segmentation model:
● Empresas 3 Núcleos (Core Companies) – responsible for companies with annual revenues between R$30 million and R$200 million. Our service model is based on dedicated relationship managers, a team of experts for more complex demands and loan managers specializing in ~~the “Banco24Horas” ATM network; (ii) send~~risk management. We also provide specialized services to multinational, technology companies and ~~receive money from any bank institution; (iii) recharge prepaid mobile phones; (iv) carry out foreign exchange transactions~~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 ~~10 different currencies; and (v) recharge public transportation passes using~~R$3 million. We offer these customers a simple banking solution through an app. In addition to all these features, customers also receive an international MasterCard credit card to make purchases in physical and online stores, and gain access to our rewards and “MasterCard Surpreenda” programs, which offerintegrated account that combines a ~~range of benefits and discounts.~~
~~On February 28, 2020, we sold our entire equity interest in Superdigital to Superdigital Holding Company, S.L.~~corporate account with a company indirectly controlled by Santander Spain. For further information regarding this sale, see “See “Item 4. Information on the Company—4A. History and Development of the Company—Important Events.”
~~Merchant Acquiring Market | Getnet~~
Getnet is a technology company that offers solutions, both physically and digitally, to individuals and businesses. The acquisition of Getnet, which was completed in 2019, gave us more flexibility, and enabled us to create more complete and tailored solutions for our customers by integrating its services with the Bank.
~~Through Getnet, we are able to offer a wide array of payment solutions for individuals and businesses, including: (i) mobile and Wi-Fi~~ point of sale, or ~~POS devices; (ii) SuperGet,~~“POS,” terminal hosted by our former subsidiary Getnet. Through this arrangement, our customers receive benefits for using the Getnet solution to process their credit card sales, with receipts being posted to a ~~mobile POS device that self-employed professionals~~Santander Brasil checking account.
● Negócios Direct - for companies with annual revenues of up to R$300 thousand. We offer these customers direct access to a relationship manager who is available during extended service hours and small companies can buy or rent; (iii) TEF (Electronic Transfer of Funds), a solution for establishments with a significant number of transactions, operating in synergy with the establishment’s systems and offering sales reconciliation through our bank-integrated customer benefits; (iv) Getnet App, which allows users to track detailed sales transactions in real time and amounts that can be anticipated, while also providing business analytics information and richer data sets that business owners can use to better manage their activities,via remote channels, such as best times of the day to sell; (v) Digital POS, a complete solution that can be customized and, when connected to the internet, allows app downloads and the use of integrated management functions; (vi) Getnet Digital Platform, a tool for all e-commerce environments, with integrated services such as safe boxes, recurrence and anti-fraud systems, which is modeled after the “one-stop shop” concept and provides financial intermediation between a marketplace and its storeowners,telephone, e-mail or chat, as well as ~~several other financial services,~~access to digital channels that facilitate the client’s day to day needs.
● Empresas MEI (Individual Microentrepreneur) – responsible for companies with annual revenues of up to R$81 thousand. We offer these customers a simplified and cost-effective option through our Santander Conta MEI, a remote service, and digital solutions such as ~~bill generation,~~Gent& Santander – the artificial intelligence solution for service and sales conciliation; and (vii) Getnet Digital Store, which is geared towards SMEs, allows users to set up their stores online, and offers a number of services such as a payment platform, alongside visual and fully integrated management.
~~The following table sets forth certain key financial and operating data regarding our merchant acquiring business for the periods indicated.~~
As of and For the Year Ended December 31, Change between 2019 and Change between 2018 and
2020 2019 2018 2020 2019
(R$ millions, except as otherwise indicated)
Market share of total turnover(1) 13.6 % 11.3 % 12.3 % 2.3 p.p (1.0 p.p)
Debit turnover 105.8 80.9 73.4 30.8 % 10.2 %
Credit turnover 167.9 126.6 114.1 32.6 % 11.0 %
Number of debit transactions (thousand) 1,572,685 1,415,089 1,245,269 11.1 % 13.6 %
Number of credit transactions (thousand) 1,234,105 1,070,717 893,519 15.3 % 19.8 %
~~(1)~~ Source: Data for 2020 is based on ABECS Monitor Bandeiras - Acquirers data for the nine-month period ended September 30, 2020. Data for the year ended December 31, 2020 was not available as of the date of this annual report. For comparison purposes, the difference between September 30, 2020 and September 30, 2019 would be: +2.3 p.psales.
Consumer Finance
We provide consumer credit to finance motor vehicles, goods and services directly or through intermediate agencies, Santander Financiamentos is our main service channel, but we also operate under multiple brands.
The following table sets forth certain key financial and operating data regarding our consumer finance business for the periods indicated:

As of December 31,
Change between 2020 and 2021
Change between 2019 and 2020

2021
2020
2019
Individual consumer finance loan portfolio market share (1) (%) 24.4% 25.1% 25.0% (1.1) p.p. 0.1 p.p.
(1) Source: Brazilian Central Bank.

Corporate
Our corporate banking segment aims to be the main distribution channel of the Santander Group to Brazilian and foreign and/or multinational corporate clients. The product offering ranges from simple cash accounts to
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mergers and acquisitions advisory services. We leverage our strength in consumer finance, asset and wealth management, payments and markets to serve our clients and their shareholders, employees, clients and suppliers. We serve companies with annual gross revenues in excess of than R$200 million located across Brazil by physical and digital channels. Our corporate banking segment has been constantly evolving as a segment relying on a disciplined analytical toolkit, consistent communication and workforce upskilling.
Global Wholesale Banking
Santander Corporate & Investment Banking (SCIB)
SCIB is the global business unit that serves customers, who, due to their size and complexity, require tailored services or high-value-added wholesale products. In this segment, we provide a wide range of domestic and international financial services to large Brazilian and multinational companies. Our customer portfolio comprises a range of industries, including telecommunications, retail, aviation, real estate and logistics, power, construction and infrastructure, natural resources, food, agribusiness and financial institutions.
Our customers in the SCIB segment benefit from Santander Group’s global structure of services, which is supported by its worldwide-integrated wholesale banking network and global services solutions, as well as local market expertise and provision of integrated services.
Our Portfolio of Products and Services
Payments
Credit and Debit Cards
We operate in the credit and debit card market by issuing these products to our customers (including both account and non-account holders), with the majority of customers being individuals. Our strategy is to offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.
In order to reach a greater number of customers and remain competitive, we launched the SX card in November 2020, as part of the SX strategy detailed below. This product benefits highly engaged and transactional customers, facilitating the exemption from annual card fees. In addition, we also took the opportunity with the SX card to launch a more modern and ambitious card design for our customers.
To improve customer experience for the high-income segment, where we are aiming to increase market share and brand awareness, we launched the Gold, Platinum and Centurion products with American Express which include NFC technology, the accumulation of Esfera points that do not expire and still allow access to Membership Rewards, an exclusive American Express program.
In line with Santander Brasil’s global purpose of becoming NetZero by 2050, we launched cards made from recycled material in July 2021. The new cards made of recycled material were issued to customers who already had an SX or Elite card, close to expiry. We expect to make the official launch for the first quarter of 2022, with the issuance of 100% of SX and Elite cards with recycled material. Currently, we are the only bank in Brazil that issues cards made from recycled material.
In the SMEs segment, believing in the great potential of microentrepreneurs, or “MEI,” who represent more than half of the companies in Brazil, we developed an exclusive card for this segment. The MEI card grants customers discounts on purchases made with partners, chosen according to the microentrepreneurs field of activity, as a result of which cardholders have access to exclusive offers for the purchase of input for their companies. In addition, there is the possibility of an annual fee waiver by binding the card by using the card on a monthly basis or by registering with the PIX system.
In line with the objective of becoming an open financial services platform, in November 2021 we launched a partnership with Samsung, a solution that offers digital account opening, card sales and SIM loans on the first screen of Samsung pay. The objective is to provide a simple and fluid journey within the app that is already used on a daily basis to pay for on-the-go purchases.
We also improved our digital journey to provide better customer self-service, which we believe is a key component for higher customer engagement. A recent novelty is “Clique e Retire,” a new physical card delivery system that provides a quick, autonomous solution for customers by allowing them to opt to collect their cards from self-service machines.
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The following table sets forth certain key financial and operating data regarding our credit card business for the periods indicated.
As of and For the Year Ended
December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 2020 2019
Credit card portfolio market share (1) 12.4 % 13.4 % 12.9 % (1.0 p.p.) 0.5 p.p.
Credit card portfolio (R$ billion) (2) 48 37.8 36.1 27.0 (100.0 %)
Total card turnover (R$ billion) (2) 306.0 242.0 236.4 26.4 2.4 %
Credit card turnover (R$ billion) (2) 203 158.7 161.0 27.9 (1.4 %)
Total card transactions (in millions) (2) 3,555.3 2,570.8 2,725.4 38.3 (5.7 %)
Credit card transactions (in millions) (2) 1,859.1 1,300.0 1,450.9 43.0 (10.4 %)
Participation of credit card in the household consumption (only debit)– Market overview (2)(%) 24.1 % 17.4 % 13.8 % 6.7 p.p. 3.6 p.p.
Participation of credit card in the household consumption (only credit) – Market overview (2)(%) 42.1 % 25.2 % 24.0 % 16.9 p.p. 1.2 p.p.
Participation of credit card in the household consumption (total, debit and credit) – Market overview (2)(%) 69.3 % 43.5 % 38.2 % 25.8 p.p. 5.3 p.p.
~~On February 25,~~
(1) Source: Brazilian Central Bank, as of September 31, 2021. Data for the year ended December 31, 2021 ~~further to~~was not available as of the ~~Material Facts disclosed~~date of this annual report.
(2) Source ABECS – “Monitor bandeiras,” The data relating for the year ended December 2021 has been revised as a consequence of the restatement of the methodology of monitoring issued by ABECS.
Santander Way
Santander Way is an app available to our cardholders that allows them to manage their Santander Brasil cards at any time and place. This complete payment platform also works as a digital wallet, enabling customers to conduct instant contactless payments. The app is frequently updated with new features. Some of the most notable features launched in 2021 included: (i) extra loan and installment offers, (ii) virtual cards that allow purchases before the physical card arrives, (iii) functions for safer online purchases without a physical card, (iv) possibility for the customer to update his or her income to obtain a higher credit limit, and (v) chargeback from unrecognized purchases. In 2021, we have nine million active customers using Santander Way.
Merchant Acquiring Market | Getnet
Getnet is a technology company that offers payment solutions to a range of merchants, from large businesses to the small entrepreneurs, both physically and digitally. Getnet was our subsidiary until the completion of the Spin-Off on October 26, 2021. For more information on the Spin-Off of Getnet, see “—A. History and Development of the Company—The Getnet Spin-Off.”
The following table sets forth certain historical key financial and operating data regarding Getnet’s business for the periods indicated.
As of and For the Year Ended December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 (1) 2020 2019
(R$ millions, except as otherwise indicated)
Market share of total turnover (2) 15.3 % 14.9 % 11.3 % 0.4 p.p. 3.6 p.p.
Debit turnover (3) 105.8 105.8 80.9 0 % 30.8 %
Credit turnover (3) 182.7 167.9 126.6 8.8 % 32.6 %

(1) We completed the Spin-Off of Getnet on ~~November 16, 2020~~October 26, 2021 and, ~~February 2, 2021, we announced that our Board of Directors approved~~as a ~~separation from our merchant payment business, which~~result, Getnet is ~~undertaken by our~~no longer a subsidiary ~~Getnet, in order to concentrate the technology and payments businesses~~ of Santander ~~Group~~Brasil. We stopped consolidating Getnet within ~~PagoNxt, a new technology-focused global payment platform. Following the potential spin-off~~our results of our equity interest held in Getnet, or the “Spin-Off,” which will be resolved upon by our shareholders in an extraordinary shareholders’ meeting, our shareholders would become direct shareholders in Getnetoperations on a pro rata basis. Accordingly, our shareholders immediately prior to the Spin-Off would hold a percentage of equity interest in Getnet in the same proportion as they held in Santander Brasil prior to the Spin-Off. After the approval of the Spin-off by our extraordinary shareholders’ meeting, our shares and units will be traded with the right to receive the shares and units issued by Getnet until the record date, which, once determined, will be disclosed to the market by means of a Notice to Shareholders.
~~Esfera~~
Esfera is our loyalty program, which can be accessed through its own website and mobile app. Our loyalty platforms enable our credit card holders to exchange their reward points for many products, services and travel benefits, including exclusive deals and discounts with partners such as Cinépolis, FastShop and Casas Bahia, among others.
~~Ben~~
Ben is an employee benefits company that provides greater flexibility, purchasing power and quality of life to its users by creating, supplying and managing various types of employee benefit vouchers (e.g. meals, such as Vale Alimentação and Vale Refeição, as well as transportation) in the form of magnetic cards. These benefits are offered through an integrated digital platform.
~~Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais LTDA.~~
~~Ben is currently working on sales partnerships and the development of new products, such as gift cards and other benefit options to expand its portfolio.~~
~~The following table sets forth certain key financial and operating data regarding our merchant acquiring business for the periods indicated.~~

As of and For the Year Ended
December 31,
2020 2019 2018
(in R$ millions, except as otherwise indicated)
Card Purchases 946 560 -
Number of Cards (in thousands) 217 98 1
Number of Transactions (in thousands) 12,192 9,534 -
Merchant accredited (in thousands) 338 253 4
March 31, 2021. For ~~further~~additional information ~~see also “Item 4. Information~~ on the ~~Company—A—History and Development of the Company—Important Events.”~~
~~Payroll Loans~~
Payroll loans support both account and non-account holders in the execution of projects and financial organization. Under these loans, monthly installments are deducted directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, significantly reducing our credit risk. We offer these payroll loans to our customers through our mobile banking platform and our branches. Our customers can refinance their payroll loans, as well as choose from other options to help them manage their debts. Furthermore, these loans are also offered to non-account holders through Olé Consignado. For further information on relevant events relating to Olé Consignado’s corporate events,Spin-Off, see “Item 4. Information on the Company—A—A. History and Development of the Company—~~Important Events.”~~
The ~~following table sets forth certain key~~Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
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(2)   Source: Data for 2021 relates to the nine-month period ended September 30, 2021 and ~~operating data regarding our payroll loans~~is based on ABECS Monitor Bandeiras - Acquirers. Data for the year ended December 31, 2021 was not available as of the ~~dates indicated.~~
As of December 31, Change between 2019 and Change between 2018 and
2020 2019 2018 2020 2019
Market share in origination (1) 22.3% 13.2% 12.2% 9.09 p.p 1.01 p.p
Payroll loan portfolio (R$ billion) 48.1     43.0    33.8     11.9% 27.1%
~~(1)~~date of this annual report. For comparison purposes, the difference between September 30, 2021 and September 30, 2020 would be an increase of 1.7 percentage points.
(3) Considers data until September, 2021.
We completed the Spin-Off of Getnet in October 2021, and Getnet is no longer our subsidiary. However, on April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.
Following the Spin-Off, Getnet is operating as the Brazilian leg and regional acquirer of the Santander Group’s PagoNxt merchant solutions. PagoNxt is a strategic initiative that seeks to promote sustainable and profitable growth by integrating various payment solutions for businesses and consumers using the latest technology. PagoNxt is an autonomous company within the Santander Group. Through its three lines of business, namely merchant solutions for businesses, trade solutions for international trade and consumer solutions for consumers, it provides solutions not only to banking clients of the Santander Group but also to third-party customers, financial institutions and fintechs.
Esfera
Esfera is our loyalty program, which can be accessed through its own website and mobile app. Our loyalty platforms enable our credit card holders to exchange their reward points for many products, services and travel benefits, including exclusive deals and discounts with a broader selection of partners such as some of Brazil’s largest retailers and a cinema chain, among others. Esfera also operates a marketplace offering cashback to is clients on purchases of products that aggregate more than sixty partners as of the date of this annual report.
Ben
Ben is an employee benefits company that provides greater flexibility, purchasing power and quality of life to its users by creating, supplying and managing types of employee benefit vouchers (e.g. meals, such as Vale Alimentação and Vale Refeição, as well as transportation) in the form of magnetic cards. These benefits are offered through an integrated digital platform.
Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.
Ben is currently working on development of new products, such as fuel cards and other benefit options to expand its portfolio.
Ben added Ben Único to its portfolio. This product allows customers to have two kinds of benefits in a single card, reducing the cost with card emission and logistics, contributing with ESG metrics,
According with new products developing planning, Ben submitted a request to the Brazilian Central Bank to issue a license to operate as a payment institution (instituição de pagamento) and it was granted in December 2021.
The following table sets forth certain key financial and operating data regarding Ben´s business for the periods indicated.
As of and For the Year Ended December 31,
2021 2020 2019
(in R$ millions, except as otherwise indicated)
Card Purchases 1,484 946 560
Number of Cards (in thousands) 565 217 98
Number of Transactions (in thousands) 20,477 12,192 9,534
Merchant accredited (in thousands) 365 338 253
For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
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Payroll Loans
Payroll loans support both account and non-account holders in the execution of projects and financial organization. Under these loans, monthly installments are deducted directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, significantly reducing our credit risk. We offer these payroll loans to our customers through our mobile banking platform and our branches. Our customers can refinance their payroll loans, as well as choose from other options to help them manage their debts. Furthermore, these loans are also offered to non-account holders through Olé Consignado. For further information on relevant events, relating to Olé Consignado’s corporate events, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
The following table sets forth certain key financial and operating data regarding our payroll loans as of the dates indicated.
As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 2020 2019
Market share in origination (1) 16.96 % 18.90 % 13.2 % (1.94) p.p 9.09 p.p
Payroll loan portfolio (R$ billion) 53.3 48.1 43.0 10.85 % 11.9 %
(1) Source: Brazilian Central Bank, ~~as of December 31, 2020, December 31, 2019 and December 31, 2018, as applicable.~~
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~~SIM~~
SIM is a digital lending platform for individuals through which customers can apply, and be approved, for a loan completely online. After 15 months of operation, SIM has already achieved a positive net profit, a loan portfolio of R$700 million as of December 31, 2021, 2020 and ~~a market share of 0.5%.~~2019, as ~~of December 31, 2020. SIM also has a high level of customer satisfaction, with an NPS of 80 points.~~
~~emDia~~
emDia is an online debt renegotiation platform. It provides customers with a simple platform to access debt renegotiation services on a 24/7 basis. As of December 31, 2020, emDia had 4 million customers and had contributed to the recovery of R$46 million in credit volume in 2020.
applicable

SIM
SIM is a digital lending platform for individuals through which customers can apply, and be approved, for a loan completely online. After two years of operation, SIM has already achieved a positive net profit, a loan portfolio of R$1.6 billion as of December 31, 2021 and a market share of 0.7%, in the year ended December 31, 2021, as well as a total of 6.5 million registered users as of December 31, 2021. SIM also has a high level of customer satisfaction, with an NPS of 80 points in the year ended December 31, 2021.
emDia
emDia is an online debt renegotiation platform. It provides customers with a simple platform to access debt renegotiation services on a 24/7 basis, As of December 31, 2021, emDia had 6.5 million customers and had contributed to the recovery of R$78 million in credit volume in 2021.
Mortgages
We offer long-term financing to our customers for real estate purchases, secured by deeds of trust. We consider mortgages to be a strategic product due to their lower risk (since the acquired property serves as collateral) and their ability to increase our customer loyalty (especially since we offer customers more attractive rates if they choose to bank with us). In this market, our customers, and those of our competitors, are primarily individuals.
We do not offer mortgage loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 90% of the value of the property to be purchased, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of the borrower’s monthly gross income,
To facilitate the process for our customers, we provide a real estate digital platform where customers can obtain mortgages completely online. We were the first bank in Brazil to offer customers the opportunity to secure a mortgage without being physically present, except for the signing of the agreement and returning it duly registered. We have a partnership with the largest real estate platform in Brazil in order to improve our sales network and strengthen our digital presence.
The following table sets forth certain key financial and operating data regarding our mortgage business for the periods indicated:
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As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 2020 2019
(in R$ billions, except percentages)
Mortgage loan portfolio 54.8 45.8 39.7 19.7 % 15.4 %
Individual sector mortgage loans 53.0 44.0 37.2 20.5 % 18.3 %
Loan to value(1) – Production (% quarterly average) 65.5 % 64.9 % 62.9 % 0.06 p.p. 2.0 p.p.
Loan to value – Portfolio (%) 52.5 % 52.2 % 49.4 % 0.30 p.p. 2.75 p.p.
(1) Ratio between loans and the value of the property to be purchased, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of the borrower’s monthly gross income.
To facilitate the process for our customers, we provide a real estate digital platform where customers can obtain mortgages completely online. We were the first bank in Brazil to offer customers the opportunity to secure a mortgage without being physically present, except for the signing of the agreement and returning it duly registered. We have a partnership with the largest real estate platform in Brazil in order to improve our sales network and strengthen our digital presence.
~~The following table sets forth certain key financial and operating data regarding our mortgage business for the periods indicated.~~
As of December 31, Change between Change between
2020 2019 2018 2019 and 2020 2018 and 2019
(in R$ billions, except percentages)
Mortgage loan portfolio 45.8 39.7 36.3 15.4 % 8.3 %
Individual sector mortgage loans 44.0 37.2 31.4 18.3 % 18.4 %
Loan to value(1) – Production (% quarterly average) 64.9 % 62.9 % 60.6 % 2.00 p.p 2.31 p.p
Loan to value – Portfolio (%) 52.2 % 49.4 % 48.7 % 2.75 p.p 0.73 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 “Use Casa”, where customers can receive a loan and provide real estate as collateral. This product enables customers to access financing to pursue their personal objectives. “Use Casa” experienced a marked increase in market share, achieving an overall market share of 29.5% in 2020 as compared to 20.5% in 2019.
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Home Equity
In our portfolio of loan products, we also offer a “home equity” financing product called “UseCasa” in which clients can receive a loan if they provide real estate as collateral. This product enables clients to access financing to pursue their personal objectives. “UseCasa” has increased its market share to 23.5% in 2021, maintaining our position as the leading private sector bank for these types of loans in Brazil. Our portfolio was R$3.2 billion in 2021, an increase of 27% in the year ended December 31, 2021 compared to the year ended December 31, 2020. Efficiency has also improved as approximately 50% of loans are now approved in less than 10 days. We do not offer home equity loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 60% of the value of the property, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of borrowers’ monthly gross income.
To facilitate the process, customers can obtain home equity loans completely online through our real estate digital platform. When using this option, customers only need to be physically present when signing the contract and ~~also~~ when returning it once it is duly registered.
Tailored Products and Services
As mentioned above, we offer a complete set of services and products worldwide. In this way, we have a portfolio that ranges from basic to tailor-made and highly complex solutions in the following areas:
·     Global Transaction Banking - responsible for the sale and management of local and global transactional banking products, which includes local loans, commercial finance, transfers of BNDES on-lending, guarantees, structured loans and cash management solutions.
·     ~~Global Transactional Services - responsible for sales and management of global transactional banking, trade finance, guarantees, structured loans, and funding from international banks.~~
·     Global Debt Financing - includes funding and financial advisory services related to projects, origination and distribution of fixed-income securities in the debt capital markets (DCM), financing of acquisitions and syndicated loans, other structured financing arrangements, subordinated debt and energy efficiency transactions.
·     ~~Investment Banking - offers advisory services for mergers and acquisitions (M&A) and equity capital markets transactions, including initial public offerings and follow-on offerings.~~
·     ~~Equities – provides stock brokerage and advisory services, equity services for individuals, corporate, and financial institutional investors in stocks, derivatives, as well as equity research.~~
·     Treasury Customers - responsible for structuring and offering foreign exchange, derivative and investment products for customers from several segments of Santander Brasil, including institutional investors, corporate and retail customers.
·     Market Making - responsible for the pricing of customer deals originated by our sales force from corporate, institutional, private banking and retail segments. This department also conducts our proprietary trading activities.
● Global Transaction Banking – Responsible for the sale and management of local transactional banking products, which include local loans, commercial financing such as on-lending of funds from development banks, structuring of local loans and cash management solutions).
● Global Transactional Services – Responsible for the sale of global transactional products, financing for export and import, guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks.
● Global Debt Financing – Responsible for the provision of financing and financial advice on infrastructure projects, origination, and distribution of fixed income instruments in capital markets both locally and internationally, financing for acquisitions and syndicated loans in local and foreign currency.
● Investment Banking – Advice on mergers and acquisitions and equity transactions in the capital markets.
● Equities – It operates brokerage services for individual, corporate and institutional investors in stocks, listed derivatives and research.
● Treasury Customers – Responsible for structuring and offering foreign exchange products, derivatives and investments to clients in our various segments, including institutional investors, corporate clients and individuals.
● Market Making – Responsible for the pricing of operations (foreign exchange and derivatives) for customers originating from the sales efforts of our corporate, institutional, corporate, private banking and retail. This area is also responsible for managing our proprietary books.
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● Energy Trader – Performs transaction with qualified customers and end consumers, and also acts as a hedge and market making provider in the energy markets.
We are one of the leading banks in capital markets and financial advisory services in the Brazilian and international markets as evidenced by the awards we have received, of which the most significant are listed in the table below.

Company
Acknowledgments
Dealogic
~~First Quarter of 2020~~Full Year 2021
#8 Latin America & Caribbean ECM Revenue
#2#9 Latin America ECM Volume by Bookrunner
#10 Brazil M&A ~~LatAm - Deal Announced¹~~Revenue by Advisor
#3#6 Brazil M&A ~~Brasil - Deal Announced¹~~
~~#6 M&A Brasil -~~ Volume ~~Announced¹~~
by Advisor
#4 ~~ECM Brasil - Deal Announced~~²Latin America & Caribbean DCM Volume by Bookrunner
#8 Latin America and Caribbean Loans Volume by Bookrunner
~~#11 ECM Brasil - Volume Announced~~²#8 Latin America and Caribbean IB Revenue by Bookrunner
#5 Brazil Investment Banking by Bank¹
#1 ~~Global Financial Advisor - Deals Announced (Brasil in the International Markets)~~
~~#1 Global Renewables MLA - Deals~~Latin American & Caribbean Project Finance Loans Volume ~~Announced~~
~~#1 Global Renewables MLA - Deals Announced~~
by MLA²
#1 Americas ~~MLA - Deals Announced~~
Project Finance Volume by Finance Adviser to Consortium²
#1 Americas ~~Financial Advisor - Deals Announced~~
~~#1 LatAm & Caribe MLA - Deals & Volume Announced~~
~~#2 Global Financial Advisor - Volume Announced (Brasil in the International Markets~~
~~#2 Americas Renewables MLA - Volume Announced~~
~~#2 Americas Financial Advisor - Volume Announced~~
~~#3 Americas MLA - Volume Announced~~
~~#1 Global ECA Financing~~Project Finance Volume by ~~MLA~~Finance Adviser²
~~#1 LatAm & Caribbean ECA Financing~~#4 Americas Renewable Energy Project Finance Volume by ~~MLA~~MLA²

~~OBS:~~¹ For the third quarter of 2021
~~GDF: Position 2019 FY~~
~~IB: (1) excludes fairness opinions / (2) Not included deals made in~~² For the ~~EUA – YTD´20~~first half of 2021

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Global Finance Best New Measures to Support Trade Finance Customers during Pandemic 2021
Best Supply Chain Finance Bank Global ~~Finance~~2021
Best Post-Shipment Financing Solution 2021
Best Provider of Short-Term ~~Investments/~~Investments Money ~~for 2020~~
2021
Market Funds in Latin America ~~for~~ 2020
Best Trade Finance Bank in LatAm 2020
~~World´s~~World’s Best Payment Hub Solution ~~for~~ 2020
~~Best Supply Chain Finance Provider in LatAm 2019~~
Best Trade Finance Provider infor LatAm ~~2019~~2020
Institutional Investors
#1 The Latin America Strategy Team
~~First Quarter of 2020~~
#4 The Latin America Sales Team
# Sales Trading Institutional Team
#5 Research Team
First Quarter of 2020
TMI Awards
Best Trade & Supply Chain Finance Bank in South America 2020
Euromoney
B3The Best Bank for SMEs Award in LatAm.
~~#2 Derivatives~~
October 2020
FX Markets
Best Bank for emerging LatAm currencies 2020
Best Bank for LatAm 2020
Best Bank for USD/BRL 2020
Global Trade Review
Best Trade Finance Bank in LatAm 2020
Best Deal Award Route 2020
Best Supply Chain Bank 2020
First Quarter of 2020
~~Best Deal Award Route 2020~~
~~Best Supply Chain Bank 2020~~
Bond Radar
#1 DCM Distributed in the International Market
Brasil Bonds & Corporate Bonds
Full Year 2020
~~Brasil Bonds & Corporate Bonds~~
Trade Finance an IJ Global

Best Supply Chain Finance Bank 2020
Best Receivables Financier 2020
PFI Awards
Global Adviser of the year
First Quarter of 2020
Anbima
#3#2 DCM Distributed in the Local Markets
~~First Quarter of 2020~~
~~#3 3~~#4 DCM Originated in Local Markets– Fixed Income Consolidation
Project Finance
~~Full Year 2019~~
Financing advisory #1 Announced value ~~and Nº Deals~~
~~Concession Auction Financial Advisor #2 Announced values and #2 Nº Deals~~
~~Structuring #5 Announced value #3 Nº Deals~~
First Quarter of 2021
Full Year 2020
Risk Net

Risk Solutions House of the Year 2020
Deals: Cosan (EDQ) / Syngenta (Special Sits)

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Latin Finance

~~Financial Advisor~~Corporate High-Grade Bond of the ~~2020: LatAm~~Year: Suzano FY2020
Equity Follow-On of The Year: Via Varejo
Infrastructure Bank of the Year – Brazil
Syndicated Loan of the Year: LD Celulose
Domestic M&A Deal of the Year: Grupo Notre Dame Intermédica purchases Clinipam
Corporate High-Yield Bond of the Year: Braskem
Bank of the Year: Southern Cone

Bacen
#1 Total FX
~~May 2020~~
~~The Banker~~

~~Most innovative investment bank of the year~~September 2021
The Banker Best Transaction Bank for ~~structured finance 2019~~
Latam 2021

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Customer Solutions
~~Santander SX~~
As required by the new Brazilian instant payment system, PIX, which was established by the Brazilian Central Bank, we developed Santander SX, a system that allows individual and corporate customers to instantly transfer money, at any time, free of charges, in a practical and safe way.
In the fourth quarter of 2020, we introduced SX. We believe that SX is complementary to the Brazilian Central Bank’s instant payment solutions, by offering exclusive benefits to customers, including 10 days of interest-free overdraft for individuals and five days for businesses. Since its launch in November 2020, we have processed more than 36 million PIX transactions (sent and received), totaling more than R$ 43 billion, through SX. More specifically, regarding the financial volume of PIX sent, we achieved a share of 15% in the fourth quarter of 2020, outperforming our regular market share in the credit market.
Agribusiness
Agribusiness remains one of our key areas of expansion, and we believe that expanding our agribusiness network will help broaden our reach into the Brazilian countryside to strategic areas in which we are not yet present. We provide a full range of products and services focused on the agribusiness sector. Our approach towards rural producers differs from the one taken with our other customers in that we offer a specialized relationship to our rural producers. We believe that a network of physical stores and digital solutions will result in a more agile and efficient communication with these customers.
The following table sets forth certain key financial and operating data regarding our agribusiness for the periods indicated.
As of and For the Year Ended December 31, Change between Change between
2020 2019 2018 2019 and 2020 2018 and 2019 As of and For the Year Ended December 31,
Change between
2020 and 2021
Change between 2019 and 2020
2021 2020 2019
Number of agribusiness-focused stores 40    34    21    6% 13% 42 40 34 5 % 6 %
Agribusiness loan portfolio (R$ billion) 13.7 10.9 11.8 26.2% (7.9)%) 13.9 13.7 10.9 1.5 % 26.2 %

Microfinance
We believe that Prospera Santander Microfinance is a leading microcredit-oriented operation among privately owned banks in Brazil, based on market share and portfolio value. This product aims to support formal and informal microentrepreneurs by generating business and ~~income. With~~income with a 100% digitalized service process, in addition to products intended to improve business management skills, we have customers who hire us for services previously not available to them, because they do otherwise have access to financial services, such as property finance, consortium and investment services.
As of and For the Year Ended December 31, Change between 2020 and 2021
Change between
2019 and 2020
2021 2020 2019
Number of Prospera stores 119 99 100 20.02 (1.0 %)
Microfinance loan portfolio (R$ billion) 1.9 1.3 1.2 49.2 % 8.3 %

As of and For the Year Ended December 31, Change between 2019 and Change between 2018 and
2020 2019 2018 2020 2019
Number of Prospera stores 99 100 45 (1.0%) 122.2%
Microfinance loan portfolio (R$ billion) 1.3 1.2 0.7 8.3% 79.1%
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Webmotors
Webmotors is the first and largest Brazilian technology company focused on providing automotive purchase and sale solutions for dealers, original equipment manufacturers and private sellers, holding the largest online automotive listing in Brazil.
Webmotors received ~~over 30.2 million visits each month and had~~ an average of ~~over 3.9~~more than 30 million ~~vehicles listed~~visits per month in ~~2020.~~2021. Through ~~the~~ Cockpit, a pioneering and disruptive platform for ~~car dealers,~~utilities, which ~~combines~~brings together solutions for the entire ~~chain~~network described above, we offer the following solutions: business management/performance, buyer profile (CRM), data intelligence, predictive pricing models and market data (AutoGuru).
~~We have~~Webmotors endeavors to be a platform that accompanies private and corporate users throughout the life of their vehicle, from purchase, to use and sale. In order to do so, Webmotors reformulated the business of its subsidiary Loop, which was a traditional auctioning business, into an omnichannel dealer which is able to increase the sale value of demobilized fleets in its digital and physical stores. Webmotors also launched ~~“+Fidelidade,~~“Agenda Fácil,” a ~~loyalty program aimed at offering incentives to our agents based~~product focused on ~~their loyalty and relationship level with Grupo Santander Brasil and Webmotors. We have sought to improve customers’ after-sales experience~~scheduling services through ~~several functionalities made available on an online portal.~~WhatsApp.
~~During 2020, we launched two service products, Car Delivery and “Troca com Troco” in partnership with Webmotors.~~
Through Car Delivery, customers seek virtual assistance through video calls, resolve concerns online, and receive their vehicle at home, sanitized and with all necessary support. “Troca com Troco” allows customers to sell their current financed vehicles while financing the purchase of a less expensive vehicle, and pocket the difference. This product allows the Bank to better manage credit exposure and control the credit quality of the portfolio with leading customer service.
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Santander Auto
In 2019, we launched Santander Auto, a fully digital car insurance solution which relies on the use of big data analytics for pricing.
The Brazilian insurance market is characterized by: (i) low insurance penetration ~~as a~~in proportion ofto its GDP; (ii) low technological evolution, dominated by companies with low innovation rates, still focused on financial results (due to a history of high interest rates); and (iii) retail brokers as the main distribution channel. As a result, the subscription process still requires that the customer complete a question form (approximately 40 questions). As a result, only approximately 20% of Brazilian vehicles are insured.
Actuarial techniques and behavioral models enable Santander Auto to make an insurance proposal, without making additional information requests from the customer, based on information already available to us.
During 2019, its first year of operation, almost 110 thousand policies were sold, which represents a penetration rate of 16% (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos). These results are based on a pricing system based on information bureaus which provides have a more accurate price, which makes it possible to make an offer at the time the vehicle is purchased, and which enables customers to include insurance in their purchase with a single click.
During 2020, we focused on consolidating our insurance offer, by ensuring that all customers have at least one insurance offer, while also covering the most diverse types of risk. We intend to expand the business through the optimization of our ecosystem and penetration in our customer base.
In 2021, Santander Auto expanded its product offering to cover 95% of all vehicles financed by Santander Financiamentos, reaching a penetration rate of 20% in the year ended December 31, 2021 (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos), and registering an increase of 80% in the number of policies sold in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the fourth quarter of 2021, Santander Auto started to offer car insurance to customers who are not financing their vehicle with Santander Financiamentos in order to expand its distribution channel further.
Solution4fleet and Car10
In 2021, we acquired Solution4fleet, a company specialized in leasing vehicles to third parties. Solution4fleet offers services such as assistance, fleet management, inspection, vehicle maintenance and fine management. It is the only company in the Brazilian market that has a complete ecosystem for fleet management and leasing operations.
We also acquired Car10, a company which provides a marketplace to simplify auto repair shops and services with over 7,000 registered garages across Brazil.
+ Negócios and ~~+ Vezes~~+Vezes | Santander Financiamentos
In 2017, we launched “+Negócios,” which we believe to be an innovative digital trading platform. This simple and intuitive platform enables faster execution of loan simulations, receipt of credit approval and proposal formalization for vehicles, in addition to providing portfolio management reports. In the same year, we also introduced “+~~Vezes”,~~Vezes,” a digital trading platform allowing retailers to offer installment payment options for the sale of goods and services.
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In ~~2020,~~2021, approximately 15 million separate Brazilian individual taxpayer identification numbers were used to simulate vehicle leasing through the “+Negocios” platform, which makes usit one of the most widely used platform in Brazil’s vehicle leasing market.
+Vezes has a strong focus on digital channels. With the use of +Vezes website, two editions of “Decora +” and “Energia +” have been launched, both focused on the development of digital showcases to bring main resellers closer to the end customers, mostly on the furniture and photovoltaic segments. Additionally, Crédito Pessoal +Vezes has also been launched, which is a complementary offer of credit for end customers in their checking account, without a specifically required purpose. We have also advanced multiplying +Vezes presence and service throughout the national territory for the implementation of the CONSULTANT + Model, strengthening the relationship with intermediary customers.
~~We also reformulated~~
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Moreover, “+Fidelidade” is a loyalty program with the ~~“+Vezes” platform in 2020~~objective of offering incentives to agents based on their relationship with Santander Brasil and Webmotors. Accordingly, we have sought to improve ~~customer~~the customer’s post-sales experience ~~and the platform's stability. We also increased our sales force in this business through sales representatives giving us a presence throughout Brazil.~~
by implementing several features on +Fidelidade’s online portal.
Cash Management
We offer cash management solutions to corporate customers and SMEs online through our Internet banking and mobile banking services.
Our revenues from cash management include fees charged for offering the following products: (i) collections, in which we assist customers in carrying out commercial transactions using printed or online payment slips; (ii) payments, consisting of simple and automatic management of our customers’ accounts payable activities through individual transactions or via electronic file transfer; (iii) instant Payments, in which our customer pays and receives funds online with an immediate credit or debit to the account (this can be added to our collection, payments or acquiring products); (iv) payroll, which is intended to facilitate the management of salary and benefits payments to our customers’ employees via an online tool; ~~(iv)~~(v) collection of values, which consists of the payment of cash values and checks at the customer’s points of sale; and ~~(v)~~(vi) custody, by which we perform the custody, control and deposit of predated checks up to the date of clearing.
In addition, we also provide other revenue-generating products which are structured and tailored to the customer’s operation.
Customer Funding
Our main sources of liquidity are customer funding through deposits and other bank funding instruments. These deposits, combined with equity and other instruments, enable us to meet most of our liquidity and legal reserve requirements.
For further information, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”
Investments
Our investment process for retail customers seeks to provide qualified guidance and help them achieve their financial objectives based on ~~four~~five major pillars:
·● Client investment profile -– We assess our customer’s situation to understand their level of financial knowledge, investment horizons, liquidity needs and the levels of risk they are willing to assume, among other factors. This analysis is reviewed periodically, according to the customer’s needs and local ~~regulations.~~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.~~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).;
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·● Execution and implementation -– To assure a successful execution of investment strategy, we provide a complete array of financial products, ranging from banking instruments, bonds, stocks, structured notes, investment funds with an open architecture and selected investment providers, real estate funds and exchange traded funds, among other capital markets instruments. Our partnership with Zurich Santander completes this offering with a wide range of private pension plans. Furthermore, our recent acquisition of Toro Corretora has further enhanced our PI DTVM investment platform by expanding our product offering. For more information regarding this acquisition, see “—A. History and Development of the Company—Important Events—Purchase of Equity Interest ~~over~~in Toro ~~Controle~~Corretora de Títulos e ~~Participações S.A.~~Valores Mobiliários Ltda.;” and
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·● Follow-up -– Our advisory team performs ~~along with the client,~~ a thorough and frequent ~~revision~~review of ~~their~~our clients’ profile, objectives and results ~~seeking~~alongside each client in order to ~~keep their investments~~maintain the client’s investment within the parameters established ~~parameters~~ and ~~Model Portfolio’s guidance.~~the guidance provided by the model portfolio.
In order to identify possible deviations from the investment profile’s recommended positions, we also rely on automated monitoring systems. These controls alert customers of any transactions that compromise the suitability of their portfolio and are in line with our commitment to protect our customers’ interests.
Furthermore, each customer has direct access to their positions through a private access ~~site~~ on the ~~Internet~~internet and ~~Mobile App,~~mobile app, where they can view the evolution of their investment strategies.
Programa Avançar
We also have a non-financial solution, known as “Programa Avanç~~ar”,~~ar,” which is aimed at entrepreneurial customers. ~~Through~~By means of this solution, SMEs can access content and solutions related to management and innovation, internationalization, team building, and other topics relevant to businesses via a web platform. We see this program as a key component of our offering to Brazilian entrepreneurs.
In addition, we offer a digital account solution ~~to these customers, especially~~where individual ~~entrepreneurs.~~
entrepreneurs can purchase banking products and services in a 100% digital experience.
Similarly, we offer “Santander ~~Copiloto”,~~Copiloto,” an enterprise resource planning tool designed for our SME customers. This tool is integrated with the Santander Digital channels, and provides solutions such as e-commerce, sales point software and tax compliance.
Service Channels
We offer our financial services and products to our customers through our multichannel distribution network composed of: (i) physical channels, such as branches, mini-branches and ATMs; (ii) call centers; and (iii) digital channels, such as Internet banking and mobile banking.
Physical Distribution Network
Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network as of the dates indicated.
As of December 31, As of December 31,
2020 2019 2018 2021 2020 2019
Branches   2,153   2,328 2  ,283 1,987 2,153 2,328
Mini-branches   1,411   1,512   1,267 1,384 1,411 1,512
Own ATMs 12,949 13,296 13,641 12,561 12,949 13,296
Shared ATMs 23,798 23,780 23,049 24,255 23,798 23,780

Branch Network
Our branch network offers our entire portfolio of products and services to our customers through a personal and customized approach. The table below shows the geographic distribution of our branch network as of the dates indicated.
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As of December 31, As of December 31,
2020 2019 2018 2021 2020 2019
Northeast   9%   8% 9.74 % 9 % 9 %
North and Midwest   7% 8.42 % 7 % 7 %
Southeast 70% 71% 67.31 % 70 % 70 %
South 14% 14.53 % 14 % 14 %

PABs (Mini-branches)
We offer daily banking services to our SMEs, as well as corporate customers and their employees through our PABs (“Postos de Atendimento Bancário”), which are exclusive sales points located at our customers’ buildings, as well as in hospitals and universities. The presence of PABs in our customers’ offices strengthens our relationship and builds loyalty with those customers, who benefit from the convenience of conducting their banking transactions at their workplace.
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ATMs
We operate an extensive network of ~~12,949~~12,561 ATMs, including those located in our branches and mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates ~~23,798~~24,255 ATM units. Through this network, our customers can access their accounts and conduct banking transactions, as well as purchase most of the products and services available in our portfolio.
~~Call Centers~~
Remote Channel
Our remote channel consists of call centers, ~~provide active Santander Brasil~~online messaging services and contact emails available to all our customers. These allow customers ~~(account~~to solve issues, engage new products and ~~single product holders)~~services and generally interact with ~~consultation, financial transactions and product hiring services. This important distribution channel has a variety of customer self-service facilities. Our call centers~~us to fulfil their banking requirements. We received over ~~150~~25 million contacts per month through our remote channel in ~~2020.~~the year ended December 31, 2021.
In, we began a process to reshape the way in which we interact with customers through our remote channel. In 2021, this transformation allowed us to achieve more than 740,000 sales in December 31, 2021.
Digital Channels
Our digital channels include Internet banking, mobile banking and other digital solutions aimed at facilitating our customers’ access to the products and services that we offer.
The last few years have been marked by a significant digital transformation for us. We believe that in 2021 we have strengthened our focus on customers with a digital mindset while also leveraging digital tools to enhance our efficiency and scalability. In this context, we highlight the ~~following key features:~~
following:
·● ~~OnePay – This service is available through~~We have created an online store to receive and serve our customers on an ongoing basis. In the ~~Santander App~~year ended December 31, 2021 we recorded an average of approximately 442 million total visits per month and ~~enables customers to transfer funds to foreign countries~~we increased the number of digital buyers in ~~various currencies.~~comparison with the year ended December 31, 2020.
·● ~~Santander On “Financial control” – Through the Santander App, customers can access~~We added 557,000 new accounts in December 2021, an increase of 190% when compared to December 2020. We believe this ~~service~~growth is due to ~~view all~~our streamlined account opening process, which improved our customers’ experience, and to an increase in our approval rates as a result of ~~their commitments to us, as well as pending issues with the Brazilian tax authority (Receita Federal do Brasil), Serasa (a Brazilian credit bureau)~~improvements in our fraud detection and the Brazilian Central Bank, thereby enhancing the transparency of the credit relationship with Santander Brasil. Customers can easily access credit quality information and the use of debt with Santander, as well as easily update income data without having to present any payroll or tax documents, and readjust available limits.offline processes.
● We have performed an average of approximately 3.2 million sales per month in the year ended December 31, 2021, an increase of 45% when compared to the year ended December 31, 2020. This increase has been primarily driven by an increase in credit cards sales, representing an average of 297,000 sales per month in the year ended December 31, 2021, an increase of 99% when compared to the year ended December 31, 2020. We have consolidated our position as a leading credit and digital recovery platform in Brazil, with more than 2.4 million contracts per quarter in the year ended December 31, 2021 (considering only individuals) an increase of 69% when compared to the year ended December 31, 2020, and with a share of sales amounting to 64% in loans in the year ended December 31, 2021.
● We have also taken steps to improve our digital customer service, in the form of Gent&, our virtual assistant. Gent& is an artificial intelligence launched in 2020. This solution offers a more personalized digital service that provides greater autonomy for our customers.
The following table provides certain key operating information with regards to our digital channels as of the dates indicated.
For the Year Ended December 31,
2021 2020 2019
(in millions)
Number of digital customers (1) 18.8 15.6 13.4
Number of digital channel transactions (2) 7,482 5,262 4,311

For the Year Ended
December 31,
2020 2019 2018
(in millions)
Number of digital customers(1)   15.6 1  3.4 1  1.4
Number of digital channel transactions(2) 5,262 4,311 4,073
(1) We define digital customers as those who used at least one of Santander Brasil’s digital channels (e.g., mobile banking and internet banking) in the 30 days preceding the end of the applicable year.
(2) Refers to transactions carried out through internet banking, mobile banking and other digital platforms. The data ~~relating~~refers to the year ended December ~~31, 2018 has been revised due to a change in the criteria applicable to digital transactions accounting.~~31.

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The following table provides an overview of the weight of each key distribution channel in our overall distribution system.

For the Year Ended
December 31,
2021 2020 2019
(%)
Internet banking 27.7 37.8 39.7
ATMs 3.6 5.9 8.9
Mobile (1) 62.3 46.9 39.0
Branch 1.1 2.2 4.1
IVR (2) 4.6 6.4 7.4
Call Center 0.7 0.9 0.9

For the Year Ended
December 31,
2020 2019 2018
(%)
Internet banking 36.9 39.7 46.1
ATMs 5.9 8.9 10.4
Mobile(1) 48.0 39.0 34.5
Branch 2.2 4.1 5.2
IVR(2) 6.1 7.4 2.3
Call Center 0.8 0.9 1.4
(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.

~~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~~ ~~– Customers can open an account with Santander Brasil entirely online.~~
· ~~Artificial Intelligence GENTE~~ ~~– Launched in 2020, this solution offers a more personalized digital service that provides greater autonomy for our customers.~~
· ~~LAB 033~~ ~~– Launched in 2019, this is innovation laboratory is focused on creating new solutions that can support transformational projects across our organization.~~
· ~~Santander Corretora App~~ ~~- A digital trading platform offered to our brokerage customers.~~
· ~~Autocompara~~ ~~- Allows customers to obtain insurance quotes from six different insurance companies and purchase the best offer through Autocompara’s website.~~
· ~~Pi DTVM~~ – Acting as a digital broker since 2019, this solution empowers customers to invest through a simple and intuitive digital platform. PI DTVM also provides market information and financial education tools.
Technology and Infrastructure
In ~~2020,~~2021, we ~~optimized~~have performed significant investments in our technology ~~investments,~~systems. We put customers at the center of our strategy. We are continuously seeking improvements in ~~order~~customer experience and satisfaction by launching new services, as well as combining self-service features with human and personalized services and channels.
Therefore, we have strengthened our technological culture and our business systems capacity, which supports an intense flow of more than 53 million customers as of December 31, 2021 and an average of 442 million total visits per month to ~~provide~~our digital channels in the year ended December 31, 2021, along with an efficient and secure processing of an average of more ~~efficiency, digitalization, security~~than 367 million transactions per day in the year ended December 31, 2021. We believe that this continuous improvement of our customer services, combined with the offer of new solutions and ~~quality~~the expansion of the range of our channels contributed to the growth of our customer base by 11% in the year ended December 31, 2021 compared to the year ended December 31, 2020.
We have increased our operational efficiency and scalability, expanding the use of computing to over 75% of operations, and improving the time-to-market of products and services, ~~provided~~by using Agile and DevOps methodologies in the execution of 85% of our projects. Furthermore, we have reduced the number of relevant incidents (which we define as high priority incidents, i.e., those that could result in the unavailability of a wide range of critical services) in the last three years by more than 90% on average, ensuring greater availability of our products and services to our customers. In the challenging scenario brought by the COVID-19 pandemic, we took on the important role of serving as an ally to our customers and the Brazilian economy. Through sizeable investments in technology and enhancements to the capabilities of our channels and digital platforms, we were able to quickly face up to the new reality, while simplifying internal processes and business models.
We established a new technological innovation center (Lab 33) in the city of São Carlos (in the state of São Paulo) and built partnerships with local universities and technical schools in order to identify and recruit qualified talent. In addition to creating job opportunities in São Carlos, this innovation center resulted in the creation of other direct and indirect positions in our technology ecosystem. Furthermore, we boosted the agility and scalability of our software development and deployment processes, while increasing automation levels and adopting advanced cloud computing and artificial intelligence solutions. We have listed below ~~a few~~ other initiatives ~~delivered~~carried on throughout ~~the year:~~2021:
● Investments: We have launched the Algo+ service (stands for “algorithm”), which simplifies the investment process to our customers, allowing them to invest in stocks from the bank’s recommended portfolios without having to sign-in to the home broker. This initiative ensures diversification and time saving in investments, also protecting investors from cognitive biases and human failures.
● Open Banking: We have started to provide the “Open Finance” service to our customers, which allows them to authorize the sharing of their financial data to other financial institutions. This enables us to understand customers’ profiles better, so we can offer personalized products, services, and other benefits, such as increases in credit card limits and competitive banking fees. Customers can also concentrate the management of their finances in a single place, and they will soon be able to manage all their accounts from other banking institutions (e.g., balance and statement checking, making payments and investments) by means of our digital channels. We have also implemented resources and mechanisms to ensure data privacy and security to conform to government regulations.
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·● ~~GENTE:~~ Security: Aiming to provide our customers with a streamlined digital experience, we have offered authentication via facial recognition, eliminating the need to authorize mobile devices at an ATM in order to ~~speed up~~use all the features of our digital channels. The new security system recognizes the customer with the use of artificial intelligence, including legitimacy checks through advanced Machine and ~~optimize the digital services provided~~Deep Learning models developed internally, ensuring proof of life and facial verification. Customers only need to register face biometrics when opening an account and afterwards in their mobile application, which grants our customers ~~we released GENTE,~~with a virtual self-service assistant that customers can use to search for information, ask questions, access account statements, review credit card limits, as well as to perform financial transactions such as transfersmore digital and ~~invoices payments, all through the Santander Mobile App, our commercial portal, WhatsApp or Santander Way.~~secure experience.
· ~~Santander SX:~~ as required by the Brazilian Central Bank, we developed Santander SX, an instant payments platform that allows individual and corporate customers to make money transfers that reach the recipient’s account in a just a few seconds 24 hours a day. Transactions can be performed from transactional account identifier directory (or “DICT”) keys, such as e-mail address, cell phone number, national tax number as well as static and dynamic QR codes.
·● Individual Bank Account (Mobile): We have added new resources and features in order to ~~enhance~~provide a better experience for our ~~customers’ experience,~~customers. Regarding customer service, we ~~improved~~provide the DialMyApp service. When the customers access our ~~mobile app~~call center, they are guided to online services ~~by adding~~(App, Website and Virtual Assistant) through a graphic menu displayed on his cell phone concurrently with the phone call they have placed, which improves engagement and reduces customer service costs. With respect to foreign exchange, we have included a new ~~consulting and sharing features to our individual account mobile app, including~~feature for uploading documents through the ~~ability to generate credit card invoices in portable document format, or “PDF”, check date and~~OnePay service, optimizing the time of carrying out exchange transactions, in addition to improvements in exchange rates checking for the ~~last balance update, as well as view all charges~~main currencies. With respect to investments, we have offered our customers a new feature to monitor and ~~number~~analyze the evolution of ~~days~~their investment portfolio for a given period of time by means of the ~~overdraft account was used.~~Investment Profitability Chart (GRENT).
·● Corporate Bank Account (Mobile): ~~in line with our sustainability goals, we launched a new digital service for~~In order to ensure greater support to our corporate customers, we offer new assistance service channels, such as our AI virtual assistant, as well as direct contact with one of our managers in our corporate mobile App. This service also includes a feature that ~~offers paperless processes~~enables our customers to contract our business management system (Santander CoPilot), by means of which they can control their business sales and ~~greater agility in opening new accounts, with~~inventory. Moreover, the Open Banking feature gives customers an opportunity to share their company data, which ensures a ~~strong lead-time reduction from a few hours to just a few minutes to open an account. Since the launch~~better understanding of ~~this new service, over 20,000 new corporate accounts have been opened using this service.~~their business profiles.
·● Credit Cards: ~~in addition to offering our customers~~In the ~~option~~context of acquiring credit cards through our digital channels, we now provide new after-sales services, such as sending digital invoices and card passwords via text messages. In December 2020, over 74% of credit card invoices were made available via digital channels, while 91% of card passwords were sent via text messaging.
· ~~Car Insurance:~~ our car insurance services are offered through a 100% digital platform, where customers may perform simulations, request inspection services and sign-up for insurance contracts spanning over 12, 24 or 36 months. This new platform aims to boost sales through simple navigation, reduce average quotes and contract time, as well as increase the ~~number of insurance contracts and total premium amount.~~
· ~~Mortgage Services:~~ we have improved the after-sales experience of our real estate loan customers. Our customers can access relevant information about their contract through a single page on our web portal, including total contract amount financed, balance due, overdue balance, interest rates and maturity date, as well as installment due payments.
· ~~Security and Antifraud~~:COVID-19 pandemic, we have expanded the ~~types~~digitalization of ~~electronic authentication methods available, so that~~our card transactional services, enabling customers to self-serve through digital channels for acquisition and post-sales purposes, such as invoice checking via WhatsApp. Another disruptive initiative is the generation of the online card before the physical card, allowing customers to make their purchases in e-commerce and also by cell phone approximation before they receive their physical card by mail.
● Customer Service: Combining entrepreneurship, technology and focus on customer experience, we developed a Voice Analytics solution to scale our capabilities of listening to our customers ~~can validate transactions via biometry, QR code (Santander ID), Token ID~~by means of the use of machine learning, Graphics Processing Units (GPU) and cloud computing, which accelerates our deliveries and adds value to our shareholders. Currently, we have already studied and addressed the needs of our customers going through credit ~~card passwords.~~recovery processes and with reduced investments.
● Software Development Agility: We have ~~also developed~~transformed our software deployment process through the ~~fraud alert center, an antifraud~~adoption of a new solution ~~designed to send alerts to customers about events identified while accessing our digital channels or any changes~~focused on the integration of software development lifecycle tools, providing greater autonomy to the ~~information registered~~development teams, in addition to ensuring production environment stability through automatic deploy and rollback processes without manual interventions (Zero Touch). As a result, our ~~databases. These actions contributed~~development teams are able to ~~protecting~~better meet customer needs, delivering new features with more assertiveness, speed and quality. In just nine months after the process was implemented, twice as many software deploys were made compared to the entire year of 2020.
● Cloud: In order to improve the availability and resilience of our ~~business~~main applications, we expanded the use of our computing capacity with two public cloud services providers, extended our on-premises datacenter network using these cloud providers, and ~~our customers from sensitive information leaks or exposure.~~created a full mesh connectivity model. Using this model, we have updated software applications to use cloud capabilities adopting an abstraction strategy for the providers’ Cloud products (for example: accessing products through open and common protocols), ensuring code standardization and reduction of lock-in (dependency on a single cloud provider technology implementation), in addition to the implementation of normal/peak/special day auto-scaling strategies and the creation of automated capacity to balance applications in multi-cloud service.
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Communications and Marketing
We use and monitor several tools in order to communicate effectively with our customers. These include not only traditional media, such as television and printed media, but also the internet, mobile advertising and social networks.
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Even though social isolation prevented in-person events in 2020, our customer outreach, conducted through direct communication across all available media, including social networks, remained unaffected. We regularly provided information through ~~these channels,~~all available media, seeking to make a real and positive difference in the lives of our ~~customers.~~clients. Such information ~~included~~includes guidance on ~~how~~what open finance is, i.e., an ecosystem that allows financial institution customers to ~~access credit lines~~share their information to other banks which enables banks to develop more tailored products. We publicized updated solutions, like Gent& and ~~other government-sponsored initiatives~~Algo+, an algorithm that helps investors to ~~combat the COVID-19 pandemic, as well as information on the solutions we introduced, such as~~follow our ~~mortgage rate reduction, deferral of loan installment payments and vehicle financing with auto insurance, without inspection.~~monthly portfolio recommendations. Internally, we released more than 200 videos aimed at instructing our teams on how to best-serve our customers, and guidelines to prevent COVID-19 in the workplace. Externally, we ran ~~more than 192~~297 video advertisements on TV and social networks. Our communications campaign generated significant feedback, with ~~more than 34,000~~100,000 articles published in newspapers and magazines, ~~as well as more than 20~~and 120 stories featured in Brazilian national media ~~outlets.~~outlets as well. On social media, we averaged 10 posts per day, with ~~nearly 800~~2.6 million impressions. We have also ~~launched~~joined new media formats on networks such as ~~Spotify (podcast)~~Telegram, WhatsApp and ~~TikTok.~~games. Additionally, we conducted more than ~~150~~120 live broadcasts and events where our senior management, as well as experts and government officials were invited to address several topics, including the current economic scenario, social investment, sustainability, diversity, women’s leadership, entrepreneurship, and culture and ~~entertainment.~~entertainment, The ~~Third~~Fourth Edition of Global Citizen, organized in collaboration with newspaper Valor Econômico and featuring ~~actress and activist Viola Davis and Esther Duflo,~~Al Gore, the ~~youngest person ever to win the~~2007 Nobel Peace Prize ~~in Economics,~~winner, received more than ~~one million~~935,338 views. Also, the ~~21st~~22^nd Annual Santander Conference ~~focused~~showed discussions on ~~discussing actions to fight COVID-19,~~politics, sustainable businesses, health and technology, with the participation of major chief executive officers, public authorities and our leadership. The conference was broadcasted on YouTube, garnering a total of ~~6.1~~7.1 million views.
Sustainability
In Brazil, sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through the Board of Directors, the Executive Committee and the Sustainability Executive Superintendents. The Sustainability Committee is responsible for providing clarification and recommendations to the Board of Directors regarding the development of sustainability-related guidelines.
~~We have organized~~Our sustainability strategy is based on three pillars: (i) strategic and efficient use of environmental resources, (ii) developing potential and (iii) resilient and inclusive economy. Our vision, based on these three pillars, is to contribute to a better society, while maintaining management excellence and responsibility, in accordance with our ~~activities to create what we believe to be one of the best financial platforms in Brazil~~ethical values and using our technology to serve ~~as an agent for the transformation~~people and prosperity of society. This involves promoting sustainability through our business, operations and relationships. We have directed our efforts to improve Brazil’s business environment, which allows people to live up to their full potential and strategically promote the use of Brazil’s natural capital.businesses.
This stance is present in the three pillars of our sustainability strategy, which reflects Brazil that we want to help build, together with our employees, customers, shareholders and society, while also contributing to the UN’s Sustainable Development Goals (“SDGs”): surrounding a Resilient and Inclusive Economy ~~the Development of Potential and the Efficient and Strategic use of Natural Resources.~~
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~~Resilient and Inclusive Economy~~
Our broad commercial activity allows us to advise and support ~~all~~ of our customers and projects. ~~Our~~We believe we can play a role ~~is to be a~~as facilitator and contribute to the generation of jobs and income, and the improvement of logistics and infrastructure for Brazil’s development.
Through this pillar, for example, we offer access to banking services, products and non-financial initiatives.
We have specific products to support ~~micro entrepreneurs~~microentrepreneurs and SMEs, such as the “Prospera Santander Microfinanç~~as”,~~as,” “Programa Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include the topic of financial management in the client's relationship with the Bank, using tools such as Santander On.
In ~~2020, by digitalizing our initiatives,~~2021, we ~~reached 156,000 participations in~~helped 341,000 people through financial inclusion products and financial education initiatives. This number includes content for our social networks, as well as live streams and podcasts on personal financial management and investment. For the first time during the national financial education week, our customer services team, or “SAC,” offered personalized financial advice to customers.guidance.
Furthermore, Santander Brasil launched several benefits to support customers and companies during the COVID-19 pandemic, including the “A Gente Banca” program, as well as long term payroll loans, installment extensions, and service packages aimed at individual microentrepreneurs among others.
Development of Potentials
Our commitment to the development of potential begins with our employees. We have ranked as one of the best companies to work for in the ~~Great Place to Work, or~~ GPTW survey since ~~2016.~~2016, ranking top ten in 2021. Guided by our corporate culture and internal policies, we offer opportunities that promote development and professional growth, in order to build a culture of delivering results, respect, innovation, inclusion and diversity.
We work to create a culture of respect, inclusion and equity, where everyone can develop their talents with their unique attributes. Diversity is one of the five principles of our Code of Ethical Conduct. Our priorities are gender and racial equity, inclusion of LGBTI+ and people with disabilities, as well as diversity of experience and generational diversity. Since 2018, we have set inclusion targets for ~~Afro-Brazilian~~black employees in the bank and female employees in leadership, which in ~~2020,~~2021, were ~~27.4%~~27.3% and ~~28%~~31.4%, respectively. ~~As of December 31, 2020, our Afro-Brazilian and female employees accounted for 25.3% and 28.8%.~~ Additionally, in ~~2020,~~2021, we received two diversity awards from GPTW: one for our ethnic-racial practices and another, for the fourth time, as one of the best companies for women to work.
Through the Santander Universities Program, we offer initiatives focused on granting national and international scholarships, programs for entrepreneurial development, as well as internship and employment programs. On
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As of December 31, ~~2020,~~2021, about ~~24,900~~33,000 scholarships and entrepreneurships were granted with a total investment of ~~about~~approximately R$~~27.2~~33 million.
We also contribute to the promotion of children and adolescents’ rights. Through the “Amigo de Valor” program, Santander Brasil, employees and customers may directly donate a part of their due income tax to the Funds for the Rights of Children and Adolescents (“Fundo dos Direitos da Criança e do Adolescente”). In 2020, this program raised R$15.7 million.
~~In 2020, we took several steps~~maintained our actions to support society ~~during~~and continued with our private social investment strategy with our programs to support children, teenagers, the ~~COVID-19 pandemic:~~
elderly and entrepreneurs.
·● ~~Between March and December 2020,~~In the 19th edition of the Amigo de Valor Program, we ~~donated more than~~raised R$~~100~~19.8 million to support 100 initiatives ~~to mitigate the impact of COVID-19;~~throughout Brazil, benefiting over 12,400 people.
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·● ~~We raised R$3.5 million, and donated another R$3.5 million, out~~Campanha Brasil sem Fome: we are responsible for the donation of ~~the R$100 million mentioned above, to five hospitals to create new intensive care units and purchase personal protective equipment;~~200,351 baskets of staple food.
· In partnership with the other two main private banks in Brazil, we helped lower income women manufacture and distribute more than 17.7 million protective cloth masks. This initiative allowed us to help support their income during the pandemic while also providing masks to those in need;
· ~~Our employees donated about 790 tons of food, clothes and hygiene products, to over 500 non-governmental organizations around Brazil, impacting more than 170 thousand people;~~
· ~~Through our volunteering program, 83 volunteers interacted weekly with elderly people living in shelters supported by “Parceiros do Idoso” in order to give them company and support.~~
Our initiatives, including Amigo de Valor, Parceiro do Idoso, Blood Donation Campaign and Volunteer Program, had an impact on 542,545 people in 2021.
We also organized a 12-hour live festival, streamed on television and radio to help single mothers in deprived communities across Brazil and raised R$3.5 million to the support the “Mães da Favela” project. With our donation included, we are giving a total of more than R$7 million to more than 20,000 mothers through SuperDigital. Through this initiative, we can also introduce these families to our banking services.
Efficient and Strategic Use of Natural Resources
We are implementing changes to our business that contribute ~~towards the goal of helping Brazil make~~to a responsible and more efficient use of ~~its~~our national environmental resources, ~~and move towards~~including with respect to a ~~low-carbon economy. Our activities include,~~reduction in carbon emissions. In this sense, in addition to the responsible environmental management of our operations, ~~financing~~we finance and ~~advising~~advise companies in the fields of infrastructure and renewable energy, ~~and~~while also providing support for sustainable agribusiness.
In the year ended December 31, 2021, we have destined R$ 51.6 billion to foster sustainable businesses, 96% more than in the year ended December 31, 2020. We believe these operations are in line with market benchmarks and include the issuance of green bonds, advisory services to sanitation businesses and financing for renewable energy (such as CDC Solar). For instance, we have transformed the Vila Olímpia station, at the city of São Paulo, into the first sustainable station in Brazil, increasing its efficiency in the use of natural resources on site. As a consequence of our investments, 70% of the energy now used by the station derives from solar panels and it has implemented a system to recycle its water usage.
~~In 2020,~~One year after the launch of Plano Amazônia, a commitment signed by Santander Brasil, ~~made important public commitments towards Brazil’s~~Bradesco and Itaú in connection with measures to enhance and scale up solutions that promote the sustainable regional development, ~~such as~~we highlight the introduction of a R$5 billion credit line for new investments in water and sanitation, as well as the “Amazon Plan” that was launched in partnership with the two other private banks in Brazil. In addition, we believe we are at the forefront of environmental, social and governance matters, or ESG, in Brazil, evidenced by the offer of ESG-linked loans and Renovabio products to customers.
~~The total amount of environmental, social and governance, or ESG, financing which~~following initiatives from Santander Brasil provided through Santander Financiamentos, responsible agribusiness, corporate, retail (individual and corporate customers), project finance, Santander Corporate, and investment banking, including green bonds, totaled approximately R$27 billion.Brasil:
● We made available over R$ 270 million in credit lines directed to cooperatives and agribusinesses in the Amazon region.
● We held the Bioeconomy in the Spotlight conference that has promoted a debate related to bioeconomy, preservation and sustainable development of the Amazon region, with market specialists and the CEOs of Santander, Bradesco and Itaú.
● We have been in contact with regional meatpacking companies to inform them about credit restrictions starting in 2025.
● In early 2021, we have announced our commitment to achieve zero net carbon emissions by 2050. The commitment applies to the Santander Group’s and also to Santander Brasil’s activities, as well as to all emissions from customers from any financial, advisory or investment service the bank offers.
Since 2002, we have adopted social and environmental parameters in the credit risk analysis ~~of credit concession~~ for projects and companies. ~~The assessment carried out by specialized professionals may result~~Our analyses seek to identify issues such as contaminated land, deforestation, labor practices in conditions ~~or restrictions for companies~~analogous to ~~operate~~slavery and child labor, among other matters that would prevent us from doing business with ~~the Bank. For customers with revenues of over R$200 million, this analysis may also influence credit rating, affecting rates, limits, terms~~such projects and ~~guarantee requirements.~~companies.
~~In relation to internal environmental management, we~~We have been carbon neutral since 2010, by completely offsetting our Scope 1 and 2 emissions. ~~Also, since~~Since 2013, we follow a methodology for selecting projects from which to purchase Verified Emission Reductions, ~~(“VERs”),~~or “VERs,” in order to ensure the social and environmental benefits for ~~that~~the Amazon region. In recent years, we ~~have been purchasing~~bought VERs from reforestation and renewable energy ventures.
In addition, we have made a commitment to supply 100% of our operations with renewable energy by 2025, establishing specific metrics for electricity, water, paper and internal renewable energy consumption. In the year ended December 31, 2021, 53% of our energy consumption came from renewable sources.
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In ~~2019,~~2021, we ~~committed publicly to:~~
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· ~~reducing single-use plastic consumption at Santander Brasil, by launching the #Desplastifique program. The implementation plan started with administrative buildings,~~will renew our ISO 14,001 certification in ~~2019 and was scheduled to be completed during the course of 2020. However, due the COVID-19 pandemic, we expect that it will be fully implemented in all branches by the end of 2021; and~~
· ~~powering 100% of our operations with renewable energy by 2025. In December 2020, approximately 47% of our consumed electricity was derived from renewable sources.~~
We improved our “Paperfree” program in 2020 to encourage digitalization, promote the use of rational resources and eliminate bureaucratic processes. The goal is to try to eliminate the use of postal stamps. As a result of the program, at our administrative buildings, including our headquarters, Campinas radar and ~~stores,~~data center, and we ~~collected and recycled around 72,000 stamps.~~will also implement the Zero Landfill Program, with the objective of giving a more sustainable destination for our waste.
Socio-Environmental Responsibility Policy
Our Socio-Environmental Responsibility Policy, or ~~“PRSA”,~~“PRSA,” meets the requirements of CMN Resolution ~~n° 4.327/~~No. 4,327/14 and SARB Regulation 14 of FEBRABAN. These regulations define guidelines and consolidate specific policies for socio-environmental practices in business and relationships with certain parties. These practices include socio-environmental opportunities and impacts, and risk management such as suitability in granting and using credits, management of suppliers and socio-environmental risk analysis. ~~In 2020, the vice-president of Legal Issues joined our~~We also have a PRSA Senior Group, which consists of our vice-presidents of Risks, Legal Issues, Corporate, Human Resources, Finance and Communication, Marketing, Institutional Relationships and Sustainability, and officers of Agribusiness and Compliance. This Group is involved in decision-making related to the PRSA and operates in connection with our Executive Committee.
On September 2021, the Brazilian Central Bank published the new CMN Resolution No. 4.945, which provides for the Social, Environmental and Climate Responsibility Policy (PRSAC) and the actions aimed at its effectiveness. As of July 1, 2022, the PRSA will be revoked and the PRSAC will come into effect.
Competition and Industry Transformation
Currently, there are five commercial financial institutions at the forefront of the Brazilian financial industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica ~~Federal.~~Federal, Together, these financial institutions accounted for ~~73.2%~~71.7% of the credit and ~~75.2%~~73.9% of the deposits available in Brazil as of ~~December 31, 2020,~~September 30, 2021, according to the Brazilian Central Bank and the financial statements of the aforementioned ~~banks.~~
banks,
The following table shows the total loans and deposits of the five leading financial institutions in Brazil at the dates indicated:
Santander Brasil Bradesco Itaú Unibanco Banco do Brasil Caixa Econômica Federal (2) Financial System
December 2020 (R$ billion)
Total loans(1) 411.7 510.3 508.6 681.8 756.5 2,868.9
Total deposits(1) 384.9 545.3 786.6 437.0 512.9 2,666.7
Santander Brasil Bradesco Itaú
Unibanco Banco
do Brasil Caixa Econômica Federal Financial System
September 2021 (R$ billion)
Total loans (1) 450.3 581.3 567.4 745.3 842.0 4,442.0
Total deposits (1) 389.8 559.8 792.6 475.2 472.5 3,641.7

(1) According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP ~~(December 2020)~~(September 2021).
~~(2)~~ Represents total loans and deposits of Caixa Econômica Federal as of September 2020 because as of the date of this report, Caixa Econômica Federal had not disclosed the information for December 31, 2020.
Insurance Coverage
We maintain insurance policies that are renewed annually in order to protect our assets. All of our branches, affiliates and administrative buildings are insured against losses caused by fire, lightning, explosions and other risks. Such coverage establishes reimbursement for the asset replacement value.
~~In addition, we also maintain the following insurance policies:~~
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·● 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.
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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~~(Instituto Nacional de Propriedade Industrial, or “INPI”), the agency responsible for registering trademarks, patents and designs in Brazil. After registration, the owner has exclusive rights to use of the trademark in Brazil for a 10-year period that can be successively renewed for equal periods.
As of the date of this annual report, we own a total of ~~553~~568 trademarks in Brazil, with Santander Brasil owning over ~~123~~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 monetary, foreign currency and credit policies, as well as regulating the institutions of the financial system.
Principal Regulatory Agencies
CMN
The CMN oversees the Brazilian monetary, credit, budgetary, fiscal and public debt policies. The board of the CMN is composed of the president of the Brazilian Central Bank, the Minister of Planning and the Minister of Finance, who also chairs the ~~Board.~~Board, Pursuant to the Banking Reform Law, the CMN is the highest regulatory entity within the Brazilian financial system, and is authorized to regulate the credit operations of Brazilian financial institutions, to regulate the Brazilian currency, to supervise Brazil’s gold reserves and foreign exchange, to determine Brazilian savings and investment policies and to regulate the Brazilian capital markets with the purpose of promoting the economic and social development of Brazil. In this regard, the CMN also oversees the activities of the Brazilian Central Bank and the CVM.
Brazilian Central Bank
The Brazilian Central Bank is an autonomous authority responsible for the implementation of CMN policies related to foreign currency and credit, the regulation of Brazilian financial institutions, particularly in regards to the minimum capital and compulsory deposit requirements, as well as the disclosure of the transactions carried out by financial institutions and their financial information. The Brazilian Central Bank addresses specific issues through the Monetary Policy Committee (COPOM), a committee responsible for adopting measures to meet inflation targets defined by the CMN and establishing monetary policy guidelines. In order to meet inflation targets, the COPOM must set the target for the SELIC ~~Rate~~rate (the average rate for daily financing, backed by federal instruments, as assessed under the ~~Special Settlement and Custody System)~~SELIC) and publish reports on the Brazilian economic and financial environment and projections for the inflation rate.
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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 ~~National Association of Investment Banks –~~ ANBIMA, the ~~Brazilian Association of Credit Card and Services Companies –~~ ABECS, the ~~Brazilian Banks Federation –~~ FEBRABAN, the Brazilian Association of Publicly-Held Companies – ABRASCA and the B3.
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
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administration of third-party funds and ~~micro-credit.~~microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:
·● No financial institution may operate in Brazil without the prior approval of the Brazilian Central ~~Bank.~~Bank, In December 2017, the CMN enacted a new rule establishing that all such requests submitted to the Brazilian Central Bank must be approved within 12 months (subject to suspension of the term in some instances);
·● A Brazilian financial institution may not hold direct or indirect equity interests in any company located in Brazil or abroad registered as permanent assets without prior approval of the Brazilian Central Bank. The corporate purpose of such company shall be complementary or subsidiary to the activities carried out by the financial institution;
·● Brazilian financial institutions must submit for prior approval by the Brazilian Central Bank the corporate documents that govern their organization and operation, such as capital increases, transfer of headquarters, opening, transfer or closing of branches (whether in Brazil or abroad), election of the members of the statutory bodies and any corporate restructuring or alteration in the composition of their equity control. The requests for 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;
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·● A Brazilian financial institution belonging to the S1 segment, as is the case of Santander Brasil, cannot lend more than 25% of its Tier 1 Regulatory Capital (patrimônio de referência) to a single person or a group and the maximum exposure to concentrated individual customers or group of connected customers of such Segment 1 financial institution is 600% of its Tier 1 Regulatory Capital (a concentrated individual client would mean, for the purpose of the proposed rule, as any one client to which exposure is equal to or higher than 10% of its Tier 1 Regulatory Capital);
·● According to the Banking Reform Law, a Brazilian financial institution cannot carry out credit transactions with (i) its controlling shareholders, directors and members of other statutory bodies (fiscal, advisory and other) and their respective spouses and relatives up to second degree, (ii) the individuals or legal entities that hold a qualified interest (15% of the capital stock) in their capital, (iii) the legal entities in which they have qualified interest (direct or indirect), (iv) the legal entities in which they have effective operational control or preponderance in the deliberations, regardless of the equity interest, and (v) the legal entities with common directors or members of the board of directors. Such prohibition does not apply, subject to limits and conditions established by the CMN through the enactment of Resolution No. 4,693 in October 2018,, to: (i) transactions with a counterparty that has an officer or director in common with the financial institution providing credit, provided that the officer or director is considered an independent member in both entities; (ii) transactions carried out under market-compatible conditions, without additional benefits or different benefits when compared to the operations deferred to the institution to other customers with the same profile, (iii) credit operations that have as counterparty a financial institution that is part of the institution prudential conglomerate, provided that they contain contractual clauses of subordination, except in the case of overnight and loan transactions with other financial institutions specified by the law, (iv) the interbank deposits, according to the law, (v) the obligations assumed by related parties under the compensation and settlement services authorized by the Brazilian Central Bank or by the CVM and their respective counterparties, and (vi) other cases authorized by the CMN; the management of third-party assets must be segregated from other activities and must follow the regulations issued by the ~~CVM.~~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.
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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. For this purpose, banks provide the Brazilian Central Bank with any information which it deems useful in performing its supervisory functions, which includes supervising changes in solvency and capital adequacy of banks.
The main principle that guides the directives set forth in the Basel Committee is that a bank’s own resources must cover its principal risks, including credit risk, market risk and operational risk.
Brazilian financial institutions are subject to capital measurement and standards based on a risk weighted asset ratio. The parameters of this methodology resemble the international framework for minimum capital measurements adopted by Basel III.
Basel III
On December 16, 2010, the Basel Committee issued ~~the~~its Basel III framework, which ~~supplements~~was revised and ~~amends Basel II.~~republished on June 1, 2011. The Basel III ~~includes higher~~framework increases minimum capital requirements, creates new conservation and countercyclical ~~buffer capital requirements, revised~~buffers, changes risk-based capital measures, and ~~the introduction of~~introduces a new leverage ~~ratio, as well as two~~limit and new liquidity ~~standards.~~standards in comparison to the former framework. The ~~Basel III framework is being~~rules were phased in gradually and were fully implemented ~~gradually~~ by ~~each country through legislation or regulation to be imposed upon that country’s home banks, including Brazil.~~
January 1, 2019. Regulatory Capital is composed by Core Capital and two 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) Core Capital consisting mainly of corporate capital and profit reserves (shares, units of ownership, reserves and earned income) of at least 4.5% ~~of RWA,~~, and (ii) Additional Tier I consisting mainly of perpetual hybrid securities and capital instruments authorized by the Brazilian Central Bank (but excluding amounts relating to funding instruments issued by other local or foreign financial institutions) and any of our own shares purchased by us and the integration of which into the Additional Tier I Capital is permitted. To improve the quality of the capital of financial institutions, Basel III restricts the acceptance of financial instruments that fail to demonstrate effective capability of absorbing losses and requires the reduction of assets that in certain situations could jeopardize the financial institution’s capital value due to the instruments’ low liquidity, dependence on future profits for realization or difficulty of value measurement.
There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid subordinated debt approved by the Brazilian Central Bank as additional capital requirements, or Tier II, are expected to be maintained if they also comply with requirements introduced by Basel III, including the mandatory conversion clauses into equity or write-off upon the occurrence of triggering events provided for in the regulations.
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In accordance with the Basel III standards, the Brazilian Central Bank created the Additional Core Capital buffer (Adicional de Capital Principal), which is composed by the sum of three buffers:
·● Core Capital Conservation buffer (Adicional de Capital Principal de Conservação), which was introduced to ensure that banks have an additional layer of usable capital that can be drawn down when losses are incurred. Whenever the buffer falls below 2.5%, automatic constraints on capital distribution (for example, dividends, share buybacks and discretionary bonus payments) will be imposed so that the buffer can be replenished.
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· Countercyclical capital buffer (Adicional Contracíclico de Capital Principal), which aims to protect the banking sector from periods of excess aggregate credit growth that have often been associated with the build-up of system-wide risks. The countercyclical capital buffer is fixed by the Financial Stability Committee (Comitê de Estabilidade Financeira) based on discussions about the pace of credit expansion, and currently is set zero (Brazilian Central Bank Communication No. 36,830/21). Should the requirement increase, the new percentage takes effect twelve months after the announcement,
·● Core Capital Systemic buffer (Adicional de Importância Sistêmica de Capital Principal), which is applicable to the S1 bank segment (banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity).
On March 16, 2020, due to the challenging macroeconomic environment resulting from the COVID-19 pandemic, the Brazilian Central Bank issued Resolution No. 4,783 which ~~decreased~~establishes the ~~Conservation Buffer level (Adicional de Conservação de Capital Principal) in 2020 from~~percentage to be applied to the risk-weighted assets value for the purpose of calculating the capital conservation buffer. This percentage increases gradually until April 2022, when it reaches 2.5% ~~to 1.25%~~.
This level will phase-in towards the 2019 level by 2022, as shown in the image below. This buffer change decreased the minimum Core Capital ~~and Total Capital~~ requirements, reaching 6.75% ~~and 10.25%~~to 10.5%, ~~respectively,~~ as of December 31, ~~2020.~~2021.
According to the new rules on regulatory capital in Brazil, the value of goodwill, intangible assets and some types of deferred tax assets, for the calculation of the capital base, was deducted in accordance with the “phase-in” for implementation of Basel III in Brazil, which was completed by January 1, 2019. The following table sets forth the percentage of required deductions for each year up to 2019:
Basel III Phase in
2016 2017 2018 2019 2020 2021
40% 60% 80% 100% 100% 100%
~~Source: Brazilian Central Bank; Resolution No. 4,192 of the Brazilian Central Bank of March 2013.~~
The Basel III rules also provide for the implementation of a leverage ratio calculated by dividing the Tier I capital by the bank’s total exposure. In early 2015, the Brazilian Central Bank issued a new regulation governing the calculation and reporting of the leverage ratio of Brazilian financial institutions in line with the Basel III rules, which became effective in October 2015. Financial institutions classified as segment 1 (S1), as is the case for Santander Brasil, or segment 2 (S2), for purposes of the application of prudential rules, are required to maintain a minimum RA of 3% as from January 1, 2018.
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Additionally, in order to enable the implementation of the Basel III framework in Brazil, certain legislative changes were made. Among others, Law No. 12,838, enacted on July 9, 2013, granted powers to the Brazilian Central Bank to limit the payment of dividends by financial institutions in case of non-compliance with the prudential capital requirements defined by the CMN.
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In 2015, the CMN and the Brazilian Central Bank also issued a set of rules for the implementation of the liquidity coverage ratio or “LCR,” a short-term liquidity index. The purpose of the LCR is to demonstrate that financial institutions have sufficient liquid assets to make it through a stress scenario lasting one month. According to these rules, the largest Brazilian banks were required to maintain an LCR of at least 60% since October 2015. This ratio increased 10% annually until it reached 100% in 2019. The Brazilian Central Bank also released, in 2015, the local methodology for calculating the LCR so as to align the existing rules with the guidelines of the document “Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools” issued by the Bank for International Settlements in January 2013. In January 2017, the Brazilian Central Bank enacted a new rule amending the calculation method and procedures for disclosure of LCR information. The new regulation establishes a new possible stress scenario and, for purposes of LCR retail, includes spot and forward deposits.
As mentioned above, the LCR is a short-term liquidity ratio for a 30-day stress scenario. It represents the ratio of high-quality liquidity assets to net outflows. High Quality Liquidity Assets are composed mainly of Brazilian federal government bonds and reserve requirement returns. Net Outflows are mainly composed of losses on deposits, offset in part by Inflows, which are mainly credits.
In November 2017, the CMN established a minimum limit for the Net Stable Funding Ratio (Índice de Liquidez de Longo Prazo, or “NSFR”) and the Leverage Ratio (Razão de Alavancagem, or “RA”) with which Brazilian financial institutions are required to comply. The NSFR corresponds to the ratio between the Available Stable Funds (Recursos Estáveis Disponíveis, or “ASF”) and the Required Stable Funds (Recursos Estáveis Requeridos, or “RSF”) of the financial institution. The financial institutions classified as “segment 1” for purposes of the application of prudential rules, as we are, must maintain, as from October 1, 2018, a minimum NSFR of 1.00. Regarding the leverage ratio, the financial institutions classified as “segment 1,” as we are, or “segment 2” for purposes of the application of prudential rules are required to maintain a minimum RA of 3% as from January 1, 2018.
Other Applicable Laws and Regulations
Consolidated Enterprise Level (conglomerado prudencial)
Financial institutions must submit to the Brazilian Central Bank, monthly and semiannually, consolidated financial statements based on the “consolidated enterprise level” (conglomerado prudencial) of which the financial institution is a ~~member, which serve~~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, ~~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. 4,818, which requires financial institutions categorized as S1, S2 and S3 to publish IFRS financial statements. The requirement is already in force for publicly held financial institutions and financial institutions which are leaders of a prudential conglomerate and ~~will 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.
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.

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~~Table of Contents~~CMN Resolution No. 4,966/2021 and Resolution No. 4,975/2021 will enter into effect on January 1, 2025, ensuring a transition period for the institutions subject to the changes.
Segmentation for the Proportional Application of Prudential Regulation
In January 2017, the CMN enacted a resolution establishing segmentation for financial institutions, financial institution groups, and other institutions authorized to operate by the Brazilian Central Bank for the purposes of proportional application of the prudential regulation. The segmentation is based on the size, international activity and risk profile of members of each segment. Pursuant to the resolution, the segments are as follows:
·● Segment 1 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base equivalent or superior to 10% of Brazil’s GDP; or (b) which perform relevant international activities, irrespective of the size of the institution;
·● Segment 2 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base lower than 10% of Brazil’s GDP; and (b) other institutions with an asset base equivalent to or greater than 1% of Brazil’s GDP;
·● Segment 3 comprises institutions with an asset base lower than 1% and equivalent to or greater than 0.1% of Brazil’s GDP;
·● Segment 4 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP; and
·● Segment 5 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP, that apply a simplified optional method for verifying the regulatory capital’s minimum requirements, except for multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks.
We have been categorized by the Brazilian Central Bank in segment 1, the highest level for application of regulation for banks in Brazil.
Regulation of Risk and Capital Management Structure
The rules enacted by the CMN and the Brazilian Central Bank provide that risk management must be conducted through an integrated effort by the relevant entity (i.e., not only must risks be analyzed on an individual basis, but must also control and mitigate the adverse effects caused by the interaction between different risks). The rules set out different structures for risk and capital management, which are applicable for different risk profiles. This means that a financial institution of limited systemic importance can have a simplified structure of management, while institutions of larger complexity have to follow stricter protocols.
Compulsory Reserve Requirements
Currently, the Brazilian Central Bank imposes a series of compulsory reserves requirements. Financial institutions must deposit these reserves with the Brazilian Central Bank. The Brazilian Central Bank uses these reserve requirements as a mechanism to control the liquidity of the Brazilian financial system for both monetary policy and risk mitigation purposes. Reserves imposed on time deposits, demand deposits and saving accounts represent almost the entirety of the amount that must be deposited at the Brazilian Central Bank.
· ~~Time Deposits (CDBs)~~. The Brazilian Central Bank imposes a reserve requirement of 17% 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 Brazilian Central Bank imposes a reserve requirement of 20% in relation to time deposits. Financial institutions must deposit an amount equivalent to the surplus of (i) R$3.6 billion for financial institutions with consolidated Tier 1 capital under R$3 billion; (ii) R$2.4 billion for financial institutions with consolidated Tier 1 capital between R$3 billion and R$10 billion; (iii) R$1.2 billion for financial institutions with consolidated Tier 1 capital between R$10 billion and R$15 billion; and (iv) zero for financial institutions with a Regulatory Capital greater than R$15 billion.
Additionally, as from the issuing of Brazilian Central Bank ~~Circular~~Resolution No. ~~3,943~~145 on ~~May 23, 2019, interbank deposits made by leasing companies are excluded from~~September 24, 2021, collateral deposit for the ~~assessment base of the compulsory reserve requirement~~new funding mechanism for ~~time deposits of~~ financial institutions (called Linhas Financeiras de Liquidez) can be used to deduct up to three percentage points of ~~the same conglomerate.~~
· ~~Demand Deposits~~~~. As a general rule, the Brazilian Central Bank imposes a~~this type of reserve ~~requirement of 21% in relation to demand deposits.~~requirements.
· ~~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.
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● 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.~~cost, Derivatives are marked-to-market and recorded as assets and liabilities in the balance sheet. Changes in the market value of derivatives are generally recognized in income with certain modifications, if these are designated as hedges and qualify for hedge accounting under the regulations issued by the Brazilian Central Bank. Securities and derivatives in the “held to maturity” portfolio may be hedged for accounting purposes but their increase or decrease in value as derived from the marked-to-market accounting method should not be taken into account.
On June 31, 2018, the CMN enacted a rule providing that financial institutions categorized as “Segment 1” as per the Brazilian Central Bank’s classification system established in 2017 (which is our case) (1) may not have more than 25.0% of their Regulatory Capital allocated to a single legal or natural person, and (2) that the total exposure of such financial institutions to one individual customer may not exceed 600% of their Regulatory Capital allocated to focused exposure, that is 10% of their Regulatory Capital – Tier 1. The rule also subjects financial institutions categorized as segment 2, segment 3 or segment 4 to less restrictive rules.
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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.
Resolution 4,734/19 sets out the guidelines applicable to the establishment of liens and encumbrances on credit and debit payment instruments due to credit operations with financial institutions and regulates credit operations guaranteed by receivables from payment arrangements. The amount of receivables perfected into guarantees for a certain credit transaction will be reduced, whenever applicable, so that they are limited to the outstanding balance of the transaction or to the maximum limit extended, in the case of an extension of a non-dischargeable credit facility by a financial institution on an absolute and unilateral basis.
Circular 3,952/19, deals in particular with the procedures for the registration of receivables, and requires a convention between market infrastructures to guarantee the uniqueness of the receivables as financial assets that can be registered, interoperability, exchange of information between registration systems and participants in the structure. ~~On October 29, 2020, the Brazilian Central Bank issued BCB Resolution 35/20, which postponed the entry into effectiveness of~~ Circular 3,952/19 ~~to February 17,~~came into effect on June 7, 2021.
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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.~~system, SPB is composed of systems for the clearing of checks, clearing and settlement of debit and credit electronic orders, transfer of funds and other financial assets, clearing and settlement of transactions involving securities, clearing and settlement of transactions carried out in commodities and futures, and others, collectively designated as Financial Market Infrastructures, as well as the payment arrangements and payment institutions.
Within the scope of SPB, the Brazilian Central Bank operates the Reserves Transfer System, or ~~“STR”~~“STR,” and the SELIC. STR is a system of transfer of funds with real-time gross settlement, which means that transfers are made at the processing time, one by one, and are subject to the existence of outstanding balance in the account. STR is composed of financial institutions, clearing and settlement houses and the National Treasury Office. SELIC is the Brazilian Special Settlement and Custody System (Sistema Especial de Liquidação e Custodia), a system intended for custody of book-entry securities issued by the National Treasury Office and for the registration and settlement of transactions involving such securities.
Instant Payment System
The Brazilian Central Bank also implemented an instant payment ecosystem in November 2020. The settlement of the system is centralized at the Brazilian Central Bank. In addition to increasing the speed at which payments or transfers are made and received, available 24 hours a day, seven days a week in all days of the year, the ecosystem has the potential to increase market competitiveness and efficiency; lower costs; and enhance customer experience.
On June 12, 2020, the Brazilian Central Bank issued Circular 4,027/20, which established the Brazilian Instant Payment System (~~Sistema~~(Sistema de Pagamentos Instantâneos,, or “SPI”). Circular 4,027/20 also approved the regulation with which the direct and indirect participants in the SPI must ~~comply. Circular 4,027/20 establishes~~comply, and provided that the SPI ~~start of operations~~started operating on November 3, 2020 with certain features ~~of the system,~~and becoming available gradually until it iswas fully operational ~~as of~~on November 16, 2020. ~~Circular Letter 4,055/~~Brazilian Central Bank Normative Ruling No. 47/20 establishes the procedures and timetable for the tests necessary ~~for~~ to register as a direct participant in the SPI, ~~as per Circular Letters~~Brazilian Central Bank Normative Ruling No. ~~4,006 and 4,022. Circular Letter No. 4,056,~~129/21, in turn, establishes the procedures for the adherence to the instant payment arrangement (PIX).
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According to the by-laws of the SPI, the participation in the SPI ~~will be~~is mandatory for the participants of the PIX arrangement, and optional for (i) the clearing houses and other providers of clearing services, and (ii) the National Treasury Department.
There are two types of participation in the SPI: (i) direct, ~~participation,~~ 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.~~payments, Circular 4,027/20 came into effect on July 1, 2020.
On August ~~13,~~12, 2020, the Brazilian Central Bank issued Central Bank Resolution No. 1, or “Central Bank Resolution 1/~~2020”,~~2020,” establishing the ~~Pix~~PIX System payment arrangement and approving the regulation governing it, or (the ~~“Pix~~“PIX Regulation”).
Pursuant to Central Bank Resolution 1/2020, participation in the ~~Pix~~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~~PIX Regulation applies to all ~~Pix~~PIX System participants. According to the ~~Pix~~PIX Regulation, there are three types of participation: (i) transactional account provider, which is a financial institution or a payment institution that offers deposit accounts or payment accounts to end users; (ii) government entity, which is the National Treasury Secretariat, with the exclusive purpose of making collections and payments related to its activities; and (iii) special clearing houses, that are the financial institutions and payment institutions that (a) within the scope of the ~~Pix~~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~~PIX System.
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Brazilian Central Bank Resolution 1/2020 came into effect on September 1, 2020. ~~Pix~~PIX System transactions started operating on a restricted basis through to November 3, 2020 and was fully as of November 16, 2020.
Furthermore, on September 2, 2021, the Brazilian Central Bank issued Resolutions No. 135 and 136, which regulate the offering of the PIX Withdrawal and PIX Change services by regulated institutions that participate in the Brazilian Instant Payments System. Both rules came into effect on November 1, 2021. The new services were established by the Brazilian Central Bank on August 24, 2021, in a meeting of its Collegiate Board, which approved changes to the PIX Regulations.
PIX Withdrawal will allow all the clients of any participating institution to make a withdrawal in kind at one of the points that offer the service. Merchants, shared ATM networks and PIX participants, through their own ATMs, may offer the service. In order to withdraw funds in kind through PIX, the client simply executes a PIX transaction to the withdrawal agent, in a similar dynamic to a normal PIX transaction, by reading a QR Code or through the service provider's API.
With the PIX Change, the dynamic is almost identical. The difference is that the withdrawal of cash can be carried out during a purchase transaction with a merchant that offers PIX as a mean of payment. In this case, the PIX transaction is executed for the total amount (purchase + cash withdrawal). The customer's invoice will show the amount corresponding to the cash withdrawal and the purchase amount.
The offer of the two new products on PIX’s evolving agenda to users is optional, and the final decision to implement PIX Withdrawal and PIX Change is up to the merchants that accept PIX, the companies that own ATM networks, and the financial institutions that have their own ATMs.
Further, on September 23, 2021, the Brazilian Central Bank issued Resolution No. 142, introducing security measures to be adopted by institutions under its regulation and supervision to prevent frauds in the provision of payment services.
Resolution No. 142 establishes that financial and payment institutions must limit the provision of payment services for the period from 8 p.m. to 6 a.m. to a maximum of R$1,000 per deposit or prepaid payment account, as applicable. This limit may be increased at the client's request, which must be submitted formally through the relevant electronic service channels, but the institution must establish a minimum period of 24 hours for the change to take effect. Resolution No. 142 required payment service providers to implement the new transaction limit by October 4, 2021.
Pursuant to Resolution No. 142, financial and payment institutions must also implement, by November 16, 2021: (i) procedures aimed at evaluating the customer prior to offering the anticipation of the settlement of payment receivables on the same date of the execution of a payment transaction within the scope of payment schemes in which the institutions participate; and (ii) daily registration of the occurrence of fraud or attempted fraud in the rendering of payment services, including the corrective measures adopted by the institution. Based on these records, the institutions must prepare a monthly report consolidating the occurrences and the preventive and corrective measures adopted. This report must be forwarded to the institution audit and risk committees (if instituted), internal audit unit, Executive Board and Board of Directors (if instituted).
Furthermore, on September 28, 2021, the Brazilian Central Bank issued Resolution No. 147, which established security mechanisms specific to PIX transactions. The rule also details, within the scope of PIX, the measures established by Resolution No. 142, which applies to all electronic payment methods (including other types of electronic transfers available in Brazil, such as Transferência Eletrônica Disponível – TED or Documento de Ordem de Crédito – DOC). The security measures came into effect on November 16, 2021, with the exception of the new transaction limits, which came into effect on October 4, 2021.
Open Banking Regulation in Brazil
On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open banking. Open banking consists of the sharing of data and payment initiation services and forwarding credit transaction proposals, by financial institutions and other authorized entities (with customers permission) and the integration of information systems.
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Among other topics, the resolution sets forth the mandatory and voluntary participating institutions, the data and services covered, the requirements for sharing, the responsibilities for sharing, the implementation schedule and the form of agreement to be entered into by the participating institutions.
According to the resolution, financial institutions and prudential conglomerates belonging to the S1 and S2 segments, as is our case, are required to participate in open banking.
Open banking has a four-stage implementation plan, as follows:
·● Stage 1 ~~(as of~~(completed on February 1, 2021): public access to participating institutions’ data on their access channels and product/service channels related to checking, savings, prepaid payment accounts and to lending transactions.
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·● Stage 2 ~~(by July 15,~~(completed on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
·● Stage 3 ~~(by August 30,~~(completed October 29, 2021): start of PIX transactions by payment transaction initiators, as well as the gradual entry of other payment arrangements.
● Stage 4 (starting on December 15, 2021): sharing of ~~payment transaction initiation services, as well as forwarding credit transaction proposals.~~
· ~~Stage 4 (by December 15, 2021): expansion of in-scope~~customer transactional data related to ~~encompass foreign exchange, investment,~~additional products, pursuant to the following deadlines: (i) insurance, ~~and~~ open-end private pension ~~transactions.~~and capitalization products: until March 4, 2022; (ii) merchant acquiring services: until March 11, 2022; (iii) foreign exchange transactions: until March 18, 2022; and (iv) time deposit accounts and other investment products: until March 25, 2022.
· On October 29, 2020, the Brazilian Central Bank issued Central Bank Resolution 32/2020, which sets forth the technical and operational requirements to be observed by institutions which participate in the Brazilian Open Banking System.
The new rule lays out, among others, rules relating to (i) the scope of the data and services to be shared by participating institutions within Open Banking, ~~which shall be~~ detailed in a specific manual; (ii) the standards for the development of application programming interfaces (APIs) by participating institutions, ~~which will likewise be~~ detailed in a specific manual, which ~~shall deal~~deals with their design, data transmission protocols, data exchange formats, control accesses, version control systems and specification parameters; among other things; (iii) criteria for registration and cancellation of registration in Open Banking; (iv) services to be rendered by the Open Banking Governance Structure, which also ~~shall be~~is detailed in a specific manual, including the maintenance of a repository of participating institutions and a website containing updated information about Open Banking and its implementation; and (v) minimal security standards and ~~certifications,~~certifications.
Additionally, on September 9, 2021, the Brazilian Central Bank published Resolution No. 138, which disclosed the minimum scope of data to be available for sharing on Stage 4 of Open Banking, to be further detailed by the Open Banking Governance Body. The fourth stage of the ecosystem, which covers data on foreign exchange, investment, insurance, and open-end private pension transactions, as well as merchant acquiring services, began on December 15, 2021, when the participating institutions must make the information about the mentioned products and services available to other financial institutions.
Regarding investment transactions, the main financial and capital market products offered in Brazil were included in the scope of Stage 4, such as: (i) Banking Time Deposit Certificates (Certificados de Depósito Bancário or CDBs); (ii) Banking Time Deposit Receipts (Recibos de Depósito Bancário or RDBs); (iii) Real Estate Credit Bills (Letras de Crédito Imobiliário or LCIs); (iv) Agribusiness Credit Bills (Letras de Crédito do Agronegócio or LCAs); (v) investment fund quotas; (vi) direct treasury government bonds (títulos do tesouro direto); (vii) stock; (viii) quotas of exchange-traded investment funds (ETFs); (ix) debentures; (x) Certificates of Real Estate Receivables (Certificados de Recebíveis Imobiliários or CRIs); and (xi) Certificates of Agribusiness Receivables (Certificados de Recebíveis do Agronegócio or CRAs).
With regard to foreign exchange transactions, effective total value of transactions (VET) and commercial exchange rates will ~~also~~need to be ~~detailed~~made available. The data referring to merchant acquiring services will cover applied service fees and rates.
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Finally, the data referring to insurance products and pension plans will follow the scope defined by the CNSP and the SUSEP in CNSP Resolution No. 415/2021 and SUSEP Circular No. 635/2021, respectively, which establish a ~~separate manual.~~specific timeline for the implementation of Open Insurance, an exclusive governance body responsible for Open Insurance, as well as specific implementation manuals.
Stage 4 of Open Banking introduced information sharing beyond traditional banking products and services, marking the beginning of the migration from Open Banking to Open Finance in Brazil.
Regulatory Sandbox
On November 28, 2019, the Brazilian Central Bank published Public Consultation No. 72/2019, which ended on January 31, 2020, regarding the Controlled Testing Environment for Financial Innovations or “Sandbox” which is intended to enable institutions test innovative financial and payment projects for a specified period.
After receiving comments on ~~the~~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~~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. ~~The~~In November 2021, the Brazilian Central Bank ~~expects that the process~~selected developers’ projects for ~~selecting~~ the first cycle, which will ~~start in the first half of 2021.~~last for one year and may be extended for another year.
Treatment of Overdue Debts
The Brazilian Central Bank requires financial institutions to classify credit transactions in accordance with their level of credit risk and to make provisions according to the level attributed to each transaction. Such credit classifications shall be determined in accordance with criteria set forth from time to time by the Brazilian Central Bank, relating to the conditions of the debtor and the guarantor and the transaction terms. Where there are several credit transactions involving the same customer, economic group or group of companies, the credit risk must be determined by analyzing the particular credit transaction of such customer or group that represents the greatest credit risk to the financial institution.
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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.~~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.
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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).
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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. ~~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.~~
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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.
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~~(Conselho de Controle de Atividades ~~Financeiras~~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 ~~National~~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.
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The regulations also impose an obligation on financial institutions to request that both customers and non-customers aare 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.
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On January 23, 2020, the Brazilian Central Bank published Circular No. 3,978, which improves the regulation applicable to financial institutions, by expanding the adoption of a risk-based approach and came into effect on July 1, 2020. Regulated institutions must carry out specific internal risk assessments in order to identify and measure the risk of using their products and services in the practice of money laundering and terrorist funding.
In connection with the aforementioned change, the Know-Your-Client procedures were also improved and include the identification, qualification and classification of the customer, compatible with the risk profile, the nature of the relationship with the AML policy and the institution’s internal risk assessment, which must be permanently reassessed, according to the evolution of the business relationship and the risk profile of the client. The procedures must also include the verification of the client’s (including their representatives’, family members’ or close collaborators) condition as a Politically Exposed Individual, as well as consider them in the monitoring, selection and analysis of operations and situations with indications of suspected money laundering or terrorist funding.
On July 27, 2021, the Brazilian Central Bank published Resolution No. 119, which came into effect on September 1, 2021 and introduced certain changes to Circular No. 3,978/2020, which establishes the regulations and procedures related to anti-money laundering and combating the financing of terrorism applicable to entities subject to the Brazilian Central Bank´s regulation and supervision.
~~On December 5, 2019,~~Among other changes brought by the new rule, financial institutions (and other entities regulated by the Brazilian Central Bank) are now required to obtain information about their customers’ place of residence, in the case of a natural person, or the location of the head office or branch, in the case of a legal entity, as part of their mandatory Know-Your-Client (KYC) procedure. The CVM also issued CVM ~~Instruction~~Resolution No. ~~617,~~50 in 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.
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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.
The ~~government of the Federal Republic~~governments of Brazil and the ~~government of the~~ United States ~~of America~~ executed an agreement on March 20, 2007, by means of which these governments established rules for the exchange of information relating to tax, or the “2007 ~~Agreement”.~~Agreement.” Under the 2007 Agreement, the Brazilian tax authority would be able to send information it receives by virtue of Section 5 of the Bank Secrecy Law to the U.S. tax authority.
Data Protection Requirements
The ~~GDPA, or in Portuguese, “~~LGPD (Lei Geral de Proteção de ~~Dados~~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~~LGPD came into effect in September 2020, except for administrative sanctions, which ~~will come~~came into effect on August 1, 2021, pursuant to Law No. 14,010/20, which delayed the applicability of certain provisions of the ~~GDPA.~~
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~~LGPD brings about profound changes in the rules and regulations applicable to the processing of personal data, with a set of rules to be complied with in activities such as the collection, processing, storage, use, transfer, sharing and erasure of information concerning identified or identifiable natural persons.
The ~~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 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 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.
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Moreover, Law 13,853/2019 created the Brazilian National Data Protection Authority, or ~~“ANPD”,~~“ANPD,” which will have powers and responsibilities analogous to the European data protection authorities, exercising a triple role of (i) investigation, comprising the power to issue norms and procedures, deliberate on the interpretation of the ~~GDPA~~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 ~~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.
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The ANPD has been assured technical independence, although it is subordinated to the Presidency of the Republic. It will be composed of five commissioners, to be appointed by the President of Brazil, and advised by a National Council for the Protection of Personal Data and Privacy, composed of 23 unpaid members.
Regulations on Cybersecurity
Financial institutions must follow certain cyber risk management and cloud outsourcing requirements which apply to the design and adaptation of internal ~~controls.~~controls, namely CMN Resolution No. 4,893/2021, which requires financial institutions to institute a Cybersecurity Policy, as well as regulates the outsourcing of relevant data processing and storage and cloud computing services and CVM Ruling No. 35/2021, which sets forth the standards and procedures to be observed in security transactions carried out in regulated securities markets requiring the implementation of cybersecurity controls and data protection. Policies and action plans to prevent and respond to cybersecurity incidents ~~must 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 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 office of the financial institution must inform the independent auditor and the audit committee, if any of the above situations occur.
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CMN regulation also requires financial institutions and certain other entities holding Regulatory Capital equal to or greater than R$1 billion to create a corporate body designated as the “audit ~~committee”.~~committee.” To obtain more information concerning the audit committee, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee.”
Internal Auditing of Financial Institutions
Financial institutions are required to establish and maintain internal audit activities compatible with their operational specifications, so that such internal bodies are able to perform an independent, autonomous and impartial audit of the quality and effectiveness of the institution’s internal systems. Such unit shall be directly controlled by the institution’s board of directors. Internal and external independent auditors are also liable for failures of the financial institution’s internal control mechanisms.
~~Socio-Environmental Responsibility Policy~~
Environmental, Social and Governance (ESG) requirements applicable to financial institutions
Financial institutions are currently required by CMN Resolution No. 4,327/14 to have a responsibility policy, which must guide the social and environmental actions in conducting their businesses, their relationship with their customers and other users of their products and services. The responsibility policy must also guide the financial institution’s relationship with its personnel and with any others affected by the financial institution’s activities. In addition, the responsibility policy must provide for the management of social and environmental risks (which, according to the Brazilian Central Bank, represent one of the several categories of risk to which financial institutions are exposed).
Following Public Consultations Nos. 82, 85 and 86, initiated by the Brazilian Central Bank in 2021 under the “Sustainability” pillar of the “Agenda BC#” (which consists of a list of goals to improve the Brazilian National Financial System), a new set of rules was published on September 15, 2021. These new rules aim to improve the disclosure of information, management and governance of social, environmental and climate risks by financial institutions, as well as to bring changes to the rural credit regulations in effect.
Resolution No. 140 establishes new conditions for the access to rural credit considering social, environmental and climatic aspects. Among them, it stands out the credit restriction for a producer who is not registered, or whose registration is canceled, in the Rural Environmental Registry (Cadastro Ambiental Rural – CAR). The new resolution also sets forth that rural credit shall not be granted to (i) an enterprise fully or partially inserted in a conservation unit, indigenous land already approved, an area of embargo in force resulting from the economic use of illegally deforested areas in the Amazon; nor (ii) an individual or legal entity registered in the official register of employers who have kept workers in conditions analogous to slavery.
CMN issued Resolution No. 4,943, which amended CMN Resolution No. 4,557/17 with the purpose of highlighting and distinguishing social, environmental and climate risks, as necessary for the identification, measurement, evaluation, monitoring, reporting, control and mitigation in connection with the risk management structure of financial institutions. The new rule provides for specific definitions to such risks, using new and modern concepts, such as the inclusion of the two main components of climate risks – physical and of transition – already recognized by international ESG standards. The amended rule also deals with the identification and monitoring of social, environmental and climate risks incurred by financial institutions, resulting not only from their products, services and activities, but also from the activities performed by their counterparties, controlled entities, suppliers and outsourced service providers.
Similar provisions were also included in the simplified structure of continuous risk management pertaining to the Simplified Reference Capital (Patrimônio de Referência Simplificado – PRS5) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.
The CMN issued Resolution No. 4,945, replacing CMN Resolution No. 4,327 of April 25, 2014 on the Social and Environmental Responsibility Policy (Política de Responsabilidade Socioambiental or PRSA). The new rule provides for the inclusion of a climate aspect to the PRSA, which will be henceforth named Social, Environmental and Climatic Responsibility Policy (Política de Responsabilidade Social, Ambiental e Climática – PRSAC). Such new policy to be implemented by financial institutions shall take into account the impacts, strategic goals and business opportunities for the financial institutions in connection with social, environmental and climate aspects. There was also a reduction in the period for reviewing the PRSA, from five to three years.
The Brazilian Central Bank issued Resolution No. 139, regulating the preparation of a Report on Social, Environmental and Climate Risks and Opportunities (Relatório de Riscos e Oportunidades Sociais, Ambientais e
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Climáticas, or the “GRSAC Report”) by financial institutions classified in segments S1 (such as Banco Santander), S2, S3 and S4. Following the propositions of the Public Consultation, this new rule seeks to contemplate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) at the national regulatory level. The GRSAC Report must be published annually with the base date of December 31, within a maximum period of 90 days from December 31, and must be made available on the financial institutions' websites for a period of five years.
Finally, on October 6, 2021, the Brazilian Central Bank published Resolution No. 151, which regulates the remittance information regarding social, environmental, and climate risks addressed in CMN Resolution No. 4,557 and CMN Resolution No. 4,945 to the Brazilian Central Bank by authorized institutions. The rule applies to institutions classified in segments S1 (such as Santander Brasil), S2, S3, or S4; and the information that must be sent to the Brazilian Central Bank is related to the assessment of social, environmental and climate risks related to their exposures in credit and securities transactions, as well as those of the respective debtors under these transactions. The information to be remitted includes identification, economic sector, risk aggravating and mitigating factors, appraisal of social, environmental and climactic risks, among others.
In order to allow financial institutions to adapt their practices and policies to this new set of rules, CMN Resolution No. 4,943/21 and article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) will enter into effect on July 1, 2022, while CMN Resolution No. 4,944/21, the other provisions of CMN Resolution No. 4,945/21 and Central Bank Resolution No. 139/21 will enter into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 will enter into effect on July 1, 2022 and Central Bank Resolution No. 140, which specifically provides for rural credit, came into effect on October 1, 2021.
Policy for Succession of Financial Institutions Managers
Brazilian financial institutions and other institutions authorized to operate by the Brazilian Central Bank shall implement and maintain internal policies for succession of managers, applicable to higher levels of the institution’s management. The internal policy shall encompass the procedures related to recruitment, promotion, appointment and retention of managers in accordance with the institution’s rules for identification, evaluation, training and selection of the candidates to management offices.
Corporate Governance of Financial Institutions
Financial institutions must (i) remit to the Brazilian Central Bank information on the financial institution’s management, controlling group and relevant shareholders, including the obligation to communicate to the regulator any information that may affect the reputation of any such persons; (ii) make available a communication channel allowing employees, contributors, customers, users, associates, or services providers to report anonymously situations indicating illegalities of any nature related to the institution; and (iii) have an internal body responsible for receiving the information and complying with the reporting obligations.
Compliance Policy
Financial institutions must implement and maintain a compliance policy compatible with the nature, size, complexity, structure, risk profile and business model of the institution, which is intended to ensure an effective compliance risk management by the institution and may be established at the consolidated enterprise level (conglomerado prudencial). The compliance policy must establish the scope and purpose of the compliance function in the institution, set forth the organizational structure of the compliance function, specify which personnel is allocated to the compliance function, and establish a segregation of roles among personnel in order to avoid conflicts of interest.
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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.
Consumer Protection
Relationships between consumers and financial institutions are governed by Law 8,078, dated September 11, 1990, or the “Brazilian Consumer Protection ~~Code”,~~Code,” which grants consumers certain rights and sets forth measures to be observed by suppliers, which must be complied with by financial institutions. The Brazilian Consumer Protection Code sets forth as consumer rights, among others, the assistance/facilitation in the defense of consumers’ rights, including through reverse burden of proof in their favor, and possibility of judicial review of contractual provisions deemed abusive.
Furthermore, banking regulation establishes procedures that financial institutions must observe when contracting any transactions, as well as when rendering services. We may highlight the following as examples of said procedures:
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·● to timely provide the necessary information including rights, duties, responsibilities, costs or advantages, penalties and possible risks when carrying out a transaction or rendering a service to allow customers and users free choice and decision-making;
·● to timely provide, to the customer or user, agreements, receipts, statements, advice and other documents related to the transactions and services, as well as the possibility of timely cancellation of the agreements;
·● formalization of an adequate instrument setting forth the rights and obligations for opening, using and maintaining a postpaid payment account;
·● to forward a payment instrument to the customers’ or users’ residence or to enable the respective instrument only upon express request or authorization; and
·● identification of end users’ beneficiaries for payments or transfer in statements and bills of the payer, including in situations in which the payment service involves institutions participating in different payment arrangements.
Financial institutions operating exclusively via digital means are excluded from the scope of certain aspects of the regulation.
Law No. 14,181, which amends the Brazilian Consumer Protection Code and Senior Citizens' Statute (Law No. 10,741 of October 1, 2003) to improve provisions related to the offering of consumer credit and provide for the prevention and treatment of over-indebtedness, came into effect on July 2, 2021.
Regarding the prevention of over-indebtedness, such rule created a chapter in the Brazilian Consumer Protection Code dedicated to responsible credit and financial education. The amendments determine the presentation of specific information to the consumer in the granting of credit or installment sales, such as the effective monthly interest rate, late payment interest and the total charges foreseen in the event of late payment.
The new law also regulates informational conduct to be observed by the credit supplier regarding the nature and modality of the credit offered, considering the age of the consumer.
The law also included a new chapter in the Brazilian Consumer Protection Code dedicated to the conciliation between debtor and creditor with respect to over-indebtedness. According to the new law, the over-indebted consumer may request the initiation of a debt renegotiation process, with the consumer being responsible for submitting a payment plan proposal, preserving the existential minimum. The unjustified non-attendance of the creditor or his attorney at the conciliation hearing may suspend the payment of the credit, with the interruption of the late payment charges. In the case of a successful conciliation, the court decision that ratifies the agreement will describe the debt payment plan and will be enforceable. A new debt renegotiation request may only be submitted after two years, counting from the settlement of the obligations provided for in the payment plan. In the case of unsuccessful conciliation, the judge, at the consumer's request, will institute proceedings for over-indebtedness to review and integrate the contracts and renegotiate the remaining debts, through a compulsory judicial plan.
Further, on September 30, 2021, the CMN published Resolution No. 4,949. The rule provides the principles and procedures to be adopted in the relationship with clients and users of products and services of financial institutions and other institutions authorized to operate by the Brazilian Central Bank. On October 13, 2021, the Brazilian Central Bank published Resolution No. 155, which establishes almost identical principles and procedures to be adopted by payment institutions and consortium administrators, which are regulated and supervised solely by the Brazilian Central Bank.
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CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 set forth new rules mainly with the goal of ensuring fair and equitable treatment at all stages of the relationship with institutions providing financial and payments services, as well as a convergence of the interests of such institutions with those of their consumers.
Under CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021, institutions authorized to operate by the Brazilian Central Bank shall prepare and implement an institutional policy for the relation with consumers and users. Such new policy should consolidate guidelines, strategic objectives and organizational values, so that the conduct of the institution’s activities is guided by the principles of ethics, responsibility, transparency and diligence.
CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 also provide that institutions authorized to operate by the Brazilian Central Bank and must indicate to such regulatory agency the officer responsible for complying with the obligations provided under the new rules.
The rules also impose other obligations to the regulated entities within their scope, such as the compliance with transparency and suitability rules. CMN Resolution No. 4,949 will enter into effect on March 1, 2022, and Central Bank Resolution No. 155 will enter into effect on October 10, 2022.
Policy for Relationship with Customers and Users of Financial Products and Services
Financial institutions and other institutions authorized to operate by the Brazilian Central Bank must have a policy governing the relationship with customers and users of financial products and services. In addition, such entities shall comply with the principles of ethics, liability, transparency and diligence promoting the convergence of interests and the consolidation of the institutional image of credibility, security and expertise.
Ombudsman
Financial institutions and other entities that are authorized to operate by the Brazilian Central Bank must have an ombudsman office. An ombudsman office has the following attributes according to the current regulation:
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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), or SAC); and
·● to act as a communication channel between the financial institutions and their customers, including for dispute ~~resolution~~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.
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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.

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The Brazilian Central Bank imposes a limit on the total exposure in foreign currency transactions and transactions subject to foreign exchange fluctuation undertaken by Brazilian financial institutions, including branches abroad, and their direct and indirect affiliates. The limit is currently equivalent to 30.0% of the financial institution’s Regulatory Capital (Patrimônio de Referência), on a consolidated basis. The CMN, the Brazilian Central Bank and the Brazilian government may change the regulation applicable to foreign currency and foreign exchange transactions undertaken by Brazilian financial institutions in accordance with Brazil’s economic policy (including its foreign exchange policy).

On ~~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 ~~is regulated (“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.
On December 22, 2020, the Brazilian House of Representatives approved the base wording of the New Foreign Exchange Bill. The Brazilian House of Representatives is expected to vote on any motions by representatives for amendment or redaction of specific sections of the New Foreign Exchange BillLaw No. 14,286 will enter into effect in ~~early 2021. Upon approval by the Brazilian House of Representatives, the bill will be sent to the Brazilian Senate for approval. As of~~one year from the date of ~~this annual report, it is not possible to estimate if and when it will be approved by the Brazilian Senate, or what changes will be approved by the House of Representatives.~~
its publication (which occurred on December 30, 2021).
Foreign Investment in Brazilian Financial Institutions
According to the Brazilian federal constitution, the acquisition of equity interests by foreign individuals or legal entities in the capital stock of Brazilian financial institutions is forbidden, unless permitted by bilateral international treaties or by the Brazilian government by means of a presidential decree. A presidential decree issued on November 13, 1997, issued in respect of Banco Meridional do Brasil S.A. (our legal predecessor) allows 100% foreign participation in our capital stock. Foreign investors may acquire the shares issued by Santander Brasil as a result of this decree. In addition, foreign investors may acquire publicly traded nonvoting shares of Brazilian financial institutions traded on a stock exchange or securities depositary receipts offered abroad representing shares without specific authorization.
Following the enactment of Decree No. 10,029, the Brazilian Central Bank published, on January 22, 2020, Circular No. 3,977 recognizing as an interest of the Brazilian government the foreign holding of equity or increase in equity interest of financial institutions headquartered in Brazil (which is still subject to the same requirements and procedures applicable to the acquisition of equity in any Brazilian financial institution), as well as the opening of local branches of foreign financial institutions. However, since Santander Brasil had already been granted a specific presidential decree authorizing the foreign interest in its share capital, prior to Decree 10,029/19 being issued it does not affect its operations in Brazil.
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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.
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Bank Correspondents
Financial institutions are allowed to provide specific services to customers, including customer services, through other entities. These entities are called “bank correspondents” and the relationship between the financial institution and the bank correspondent is ruled by a specific regulation published by CMN and is subject to the supervision of the Brazilian Central Bank.
On July 29, 2021, the CMN published Resolution No. 4,935, which will revoke CMN Resolution No. 3,954, of February 24, 2011, changing the regulation of banking correspondents in Brazil. Banking correspondents are companies contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank to provide services to their contracting institutions.
The new rule determines that these institutions set forth a policy for the operation and hiring of their correspondents, and it should formalized by a specific document and approved by the institution’s board of officers or board of directors. This operation and contracting policy should provide for the criteria required for contracting correspondents, internal controls related to the correspondent and remuneration rules for the provision of services.
The contracting institutions will continue to be required to maintain adequate internal control systems in order to monitor the public service activities carried out by the contracted correspondents and the contracting institution’s internal audit must annually assess the effectiveness of these quality control mechanisms.
In addition, with the inclusion of the express possibility of the correspondents acting in a digital setting, some provisions were improved, highlighting the need for the correspondent’s digital platform itself to have a minimum technical qualification that allows the offering of products and services suited to the needs, interests and goals of the contracting institution’s clients.
CMN Resolution 4,935 came into effect on February 1, 2022.
Regulation of Branches
Authorization by the Brazilian Central Bank is required for operations of branches or subsidiaries of Brazilian financial institutions, upon the compliance with certain term, capital and equity requirements, as well as the submission of an economic and financial feasibility analysis.
The Brazilian Central Bank’s prior authorization is also required in order to: (i) allocate new funds to branches or subsidiaries abroad; (ii) subscribe capital increases, directly or indirectly, in subsidiaries abroad; (iii) increase equity participation, directly or indirectly, in subsidiaries abroad; and/or (iv) merge or spin off, directly or indirectly, subsidiaries abroad.
The Brazilian Central Bank determines that financial institutions can install the following establishments in Brazil: (i) branches, (ii) teller booths, (iii) automatic teller machines, and (iv) segregated administrative units, provided that, for items (i) to (iii), conformity with requirements of minimum capital and operating limits are necessary.
Cayman Islands Banking Regulation
We have a branch in the Cayman Islands with its own staff and representative ~~officers.~~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.
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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, 2020, CI$1 was equivalent to R$~~6.29,~~6.68, according to the Brazilian Central Bank.
Luxembourg Banking Regulation
Branches of credit institutions from outside the European Union (“non-EU credit institutions”) must be licensed by the Luxembourg Minister of Finance under the law of 5 April 1993 on the financial sector, as amended, in order to operate in Luxembourg.
We have a branch in Luxembourg with its own staff and representative officers. Our Luxembourg branch is licensed as a Luxembourg branch of a non-EU credit institution and is duly registered with the Luxembourg Trade and Companies’ Registry. The branch, therefore, is duly authorized to carry on banking business in Luxembourg. Its registered offices are at 35F, avenue ~~J.F.~~J. F. Kennedy, 2nd floor, L-1855 Luxembourg, Grand Duchy of Luxembourg.
Our Luxembourg branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions involving Brazil. The results of the operations of the Luxembourg branch are consolidated in our consolidated financial statements.
Luxembourg law requires the Luxembourg branch to have a minimum endowment capital of €8,700,000 and the solvency, and liquidity requirements deriving, among others, from EU Regulation No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms apply to it.
Foreign Subsidiary
We had established an independent subsidiary in Spain, Santander EFC, in order to complement our foreign trade strategy for corporate customers, which are composed of large Brazilian companies and their operations abroad. This has allowed us to provide financial products and services by means of an offshore entity, which is not established in a “tax haven,” such as our Cayman Islands branch, in accordance with Law No. 12,249, of June 11, 2010, and Brazilian Federal Revenue Normative Ruling No. 1,037, of June 4, 2010.
The establishment of our foreign subsidiary was approved by the Brazilian Central Bank on September 26, 2011, by the Spanish Ministerio de Economia y Haciendaon February 6, 2012 and by the Bank of Spain on March 28, 2012. The remittance of resources to pay up the share capital of the subsidiary was carried out on March 5, 2012, totaling €748 ~~million.~~million, Santander EFC was operational from 2012 to November 12, 2020, when we approved its liquidation. As a consequence of the liquidation, we, as sole shareholder of Santander EFC, have participated in the net assets of the corporation, in the net amount of €741 million.
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U.S. Banking Regulation
Financial Regulatory Reform
Banking statutes and regulations are continually under review by the United States Congress. In addition to laws and regulations, the U.S. bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance. Many changes have occurred as a result of the 2010 Dodd-Frank Act and its implementing regulations, most of which are now in place. In 2017, the President of the United States issued an executive order that sets forth principles for financial regulatory 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~~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~~or the “Tailoring ~~Rules”)~~Rules,” that ~~pursuant to EGRRCPA,~~ adjust the thresholds at which certain enhanced prudential standards and capital and liquidity requirements apply to certain banking organizations, including large FBOs such as Santander Spain. As a result, Santander Spain is now generally subject to less restrictive enhanced prudential standards and capital and liquidity requirements than under previously applicable regulations.
Under the current administration, however, banking organizations, including large FBOs, may become subject to increased scrutiny and more extensive legal and regulatory requirements than under the prior presidential and congressional regime. In addition, changes in key personnel at the agencies that regulate such banking organizations, including the federal banking regulators, may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more severe penalties than previously.
Volcker Rule
Section 13 of the U.S. Bank Holding Company Act of 1956, as amended, and its implementing rules (collectively, the “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.~~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.
~~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.
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U.S. Anti-Money Laundering, Anti-Terrorist Financing, and Foreign Corrupt Practices Act Regulations
Santander Brasil, as a foreign private issuer whose securities are registered under the Exchange Act, is subject to the U.S. Foreign Corrupt Practices Act, or the ~~“FCPA”.~~“FCPA.” The FCPA generally prohibits such issuers and their directors, officers, employees and agents from using any means or instrumentality of U.S. interstate commerce in furtherance of any offer or payment of money to any foreign official or political party for the purpose of influencing a decision of such person in order to obtain or retain business. It also requires that the issuer maintain books and records and a system of internal accounting controls sufficient to provide reasonable assurance that accountability of assets is maintained and accurate financial statements can be prepared. Penalties, fines and imprisonment of Santander Brasil’s officers and/or directors can be imposed for violations of the FCPA.
Furthermore, Santander Brasil is subject to a variety of U.S. anti-money laundering and anti-terrorist financing laws and regulations, such as the Bank Secrecy Act of 1970, as amended, and the USA Patriot Act of 2001, as amended, and a violation of such laws and regulations may result in substantial penalties, fines and imprisonment of Santander Brasil’s officers and/or directors.
The Anti-Money Laundering Act of 2020, or “AML Act,” enacted on January 1, 2021 as part of the National Defense Authorization Act, does not directly impose new requirements on banks, but requires the U.S. Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, and conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that the Bank Secrecy Act and Patriot Act impose on banks. The AML Act also contains provisions that promote increased information-sharing and use of technology and increases penalties for violations of the Bank Secrecy Act and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.
U.S. Sanctions
“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, OFAC), the United Nations Security Council, the European Union or Her Majesty’s Treasury. The Office of Foreign Assets Control, ~~(“OFAC”)~~or “OFAC,” is responsible for administering economic sanctions imposed against designated foreign countries, governments, individuals and entities pursuant to various Executive Orders, statutes and regulations.
OFAC-administered sanctions take many different forms. For example, sanctions may include: (1) restrictions on U.S. persons’ trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (2) blocking of assets of targeted governments or “specially designated nationals,” by prohibiting transfers of property subject to U.S. jurisdiction, including property in the possession or control of U.S. persons. Blocked assets, such as property and bank deposits, cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. In addition, non-U.S. persons can be liable for “causing” a sanctions violation by a U.S. person or can violate U.S. sanctions by exporting services from the United States to a sanctions target, for example by engaging in transactions with targets of U.S. sanctions denominated in U.S. dollars that clear through U.S. financial institutions (including through U.S. branches or subsidiaries of non-U.S. banks).
Failure to comply with applicable U.S. sanctions could have serious legal and reputational consequences, including significant civil monetary penalties and, in the most severe cases, criminal penalties.
In addition, the U.S. government has implemented various sanctions that target non-U.S. persons, including non-U.S. financial institutions that engage in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”) that involve Iran, North Korea, Russia, or Hezbollah or other persons designated by the United States under the Specially Designated Global Terrorist, or “SDGT,” sanctions program. If a non-U.S. financial institution were determined to have engaged in activities targeted by certain secondary U.S. sanctions or used proceeds produced by such activities targeted, it could lose its ability to open or maintain correspondent or payable-through accounts with U.S. financial institutions, among other potential consequences.
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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.
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The Brazilian Central Bank will also examine certain corporate reorganizations and other acts involving two or more financial institutions not only considering their potential effects on the financial system and its stability but also any potential impacts regarding market concentration and competition. Upon approval of the transaction, the Brazilian Central Bank may establish certain restrictions and require that the financial institutions execute an agreement of market concentration control, pursuant to which the terms and conditions of the sharing of the efficiency gain resulting from the act shall be set forth.
In December 2018, the Brazilian Central Bank and CADE approved a joint normative act establishing procedures with the purpose of increasing efficiency for their respective actions regarding antitrust matters. Pursuant to the joint normative act, the authorities are authorized to share information for the purposes of their respective activities and carry out meetings with each other to discuss matters requiring the regulatory cooperation between both authorities.
Insolvency Laws Concerning Financial Institutions
Financial institutions are subject to the proceedings established by Law 6,024 of March 13, 1974, or “Law ~~6024”,~~6024,” which establishes the applicable provisions in the event of intervention or extrajudicial 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:
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·● the institution’s economic or financial situation is at risk, particularly when the institution ceases to meet its obligations as they become due, or upon the occurrence of an event that could indicate a state of insolvency under the rules of the Bankruptcy Law;
·● management seriously violates Brazilian banking laws, regulations or rulings;
·● the institution suffers a loss which subjects its unprivileged and unsecured creditors to severe risk; and/or
·● upon revocation of the authorization to operate, the institution does not initiate ordinary liquidation proceedings within 90 days or, if initiated, the Brazilian Central Bank determines that the pace of the liquidation may harm the institution’s creditors.
A request for liquidation procedures can also be filed on reasonable grounds by the officers of the respective financial institution or by the receiver appointed by the Brazilian Central Bank in the receivership procedure.
The decree of extrajudicial liquidation will: (i) suspend the actions or foreclose on rights and interests relating to the estate of the entity being liquidated, while no other actions or executions may be brought during the liquidation; (ii) accelerate the obligations of the entity; and (iii) interrupt the statute of limitations with regard to the obligations assumed by the institution.
Extrajudicial liquidation procedures may be terminated:
·● by discretionary decision of the Brazilian Central Bank if the parties involved undertake the administration of the financial institution after having provided the necessary guarantees; or
·● when the final accounts of the receiver are delivered and approved and subsequently registered in the relevant public records; 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 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.
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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.
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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 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 ~~11,112/~~14,112/20,” was passed. Law ~~11,112/~~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~~debtor’s tax liabilities and installment payments, as well as new taxation schemes; and (vi) incorporation of rules on cross-border insolvency proceedings into the Brazilian framework.
Law 14,112/20 replicates, with some adjustments, the provisions of the UNCITRAL Model Law on Cross-Border Insolvency. As a result, Law 14,112/20 sets out some rules on access of foreign representatives to courts in Brazil, the method and requirements for recognition of foreign main and ancillary proceedings, authorization for the debtor and his representatives to act in other countries, methods of communication and cooperation between foreign authorities and representatives and the Brazilian jurisdiction, and the processing of concurrent proceedings.
Law 14,112/20 also sets forth, among other measures, (i) a protection for creditors that agree on the conversion of debt into equity against potential transfer of liability with regard to the ~~debtor's~~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.
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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.
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The total amount of credit in the form of demand deposits, savings deposits, time deposits, deposits maintained in accounts blocked for transactions with checks (for the registration and control of funds relating to the rendering of services of payment of salaries, earnings, pensions), bills of exchange, real estate bills, mortgage bills, real estate credit bills and repurchase and resale agreements whose objects are instruments issued after March 8, 2012 by a company of the same group due to each customer by a financial institution (or by financial institutions of the same financial group) will be guaranteed by the FGC for up to a maximum of R$250,000 per customer. When the assets of the FGC reach 2% of the total amounts they guarantee, the CMN may temporarily suspend or reduce the contribution of financial institutions to the FGC. As from February 2016, credits of financial institutions and other institutions authorized to operate by the Brazilian Central Bank, complementary welfare entities, insurance companies, capitalization companies, investment clubs and investment funds, as well as those representing any interest in or financial instrument held by such entities, are not protected by the ordinary guarantee of FGC. In December 2017, the CMN enacted a new rule amending certain provisions of the FGC regulation among which includes the establishment of a limit of R$1 million per four-year period for the coverage of the credits of a certain creditor against the group of associated financial institutions.
Administrative Proceedings in the Brazilian National Financial System, the Brazilian Payment System and Capital Markets
Law 13,506 of November 13, 2017 or “Law 13,506/17” applies to entities authorized or supervised by the Brazilian Central Bank or by the CVM, as well as to market participants. Some of the key aspects of Law 13,506 are that: (i) it increases the maximum fine applicable by the Brazilian Central Bank from R$250,000 to R$2 billion or 0.5% of the revenues of the company arising from services and financial products in the year prior to the violation; (ii) it increases the maximum fine applicable by the CVM from R$500,000 to R$50 million; (iii) it makes additional types of violations subject to penalties; (iv) it provides that the penalty of “public admonition” may be cumulative to other penalties applicable by the Brazilian Central Bank; (v) it provides that Brazilian Central Bank may enter into cease-and-desist commitments; and (vi) it provides that the Brazilian Central Bank and the CVM may enter into administrative agreements similar to leniency agreements.
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Opening, Maintenance and Closing of Deposit Accounts
CMN Resolution No. 4,753/19 provides criteria for the opening, maintenance and closing of deposit accounts. The regulation determines that financial institutions must adopt procedures and controls that allow the verification and validation of the identity and qualification of the account holders and, if applicable, their representatives, as well as the authenticity of the information provided by the client. This information must be kept updated by the financial institution.
The rule also requires financial institutions to ensure, through the procedures and technology used for the opening, maintaining and closing of deposit accounts, the integrity authenticity and confidentiality, as well as the protection against unauthorized access, use, alteration, reproduction and destruction, of the information and the electronic documents used by them during the process.
Issuance of Credit Instruments Electronically
Provisional Measure No. 897, or “MP 897/2019,” among other provisions, (i) created a new credit instrument, the Rural Real Estate Note (Cédula Imobiliária Rural or “CIR”), with the purpose of advancing rural real estate financing by the creation of an instrument specifically designed to that end; (ii) changed the rules governing Bank Deposit Certificates (Certificado de Depósito Bancário or “CDB”), especially regarding their issuance and the transfer of their ownership, by providing among other changes that CDB issued in book-entry form should be transferred by electronic endorsement, exclusively by means of a specific notation in the issuing institution’s own electronic system or, when deposited in central depositary, by means of specific notation in the corresponding electronic system; and (iii) authorized that customary credit instruments such as the Agricultural Certificate of Deposit (Certificado de Depósito do Agronegócio - CDA), the Agricultural Warrant (Warrant Agropecuário - WA), the Real Estate Credit Certificate (Certificado de Crédito Imobiliário - CCI), the Bank Credit Note (Cédula de Crédito Bancário - CCB), the Rural Credit Note (Cédula de Crédito Rural - CCR), the Rural Promissory Note (Nota Promissória Rural - NPR), the Rural Trade Bill (Duplicata Rural - DR), may be issued in book-entry form through the electronic bookkeeping system held at a financial institution or other entity authorized by the Brazilian Central Bank to perform electronic bookkeeping activity.
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On July 15, 2020, the Brazilian Central Bank regulated, through Circular No. 4,036/20, the electronic issuance of book-entry CCBs and CCRs by financial institutions. A financial institution must render the following services in respect of the bookkeeping of CCBs and CCRs: (i) issue the instrument in book-entry form at the request of the borrower; (ii) include of all obligatory information related to CCBs and CCRs, as well as ancillary documents and/or information for the purposes of verifying the outstanding balance of the underlying credit transaction; (iii) verify the effective title or fiduciary title of the instruments; (iv) make the payment CCBs and CCRs for the settlement of obligations available to the debtor; (v) control the financial flow related to the CCBs and CCRs, including prepayments; (vi) record security interests in an entity authorized to perform centralized registration or deposit of financial assets; (vii) make information about the CCBs and CCRs available to debtors, holders, collateral beneficiaries or any other legally qualified interested party; and (viii) carry out the issuance of certificates regarding the instruments whenever required.
Limitation to the fees and interest rates on overdraft-secured checks
On November 27, 2019, the CMN issued Resolution No. 4,765 or “Resolution No. 4,765/~~2019”,~~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.
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Resolution No. 4,765/2019 came into force on January 6, 2020, for agreements executed after the referred date, came into force on June 1, 2020, for agreements executed prior to such date. Regarding the 8% limitation above, the rule applies to all contracts from January 6, 2020, regardless of the date the applicable contract was entered into.
On February 6, 2020, the Brazilian Central Bank issued Circular No. 3,981, which deals with the new information regarding overdraft facilities that must be highlighted in the statement of the checking accounts held by natural persons or MEIs. Circular No. 3,981 came into effect on June 1, 2020.
Automatic debit of banking accounts
On March 26, 2020, CMN issued Resolution No. 4,790, which sets forth new rules for the automatic debit payments from checking account and accounts designated for the payment of an individual’s wages. The new rule sets forth that financial institutions should only process automatic debit payments upon prior and express authorization of the client, and provides for the procedures for the authorization and cancellation of automatic debit payments. The new rule came into force on March 1, ~~2021.~~2021, CMN Resolution No. 4,790 repealed CMN Resolution 4,771.
Taxation
Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL)
The IRPJ is calculated at a rate of 15.0%, plus a surtax of 10.0% which is levied on profits exceeding the amount of R$240,000 per year and the CSLL is calculated at a rate of ~~15.0% or~~ 20.0% (25.0% exceptionally in 2021, as per Law No. 14,183/2021) for financial institutions and 9.0% for companies, after adjustments determined by the tax legislation.
~~Constitutional amendment 103/2019 increased the CSLL tax rate applicable to banks from 15.0% to 20.0% from March 1, 2020.~~
Deferred tax assets and liabilities are measured based on temporary differences between the book basis and tax basis of assets and liabilities, tax losses, and adjustments to fair value of securities and derivatives.
According to the requirements in the current regulations, the expected realization of deferred tax assets is based on projections of future results and a technical study approved by the Directors of Santander Brasil.
Income tax (IRPJ) and Social Contribution Tax (CSLL) on Foreign Exchange Variation of Hedges for Investments Held Abroad (Law No. 14,031/2020)
Pursuant to Law No. 14,031/2020, which came in force in July 2020, exchange rate variations arising from hedges on investments held abroad are taxable starting in 2021. Accordingly, in 2021, 50% of the exchange rate variation shall be taxable under the IRPJ and CSLL, while, in 2022, 100% of the exchange rate variation will be considered as taxable.
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Tax on Services (ISS)
Each of the Municipalities of Brazil and the Federal District are responsible for establishing the applicable ISS rate, which is charged on the value of services provided by the company, to the municipality where the service renderer is located. The rates vary from 2% to 5% and depend on the nature of the service.
On December 30, 2016, Complementary Law No. 157/2016 was enacted. This ~~new~~ legislation establishes a minimum rate of 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.
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Before the aforementioned Law was enacted, the ISS was due in the municipality in which the service provider was located (irrespective of where the service taker was located). With this new legislation, ISS rates may vary depending on where the service taker is located.
There are several complications that may arise from this new legislation, including (i) as service takers are generally located in several municipalities, it is logistically difficult to comply and collect the taxes; and (ii) there are situations where the municipality of the service taker is not easily identifiable by the credit card company (as is the case for online transactions, for example).
Since the ISS is a municipal tax, the rule must be regulated by each municipality in order to be enforceable. This new rule is only applicable to triggering events occurring from 2018 onwards, when the municipal regulations applicable to Supplementary Law No. 157 come into force.
On March 23, 2018, the Brazilian Supreme Court suspended the application of the Complementary Law No. 157. It is still suspended as of the date of this annual report. This suspension may be circumvented by the enactment of Complementary Law No. 175/20.
Complementary Law No. 175, published on September 24, 2020, was enacted to create a unified ISS collection system, in which taxpayers would be able to collect ISS in every municipality in Brazil. It’s an effort to facilitate tax collection considering the complexity regarding the multiple rulings on ISS, since each municipality can pass its own laws on ISS.
The system is currently under development, and it is expected that it would enable Complementary Law No. 157 to be brought back into effect.
PIS and COFINS Tax Rates
PIS and COFINS (respectively, the profit participation contribution and the social security financing contribution, both of which are social contributions due on certain revenues net of certain expenses) payable by financial institutions and similar entities, as defined by law, are due at the rate of 0.65% and 4%, respectively. They are levied cumulatively on gross revenue billed, which is defined as the total revenues earned by the legal entity, net of certain expenses, such as funding costs.
Non-financial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to non-cumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.
Tax on Financial Transactions (IOF)
IOF is a tax levied on credit, currency exchange, insurance and securities transactions and it is imposed on the following transactions and at the following ~~rates:~~rates.
Decree No. 10,797/2021 temporarily increased IOF on credit transactions as follows:
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~~Transaction(1)~~Transaction (1)
Maximum Legal Rate
Current Rate
Credit extended by financial institutions and non-financial entities 1.5% or 3% (between 2.04% and 4.08% in 2021) 0.0041% per day for loans contracted by legal entities and 0.0082% per day for individuals capped at 365 days. An additional 0.38% rate is applicable in both cases. (Exceptionally, in 2021, 0.00559% per day for legal entities and 0.01118% per day for individuals).
Transactions relating to ~~securities(2)~~securities (2) 1.5% per day 0.5% per day for certain investment funds.
0% on transactions with equity securities and certain debt securities, such as debentures and real estate receivables and agribusiness receivables (CRI/CRA).
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~~Transaction(1)~~
~~Maximum Legal Rate~~
~~Current Rate~~
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% on credit card transactions as from April 27, 2011.
6.38% on withdrawals abroad using credit or debit cards as from December 28, 2013.
6.38% on purchase of travelers checks or loading of international prepaid card as from December 28, 2013.
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
6% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is equal or less than 180 days.
0% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is higher than 180 days.
0% for interbank transactions.
0% for exchange transactions in connection with the outflow of proceeds from Brazil for the remittance of interest on net equity and dividends to be received by foreign investors.
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~~Transaction(1)~~
~~Maximum Legal Rate~~
~~Current Rate~~
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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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.
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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 No. ~~1,680~~1680 was enacted, introducing the Common Reporting Standard in Brazil. The Common Reporting Standard provides for certain account reporting obligations similar to those existing under FATCA. It was created in the context of the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting project, which is aimed at reducing tax avoidance. Normative Ruling n°No. 1,680 applies to legal entities required to present the e-Financeira pursuant to Normative Ruling ~~n° 1,571,~~No. 1571, dated July 2, 2016.
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 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.~~general, Under Law 13,259/16, the income tax rates applicable to capital gains realized by these investors would be: (i) 15% for the portion of the gains up to R$5 million, (ii) 17.5% for the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million.
The provisions of Law 13,259/16 may apply to ~~Non Resident~~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%.
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Most transactions carried out by ~~Non Resident~~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.
~~Temporary IOF/Credit Tax Relief~~
~~Decree 10,305/20, published in April 2020, along with further amendments, reduced the rate of IOF tax applicable to credit transactions to zero between April 3 and November 27, 2020.~~
Credit transactions in which funds were redeemed by the customer between the aforementioned dates are not subject to IOF tax. Subsequent renegotiations on credit transactions covered by Decree 10,305/20 that do not include the provision of additional funds are also not subject to IOF tax. Any additional funds are subject to IOF.
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 five blocked accounts for three customers, with the first customer holding one GBP savings account and one GBP current account, the second customer holding one GBP savings account, and the third customer holding two GBP current accounts. All three customers, who are resident in the UK, are currently designated by the U.S. 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)       Santander UK holds two frozen current accounts for two UK nationals who are designated by the U.S. under the SDGT sanctions program. The accounts held by one customer were fully inaccessible at the time of the US designation and were blocked at the time of the account going into a debit balance. The accounts held by the second customer were blocked immediately following the US designation and have remained frozen throughout 2020. These accounts are frozen in order to comply with Articles 2, 3 and 7 of Council Regulation (EC) No 881/2002 imposing certain specific restrictive measures directed against certain persons and entities associated with the Al-Qaeda network, by virtue of Commission Implementing Regulation (EU) 2015/1815. 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, 2020.
(c)       Santander Consumer Bank, S.A. holds seven blocked correspondent accounts for Bank Melli. Three USD accounts and four EUR accounts. The accounts have been blocked since 2008. Bank Melli is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. No revenues or profits were generated by Santander Consumer Bank, S.A. on these accounts in the year ended 31 December 2020.
(d) The Santander Group also has certain legacy performance guarantees for the benefit of Bank Mellat (standby 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.
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(a) Santander UK holds seven blocked accounts for five customers that are currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander UK on these accounts in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(b) Santander Consumer Finance, S.A. holds through its Belgian branch seven blocked correspondent accounts for an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by Santander Consumer Bank, S.A. on these accounts in the year ended December 31, 2021.
(c) Santander Brasil holds a blocked account for a customer with domicile in Brazil designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship with the customer preceded its designation under the sanctions program. Revenues and profits generated by Santander Brasil on this account in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(d) The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program (stand-by letters of credit to guarantee the obligations – either under tender documents or under contracting agreements – of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007.
In the aggregate, all of the transactions described above resulted in gross revenues and net profits in the year ended December 31, ~~2020,~~2021 which were negligible relative to the overall revenues and profits of Banco Santander, S.A. The Santander Group has undertaken significant steps to withdraw from the Iranian market such as closing its representative office in Iran and ceasing all banking activities therein, including correspondent relationships, ~~deposit-taking~~deposit taking from Iranian entities and issuing export letters of credit, except for the legacy transactions described above. The Santander Group is not contractually permitted to cancel these arrangements without either (i) paying the guaranteed amount (in the case of the performance guarantees), or (ii) forfeiting the outstanding amounts due to it (in the case of the export credits). As such, the Santander Group intends to continue to provide the guarantees and hold these assets in accordance with company policy and applicable laws.
Regulatory Developments Related to COVID-19
The following section summarizes the measures implemented by the CMN and the Brazilian Central Bank to mitigate the consequences of the COVID-19 pandemic on the Brazilian financial system.
Temporary Suspension of Dividend Distributions and Other Payments
On May 29, 2020 the CMN enacted Resolution No. 4,820 in response to the COVID-19 pandemic. Resolution No. 4,820 prohibits financial institutions, such as us, to: (i) offset their capital, including by means of early payment, in excess of amounts equivalent to the minimum mandatory dividend required by the Brazilian Corporate Law, including as interest on capital (ii) repurchase their own shares, subject to certain exceptions as authorized by the Brazilian Central Bank; (iii) reduce their capital stock, except if such reduction is required by law or approved by the Brazilian Central Bank; and (iv) increase the compensation of their officers, directors and members of the board of directors and audit committee, including fixed and variable ~~compensation.~~compensation, CMN Resolution No. 4,280 repealed CMN Resolution No. 4,797.
On December 23, 2020, the CMN enacted Resolution No. 4,885, which made the payment of dividends or interest on capital more flexible. As a result, financial institutions were not allowed to pay in excess of the greater of (x) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (y) the amount equivalent to the mandatory dividends as set forth in article 202 of the Brazilian Corporate Law. This is the only restriction still in force as a result of Resolution ~~4,820/20.~~
No. 4,820.
As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This measure was not applied by the Brazilian Central Bank in 2021.
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Reduction of Capital Conservation Buffer
On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduces the Capital Conservation Buffer (where all rates relate to the total amount of risk weighted assets) required from financial institutions, from 2.5% to 1.25%. The rate of 1.25% will remain in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the Capital Conservation Buffer requirement will gradually be restored to 2.5%. The measure aims to increase the ability of banks to renegotiate credit transactions and maintain engagement in new transactions, considering the current scenario of increased demand for financial services. CMN Resolution No. 4,783 was replaced by CMN Resolution No. 4,958/2021, which maintains the same rates for the periods set forth in the previous rule.
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Repos on Sovereign Bonds Denominated in U.S. Dollars
On March 18, 2020, the Brazilian Central Bank issued Circular No. 3,990, which allowed the repurchase transactions of U.S. Dollar denominated federal bonds between the Brazilian Central Bank and Brazilian financial institutions. The Brazilian Central Bank can purchase such bonds with a discount of 10% in comparison to market prices and the financial institution assumes the obligation to purchase the bonds in a future date. The rules also set out a margin transfer during the term of the transaction whenever the exposure is equal or greater than ~~US$~~U.S.$500,000. The purpose of this measure is to provide liquidity to the Brazilian sovereign bonds market, by offering liquidity in U.S. Dollars to Brazilian banks and reducing trading volatility of such bonds. Circular No. 3,990 was revoked by Brazilian Central Bank Resolution No. 76, of February 23, 2021, which essentially maintains the same wording established in the previous rule.
Changes to Provision Requirements
On March 16, 2020 CMN enacted Resolution No. 4,782/20, which was amended by Resolution No. ~~4.856/~~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 ~~September 30,~~December 31, 2020. These measures were not applied in 2021.
New Time Deposits with Special Collateral
CMN Resolution No. 4,799/20 has regulated funding through new Time Deposits with Special Collateral ~~(Novo~~(Novo Depósito a Prazo com Garantias Especiais or “DPGEs”), which are deposits taken by financial institutions and guaranteed by the Credit Guarantee Fund ~~(Fundo~~(Fundo Garantidor de Crédito or “FGC”). The resolution increased the cap from R$20 million to R$40 million and is intended to strengthen the liquidity strength of smaller financial institutions. The current limit, set forth 4,964/2021, is set at R$90 million.
Central Bank Loans Backed by Debentures and Financial Bills Held by Financial Institutions
On March 23, 2020, the CMN enacted Resolution No. 4,786, which authorized the Brazilian Central Bank to grant loans to multiservice banks, commercial banks, investment banks and saving banks, backed by debentures (corporate debt instruments) held by such institutions and acquired in the secondary market, provided that certain provisions set forth in the ruling are complied with. It is worth mentioning the ruling sets forth that said loans will also be secured by mandatory deposits in Bank Reserve Accounts, in amount equivalent to, at least, the total amount of the transactions, as well as by the debenture collateral.
This is considered a Temporary Special Liquidity Credit Facility, and iswas 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 ~~may~~could be engaged for a 125 business day term, which ~~may~~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 ~~authorizes~~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 ~~will be~~was available in tranches, and could reach 100% of the Reference Assets of such financial institutions. The facility ~~will be~~became available to financial institutions through December 31, 2020 and the Financial Bills issued thereunder ~~will have~~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.
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Flexibilization of Funding Requirements Through Agribusiness Credit Notes (Letras de Crédito do Agronegócio or “LCAs”)
On March 23, 2020, the CMN issued Resolution No. 4,787, which adjusted the assessment base of the mandatory reserve requirements of funds raised through LCAs, which are credit notes issued exclusively by financial institutions and related to credit rights originated from transactions conducted between rural producers and their cooperatives and agents of the agribusiness production chain, with the purpose of increasing their liquidity. As a result, the rules for applying funds originated from agribusiness activities were relaxed. The Brazilian Central Bank expects an increase in credit extension directed to agribusiness of R$6.3 billion as a result of the measure. The measure was revoked on April 29, 2021.
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Employment Support Program providing emergency payroll financing for small and medium-sized businesses
The CMN enacted Resolution No. 4,846 on August 24, 2020, which regulates the granting of loans under the Emergency Employment Support Program (Programa Emergencial de Suporte a Empregos or “PESE”), established through Provisional Measure No. 944/2020. PESE sets forth the offering of an emergency credit line of R$40 billion to finance, for two months, the payroll of small and medium-sized companies that adhere to the program, with the purpose of preserving jobs. Regarding the funding of said credit line, 85% will derive from the National Treasury and the remaining 15% from participating financial institutions, including Santander Brasil. The adhering small and medium-sized businesses will not be able to dismiss workers during the period that the loan is taken out and up to the 60th day after the business receives its last installment. The maximum amount financed per worker will be up to two minimum wages. The funding will go directly to the worker’s account, as is done today through payrolls operated by financial institutions. PESE came into effect on April 6, 2020. CMN Resolution No. 4,846 repealed CMN Resolution No. 4,800.
FX overhedge of equity interests abroad
On March 18, 2020, the CMN enacted Resolution No. 4,784, which amended CMN Resolution No. 4,192, of March 1, 2013. The rule sets forth that the tax credits arising from losses on excess FX position aimed at hedging of investments held abroad by financial institutions will not be deducted from their regulatory capital (patrimônio de referência). The measure aims at providing further capital relief and hence additional comfort for financial institutions to maintain and extend credit.
The changes were incorporated into CMN Resolution No. 4,955, of 2021, which repealed and replaced Resolution No. 4,192.
Higher ceiling for repurchase of financial bills (letras financeiras) by financial institutions
Pursuant to CMN Resolution No. 4,788, issued on March 23, 2020, financial institutions classified as Segment 1 for the proportional application of the prudential regulation, as is our case, may, from March 23 to April 30, 2020, repurchase up to 20% of financial bills of their own issuance, a substantial increase from the previous ceiling of 5%.
Brazilian Central Bank authorized to buy and sell government bonds and private financial assets and securities in the secondary market
Constitutional Amendment No. 106, enacted on May 7, 2020, sets forth emergency economic and budget measures for the Brazilian government during the COVID-19 pandemic. Among them, the Amendment authorizes the Brazilian Central Bank, for the duration of the pandemic, to buy and sell (i) government bonds in local and foreign secondary markets; and (ii) other assets, in domestic secondary financial, capital and payments markets, provided that, at the time of purchase, they have a credit risk rating in the local market equivalent to BB- or higher, conferred by at least one of the three largest international rating agencies, as well as a reference price published by a financial market entity accredited by the Brazilian Central Bank.
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SELECTED STATISTICAL INFORMATION
The following information for Santander Brasil is included for analytical purposes and is derived from, and should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 5. Operating and Financial Review and Prospects.”
Average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: as of December 31, of the prior year and each of the month-end balances of the 12 subsequent months. Average income statement and balance sheet data and other related statistical information have been prepared on a consolidated annual basis.
The selected statistical information set forth below includes information as of and for the years ended December 31, 2021, 2020, ~~2019,~~ and ~~2018~~2019 extracted from the audited financial statements prepared in conformity with IFRS as issued by the IASB. See “Presentation of Financial and Other Information” and “Item 3. Key Information—A. Selected Financial Data.”
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Average Balance Sheet and Interest Rates

The following tables show our average balances and interest rates for each of the periods presented. With respect to the tables below and the tables under “—Changes in Net Interest Income – Volume and Rate Analysis” and “—Assets—Earning ~~Assets–~~Assets – Yield Spread,” (i) we have stated average balances on a gross basis, before netting impairment losses, except for the total average asset figures, which include such netting, and (ii) all average data have been calculated using month-end balances, which is not significantly different from having used daily averages. We stop accruing interest on loans once they are more than 60 days past due. All our non-accrual loans are included in the table below under “Other assets.”
For the Year Ended December 31,
2021 2020 2019
Average Balance(1) Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate
(in millions of R$, except percentages)
Assets and Interest
Income
Cash and balances with the Brazilian Central Bank 58,494 2,581 4.4 % 54,531 1,552 2.8 % 48,670 3,828 7.9 %
Loans and amounts due from credit institutions 95,513 5,191 5.4 % 104,759 1,519 1.4 % 101,981 3,844 3.8 %
Of which:
  Reverse repurchase
agreements 45,458 2,154 4.7 % -   -   -   -   -   -
Loans and advances to customers 461,141 49,538 10.7 % 384,389 44,104 11.5 % 323,180 50,406 15.6 %
Debt instruments 224,890 19,042 8.5 % 203,578 13,556 6.7 % 178,811 13,528 7.6 %
Other interest – earning assets -   1,636 -   -   2,044 -   -   1,235 -
Total interest – earning assets 840,038 77,988 9.3 % 747,257 62,775 8.4 % 652,642 72,841 11.2 %
Equity instruments 2,279 90 3.9 % 1,730 34 2.0 % 1,464 19 1.3 %
Investments in associates 952 -   -   1,098 -   -   1,060 -   -
Total earning assets 843,269 78,077 9.3 % 750,085 62,809 8.4 % 655,166 72,860 11.1 %
Cash and balances with the Brazilian Central Bank 4,633 -   -   4,800 -   -   4,538 -   -
Loans and amounts due from credit institutions 441 -   -   6,668 -   -   2,258 -   -
Impairment losses (26,908 ) -   -   (23,936 ) -   -   (22,528 ) -   -
Other assets 81,669 -   -   76,642 -   -   56,912 -   -

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For the Year Ended December 31,
2020 2019 2018
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 54,531 1,552 2.8 % 48,670 3,828 7.9 % 81,018 5,096 6.3 %
Loans and amounts due from credit institutions 104,759 1,519 1.4 % 101,981 3,844 3.8 % 56,093 2,978 5.3 %
Loans and advances to customers 384,389 44,102 11.5 % 323,180 50,406 15.6 % 304,633 46,471 15.3 %
Debt instruments 203,578 13,556 6.7 % 178,811 13,528 7.6 % 164,111 13,629 8.3 %
Other interest – earning assets - 2,044 - - 1,235 - - 2,304 -
Total interest – earning assets 747,257 62,773 8.4 % 652,642 72,841 11.2 % 605,855 70,478 11.6 %
Equity instruments 1,730 34 2.0 % 1,464 19 1.3 % 1,213 33 2.7 %
Investments in associates 1,098 - - 1,060 - - 963 - -
Total earning assets 750,085 62,807 8.4 % 655,166 72,860 11.1 % 608,031 70,511 11.6 %
Cash and balances with the Brazilian Central Bank 4,800 - - 4,538 - - 4,351 - -
Loans and amounts due from credit institutions 6,668 - - 2,258 - - 1,676 - -
Impairment losses (23,936 ) - - (22,528 ) - - (21,056 ) - -
Other assets 76,642 - - 56,912 - - 56,276 - -
Tangible assets 9,587 - - 9,091 - - 6,414 - -
Intangible assets 30,769 - - 30,070 - - 29,839 - -
Total average assets 854,615 62,807 7.3 % 735,507 72,860 9.9 % 685,531 70,511 10.3 %
Liabilities and Interest Expense
Deposits from the Brazilian Central Bank and Deposits from credit institutions 111,684 4,327 3.9 % 100,473 4,866 4.8 % 95,217 5,367 5.6 %
Customer deposits 380,058 7,498 2.0 % 303,741 14,966 4.9 % 285,694 13,577 4.8 %
Marketable debt securities 68,585 2,514 3.7 % 76,194 5,138 6.7 % 71,525 4,607 6.4 %
Subordinated debts 13,102 863 6.6 % 10,779 660 6.1 % 10,952 630 5.8 %
Other interest-bearing liabilities - 3,125 - - 2,890 - - 4,376 -
Total interest-bearing liabilities 573,429 18,327 3.2 % 491,187 28,520 5.8 % 463,388 28,557 6.2 %
Noninterest bearing demand deposits 28,581 - - 14,612 - - 11,127 - -
Other liabilities 150,759 - - 133,255 - - 121,198 - -
Non-controlling interests 315 - - 617 - - 555 - -
Stockholders’ Equity 101,531 - - 95,836 - - 89,263 - -
Total average liabilities and equity 854,615 18,327 2.1 % 735,507 28,520 3.9 % 685,531 28,557 4.2 %
Property, plant and equipment 8,823 -   -   9,587 -   -   9,091 -   -
Intangible assets 30,250 -   -   30,769 -   -   30,070 -   -
Total average assets 942,177 78,077 8.3 % 854,615 62,809 7.3 % 735,507 72,860 9.9 %
Liabilities and Interest Expense
Deposits from the Brazilian Central Bank and Deposits from credit institutions 149,111 4,712 3.2 % 111,684 4,327 3.9 % 100,473 4,866 4.8 %
Of which:
   Repurchase agreements 103,809 4,567 4.4 % -   -   -   -   -   -
Customer deposits 420,185 13,188 3.1 % 380,058 7,504 2.0 % 303,741 14,966 4.9 %
Of which:
   Repurchase agreements 58,264 -   -   -   -   -   -   -   -
Marketable debt securities 63,906 4,537 7.1 % 68,585 2,786 3.7 % 76,194 5,138 6.7 %
Subordinated debts 14,550 955 6.6 % 13,102 909 6.6 % 10,779 660 6.1 %
Other interest-bearing liabilities -   3,277 -   -   2,806 -   -   2,890 -
Total interest-bearing liabilities 647,752 26,669 4.2 % 573,429 18,332 3.2 % 491,187 28,520 5.8 %
Noninterest bearing demand deposits 33,893 -   -   28,581 -   -   14,612 -   -
Other liabilities 155,133 -   -   150,759 -   -   133,255 -   -
Non-controlling interests 329 -   -   315 -   -   617 -   -
Stockholders’ Equity 105,070 -   -   101,531 -   -   95,836 -   -
Total average liabilities and equity 942,177 26,669 2.8 % 854,615 18,332 2.1 % 735,507 28,520 3.9 %
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~~Table~~(1)     In the year ended December 31, 2021, we revisited the accounting treatment of ~~Contents~~electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.
Changes in Net Interest Income – Volume and Rate Analysis
The following tables present the changes in our net interest income allocated between changes in average volume and changes in average rate for the year ended December 31, 2021, compared to the year ended December 31, 2020, and for the year ended December 31, 2020 compared to the year ended December 31, ~~2019, and for the year ended December 31, 2019 compared to the year ended December 31, 2018.~~2019. We have calculated volume variances based on movements in average balances over the period and rate variance based on changes in interest rates on average interest-earning assets and average interest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume. You should read the following tables and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Years Ended 2021/2020 For the Years Ended 2020/2019
Increase (decrease) due to changes in
Volume Rate Net change Volume Rate Net change
(in millions of R$)
Interest and Similar Income
Interest-earning assets
Cash and balances with the Brazilian Central Bank 113 854 1,029 414 (2,690 ) (2,276 )
Loans and amounts due from credit institutions (134 ) 4,175 3,672 102 (2,427 ) (2,325 )
Loans and advances to customers 8,806 (2,809 ) 5,436 8,493 (14,797 ) (6,304 )
Debt instruments 1,419 3,681 5,486 1,753 (1,725 ) 28
Other interest-earning assets (408 ) —   (408 ) 809 —   809
Total interest-earning assets 9,796 5,901 15,215 11,571 (21,639 ) (10,068 )
Equity Instruments 11 34 56 4 11 15
Total earning assets 9,807 5,935 15,271 11,575 (21,628 ) (10,053 )
Interest Expense and Similar Charges
Interest-bearing liabilities
Deposits from the Brazilian Central Bank and Deposits from credit institutions 1,450 (798 ) 385 504 (1,043 ) (539 )
Customer deposits 792 4,431 5,690 3,095 (10,563 ) (7,468 )
Marketable debt securities (172 ) 2,355 2,023 (471 ) (2,153 ) (2,624 )
Subordinated liabilities 95 (51 ) 39 150 53 203
Other interest-bearing liabilities 2,421 —   2,421 235 —   235
Total interest-bearing liabilities 4,587 5,937 10,558 3,513 (13,706 ) (10,193 )

For the Years Ended 2020/2019 For the Years Ended 2019/2018
Increase (decrease) due to changes in
Volume Rate Net change Volume Rate Net change
(in millions of R$)
Interest and Similar Income
Interest-earning assets
Cash and balances with the Brazilian Central Bank 414 (2,690 ) (2,276 ) (2,348 ) 1,080 (1,268 )
Loans and amounts due from credit institutions 102 (2,427 ) (2,325 ) 1,915 (1,049 ) 866
Loans and advances to customers 8,493 (14,797 ) (6,304 ) 2,876 1,059 3,935
Debt instruments 1,753 (1,725 ) 28 1,166 (1,267 ) (101 )
Other interest-earning assets 809 - 809 (1,069 ) - (1,069 )
Total interest-earning assets 11,571 (21,639 ) (10,068 ) 2,540 (177 ) 2,363
Equity Instruments 4 11 15 6 (20 ) (14 )
Total earning assets 11,575 (21,628 ) (10,053 ) 2,546 (197 ) 2,349
Interest Expense and Similar Charges
Interest-bearing liabilities
Deposits from the Brazilian Central Bank and Deposits from credit institutions 504 (1,043 ) (539 ) 285 (786 ) (501 )
Customer deposits 3,095 (10,563 ) (7,468 ) 878 511 1,389
Marketable debt securities (471 ) (2,153 ) (2,624 ) 309 222 531
Subordinated liabilities 150 53 203 (10 ) 40 30
Other interest-bearing liabilities 235 - 235 (1,486 ) - 1,486
Total interest-bearing liabilities 3,513 (13,706 ) (10,193 ) (24 ) (13 ) (37 )
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Assets
Earning Assets – Yield Spread
The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
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For the Year Ended December 31,
2020 2019 2018
(in millions of R$, except percentages)
Average earning assets 747,257 652,642 605,855
Interest and dividends on equity securities(1) 62,807 72,860 70,511
Net interest income 44,480 44,340 41,954
Gross yield(2) (*) 8.4 % 11.2 % 11.6 %
Net yield(3) (*) 6.0 % 6.8 % 6.9 %
Yield spread(4) (*) 5.2 % 5.3 % 5.4 %
For the Year Ended December 31,
2021 2020 2019
(in millions of R$, except percentages)
Average earning assets 840,038 747,257 652,642
Interest and dividends on equity securities(1) 78,078 62,807 72,860
Net interest income 49,193 44,480 44,340
Gross yield(2)(*) 9.3 % 8.4 % 11.2 %
Net yield(3)(*) 5.9 % 6.0 % 6.8 %
Yield spread(4)(*) 4.8 % 5.2 % 5.3 %

(*) Yield information does not give effect to changes in fair value that are reflected as a component of stockholder’s equity.
(1) Total earning assets plus dividends from companies accounted for by the equity method (equity instruments).
(2) Gross yield is the amount of “Interest and dividends on equity securities” divided by “Average earning assets.”
(3) Net yield is the amount of “Net interest income” divided by “Average earning assets.”
(4) Yield spread is the difference between the average rate of “Total earning asset” and the average rate of “Total interest-bearing liabilities.”

Return on Equity and Assets
The following table presents our selected financial ratios for the periods indicated.
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For the Year Ended December 31,
2020 2019 2018
ROA: Return on average total assets 1.6 % 2.3 % 1.9 %
ROE: Return on average stockholders’ equity 13.3 % 17.4 % 14.3 %
ROE (adjusted) (1) 18.5 % 24.6 % 21.0 %
Average stockholders’ equity as a percentage of average total assets 11.9 % 13.0 % 13.0 %
Payout (2) 24.6 % 65.8 % 52.5 %
For the Year Ended December 31,
2021 2020 2019
ROA: Return on average total assets 1.7 % 1.6 % 2.3 %
ROE: Return on average stockholders’ equity 14.8 % 13.3 % 17.4 %
ROE (adjusted) (1) 20.2 % 18.5 % 24.6 %
Average stockholders’ equity as a percentage of average total assets 11.2 % 11.9 % 13.0 %
Payout(2) 62.0 % 24.7 % 64.9 %

(1) “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” is a non-GAAP financial measure which adjusts “Return on average stockholders’ equity” to exclude the goodwill arising from the acquisition of Banco Real in 2008, Getnet ~~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, and Banco Olé Bonsucesso Consignado S.A. in ~~2015,60%~~2015, 60%, and the remaining 40% in 2020. See “Item 3. Key Information—A. Selected Financial Data—Selected Consolidated Ratios” for a reconciliation of “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” to “Return on average stockholders’ equity.”
(2) Dividend payout ratio (dividends declared per preferred share divided by net income per preferred share).

Interest-Earning Assets (other than Loans)
The following table shows the percentage mix of our average interest-earning assets for the years indicated. You should read this table in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Year Ended December 31,
2021 2020 2019
Cash and balances with the Brazilian Central Bank 7.0 % 7.3 % 7.5 %
Loans and amounts due from credit institutions 11.4 % 14.1 % 15.6 %
Loans and advances to customers 54.9 % 51.4 % 49.5 %
Debt instruments 26.8 % 27.2 % 27.4 %
Total interest-earning assets 100 % 100 % 100 %

For the Year Ended December 31,
2020 2019 2018
Cash and balances with the Brazilian Central Bank 7.3 % 7.5 % 13.4 %
Loans and amounts due from credit institutions 14.1 % 15.6 % 9.3 %
Loans and advances to customers 51.4 % 49.5 % 50.3 %
Debt instruments 27.2 % 27.4 % 27.0 %
Total interest-earning assets 100 % 100 % 100 %
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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 this annual report.

Investment Securities
As of December 31, ~~2020~~2021 and ~~2019,~~2020, the book value of investment securities was R$~~232~~228 billion and R$~~176~~232 billion, respectively (representing ~~24.7%~~24.5% and ~~23.0%~~24.9%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$171 billion, or 75.3% and R$192 billion, or 82.8% ~~and R$136 billion, or 77.3%~~ of our investment securities as of December 31, ~~2020~~2021 and ~~2019,~~2020, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:

As of December 31, As of December 31,
2020 2019 2018 2021 2020 2019
(in millions of R$) (in millions of R$)
Debt securities
Government securities—Brazil 191,896 135,848 116,531 171,437 191,896 135,848
Debentures and promissory notes 17,072 13,875 10,556 19,882 17,072 13,875
Other debt securities 21,134 23,609 48,346 33,894 21,134 23,609
Total domestic/debt securities 230,102 173,332 175,433 225,212 230,102 173,332

Equity securities
Shares of Brazilian companies 1,953 665 783 1,870 1,953 665
Shares of foreign companies - - 2 49 14 —
Investment fund units and shares 363 1,693 320 609 363 1,693
Total equity securities 2,316 2,358 1,106 2,528 2,329 2,358
Total investment securities 232,418 175,690 176,539 227,740 232,432 175,690

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As of December 31, ~~2020~~2021 and ~~2019,~~2020, we held no securities of single issuers or related groups of companies whose aggregate book or market value exceeded 1% of our stockholders’ equity, other than the Brazilian government securities, which represented ~~180.5%~~151.5% and ~~140.5%~~180.5%, respectively of our stockholders’ equity. As of December 31, ~~2020~~2021 and ~~2019,~~2020, the total value of our debt securities was approximately ~~217.4%~~212.5% and ~~181.8%~~217.4%, respectively, of stockholders’ equity.
The following table analyzes the maturities and weighted average yields of our debt investment securities not carried at fair value (before impairment allowance) as of December 31, ~~2020.~~2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.
Maturing within 1 year Maturing between 1 and 5 years Maturing between 5 and 10 years Maturing after 10 years Total
(in R$ millions)
Debt securities
Government securities—Brazil (1) 107,450 41,694 22,293 -   171,437
Other debt securities (2) 34,295 3,045 16,435 -   53,776
Total debt investment securities 141,745 44,739 38,728 -   225,212

Maturing within 1 year Maturing between 1 and 5 years Maturing between 5 and 10 years Maturing after 10 years Total
(in R$ millions)
Debt securities
Government securities—Brazil 46,475 135,212 44,041 - 225,728
Other debt securities 1,015 437 2,922 - 4,374
Total debt investment securities 47,490 135,649 46,963 - 230,102
(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 ~~6.7%~~7.1%.
Investment Portfolio – Yields
The following table shows the balances and weighted-average yields for our debt securities not carried at fair value through earnings, for each range of maturities, as of December 31, 2021. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.
Maturing within 1 year Yield within 1 year Maturing between 1 and 5 years Yield between 1 and 5 years Maturing between 5 and 10 years Yield between 5 and 10 years Maturing after 10 years Yield after 10 years
(in R$ millions, except percentages)
Weighted-average yields % % % %
Domestic:
Brazilian Government 16,969 9.8 61,237 8.4 19,282 6.8 5,297 6.8
Other fixed-income securities 25,793 8.4 27,239 9.0 207 7.8 369 9.2
Impaired financial assets 829 8.4 257 9.0 842 7.8 -   -
Impairment losses (13 ) 8.4 (267 ) 9.0 (784 ) 7.8 -   -
Total domestic 43,578 6.4 88,466 7.2 19,547 6.8 5,666 6.7
International:
Foreign government 1,588 5.0 7,756 5.0 1,917 4.7 -   -
Other fixed-income securities 720 4.3 5,122 2.7 -   2.7 -   -
Impaired financial assets 105 4.3 -   2.7 -   2.7 -   -
Impairment losses (32 ) 4.3 (31 ) 2.7 (64 ) 2.7 -   -
Total international 2,381 4.1 12,847 3.6 1,853 2.7 -   -
Total weighted-average yields 8.7 8.0 6.6 6.7

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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.
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As of December 31,
2020 2019 2018
Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank (1) 4,531 15,617 4,878 15,250 16,651 15,065
Debt instruments 226,787 3,315 164,447 8,885 166,743 8,690
Loans and amounts due from credit institutions, gross (1) 109,339 3,520 107,694 1,553 79,166 454
Loans and advances to customers, gross 396,950 20,822 326,421 20,835 304,031 17,902
Equity Instruments 1,675 - 2,358 - 1,106 -
Total assets 739,283 43,275 605,798 46,523 567,697 42,111
Liabilities
Financial Liabilities at Amortized cost:
Deposits from the Brazilian Central Bank and Deposits from credit institutions 86,564 45,093 58,283 40,988 74,160 24,863
Customer deposits 445,900 - 336,515 - 304,198 -
Marketable debt securities 47,476 9,399 64,987 8,715 70,109 4,517
Subordinated debts - - - - �� 9,886 -
Debt instruments eligible to compose capital - 13,120 - 10,176 - 9,780
Other financial liabilities 66,727 153 60,885 - 51,729 -
Total liabilities 646,667 67,766 520,670 59,879 510,082 39,160
(1) In the fiscal year ended December 31, 2018, the balances related to compulsory deposits were reclassified from cash and reserves at the Brazilian Central Bank to the item Loans and other amounts with credit institutions for better presentation and, consequently, the respective comparative balances also have been reclassified.
As of December 31,
2021 2020 2019
Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank 21,543 10,851 4,531 15,617 4,878 15,250
Debt instruments 208,133 17,080 226,787 3,315 164,447 8,885
Loans and amounts due from credit institutions, gross 91,868 3,797 109,339 3,520 107,694 1,553
Loans and advances to customers, gross 398,335 66,509 396,950 20,822 326,421 20,835
Equity Instruments 2,078 45 1,675 -   2,358 -
Total assets 721,957 98,282 739,283 43,275 605,798 46,523
Liabilities
Financial Liabilities at Amortized cost:
Deposits from the Brazilian Central Bank and Deposits from credit institutions 62,332 58,674 86,564 45,093 58,283 40,988
Customer deposits 470,973 -   445,900 -   336,515 -
Marketable debt securities 66,027 13,009 47,476 9,399 64,987 8,715
Debt instruments eligible to compose capital -   12,781 -   13,120 -   10,176
Other financial liabilities 68,496 413 66,727 153 60,885 -
Total liabilities 667,828 84,877 646,667 67,766 520,670 59,879

Loan Portfolio
As of December 31, ~~2020,~~2021, our loans and advances to customers totaled R$~~418~~493 billion ~~(54.8%~~(53.0% of our total assets). Net impairment losses, loans and advances to customers totaled R$~~418~~465 billion as of December 31, ~~2020 (48.0%~~2021 (49.9% of our total assets). In addition to loans, we had outstanding loan commitments drawable by third parties totaling R$~~131.9~~146.0 billion, R$~~125.9~~131.7 billion, R$~~122.7 billion, R$106.9 billion and R$91.2~~125.9 billion as of December 31, 2021, 2020, 2019, ~~2018, 2017 and 2016,~~ 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~~~~. The table below breaks down our loans and advances to customers (including securities purchased under agreements to resell), by type of customer, at each of the dates indicated.~~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.~~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.
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We have a diversified loan portfolio, with no specific concentration exceeding 10% of our total ~~loans.~~loans, Currently, ~~1.3%~~1.2% of our loan portfolio is allocated to our largest debtor and ~~6.5%~~7.4% to the next 10 largest debtors.
For further information about the breakdown of our Loans and Maturity see sections “a - Breakdown” and “b – Detail” of note “9 – Loans and advances to customers” to our audited consolidated financial statements included in this annual report.
Maturity
The following table sets forth an analysis by maturity of our loans, by type and status, as of December 31, 2021.
As of December 31, 2021
Debt Sector by Maturity Less than 1 year % of
total Between 1 and 5 years % of
total Between 5 and 15 years % of
total More than 15 years % of
total Total % of
total
Commercial and industrial 165,729 61.37 % 73,723 45.81 % 8,222 20.16 % -   -   247,674 50.20 %
Real estate 3,986 1.48 % 10,138 6.30 % 19,337 47.41 % 21,278 98.58 % 54,739 11.10 %
Installment loans to
individuals 99,051 36.68 % 75,833 47.12 % 13,219 32.41 % 306 1.42 % 188,409 38.19 %
Lease financing 1,285 0.48 % 1,238 0.77 % 10 0.02 % -   -   2,533 0.51 %
Loans and advances to customers, gross 270,051 100.00 % 160,932 100.00 % 40,787 100.00 % 21,585 100.00 % 493,355 100.00 %
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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, ~~2020.~~2021.
Fixed and variable rate loans with maturity
Less than one year One to five years Over five years Total Fixed and variable rate loans maturing in
Balance % of Total Balance % of Total Balance % of Total Balance % of Total Less than one year Between one and five years Between five and 15 years Over 15 years Sub-total more than one year Total
(in millions of R$, except percentages) (in millions of R$, except percentages)
Fixed rate 162,684 74 113,662 77 16,538 32 292,884 70
Commercial and industrial 111,499 29,745 1,941 -   31,865 143,185
Real estate 24 73 62 18 153 177
Installment loans to individuals 105,045 74,689 12,965 306 87,961 193,005
Lease financing 522 694 -   -   695 1,217
Total Fixed rate 217,090 105,201 14,968 324 120,493 337,583
Variable rate 56,378 26 33,352 23 35,208 68 124,938 30
Commercial and industrial 37,149 33,524 2,109 -   35,633 72,782
Real estate 3,962 10,065 19,274 21,260 50,600 54,562
Installment loans to individuals 11,087 11,598 4,426 -   16,024 27,111
Lease financing 763 544 9 -   553 1,316
Total Variable rate 52,961 55,731 25,819 21,261 102,810 155,771
Total 219,063 100 147,014 100 51,745 100 417,822 100 270,051 160,932 40,787 21,585 223,304 493,355

Cross-Border Outstandings
The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.
As of December 31,
2021 2020 2019
Balance % of Total Assets Balance % of Total Assets Balance % of Total Assets
(in millions of R$, except percentages)
OECD countries(1)
Spain 108 - 437 - 1,984 0.3
United States 835 0.1 12,674 1.4 3,721 0.5
Netherlands - - 80 - 1,531 0.2
United Kingdom 20 - 29 - 1,003 0.1
Luxembourg 13,058 1.4 - - - -
Other OECD countries(2) 1,958 0.2 3,534 0.4 16,264 2.4
Total OECD 15,979 1.7 16,754 1.8 24,503 3.6
Non-OECD countries
Latin American countries(2) 560 0.1 1,204 0.1 1,382 0.2
Cayman Islands 1,679 0.2 2,917 0.3 3,528 0.5
Other(2) 282 - 1,189 0.1 2,397 0.3
Total non-OECD 2,521 0.3 5,310 0.6 7,307 1.1
Total 18,500 2.0 22,064 2.4 31,810 4.6

As of December 31,
2020 2019 2018
Balance % of Total Assets Balance % of Total Assets Balance % of Total Assets
(in millions of R$, except percentages)
OECD countries(1)
Spain 437 0.1 1,984 0.3 1,217 0.2
United States 12,674 1.8 3,721 0.5 3,304 0.5
Netherlands 80 0.0 1,531 0.2 3,853 0.6
United Kingdom(3) 29 0.0 1,003 0.1 6,508 1.0
Other OECD countries(2) 3,534 0.5 16,264 2.4 1,072 0.1
Total OECD 16,754 2.4 24,503 3.6 15,954 2.5
Non-OECD countries
Latin American countries(2) 1,204 0.2 1,382 0.2 314 -
Cayman Islands 2,917 0.4 3,528 0.5 (8,304 ) (1.3 )
Other(2) 1,189 0.2 2,397 0.3 100 -
Total non-OECD 5,310 0.8 7,307 1.1 (7,890 ) (1.3 )
Total 22,064 3.2 31,810 4.6 8,064 1.2
(1) The Organization for Economic Cooperation and Development.
(2) Aggregate outstandings in any single country in this category do not exceed 1.5% of our total assets.
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The following table presents the amounts of our cross-border outstandings as of December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019 by type of borrower where outstandings in the borrower’s country exceeded 1.2% of our total assets.
Government Banks and Other Financial Institutions Commercial and Industrial Other Loans Total
(in millions of R$)
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 ) 468
Total 469 8,973 3,030 (287 ) 12,187
2020
United States - 12,653 9 12 12,674
Netherlands - - 80 - 80
Austria - - - 444 444
United Kingdom - 28 - 1 29
Cayman Islands - 1,341 (1 ) 1,577 2,917
Total - 14,022 88 2,034 16,144
Government Banks and Other Financial Institutions Commercial and Industrial Other Loans Total
(in millions of R$)
2019
United States -   8,710 55 316 9,081
Netherlands -   -   2,355 -   2,355
Austria -   -   127 (2 ) 125
United Kingdom -   -   7 151 158
Cayman Islands 469 263 488 (752 ) 468
Total 469 8,973 3,032 (287 ) 12,187
2020
United States -   12,653 9 12 12,674
Netherlands -   -   80 -   80
Austria -   -   -   444 444
United Kingdom -   28 -   1 29
Cayman Islands -   1,341 (1 ) 1,577 2,917
Total -   14,022 86 2,034 16,144
2021
United States -   3,943 1 12 3,956
Netherlands -   -   3 -   3
Austria -   -   -   595 595
United Kingdom -   28 -   -   28
Cayman Islands -   2,815 -   1,290 4,105
Total -   6,786 4 1,897 8,687

Non-current assets held for sale
For further information, see note ~~“10 - Non-current assets held for sale”~~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 ~~note “16 – Deposits from the Brazilian Central Bank~~notes 16 and ~~Deposits from Credit Institutions” and “17 – Client deposits” in “Financial Statements”~~17 to our audited consolidated financial statements included elsewhere in this annual report.

The following table shows the maturity of time deposits (excluding inter-bank deposits) in denominations of U.S.$100,000 or more at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.
As of December 31, ~~2020~~2021
Domestic International
(in millions of R$)
Under 3 months ~~344,923~~ 255,120 -
3 to 6 months ~~63,380~~ 25,742 -
6 to 12 months ~~63,390~~ 51,483 -
Over 12 months ~~105,788~~ 257,622 -
Total ~~577,470~~ 589,967 -
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The following table presents the total amount of ~~Contents~~uninsured deposits, and total uninsured deposits by time remaining until maturity as of December 31, 2021.

As of
December 31, 2021
Maturing
Three Months or Less
Over Three Months Through Six Months
Over Six Months Through
12 Months
Over 12 months
(in millions of R$)
Total uninsured deposits 285,967 96,146 20,896 68,960 99,965
Short-Term Borrowings
The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.
As of December 31, As of December 31,
2020 2019 2018 2021 2020 2019
Amount Average Rate Amount Average Rate Amount Average Rate Amount Average Rate Amount Average Rate Amount Average Rate
(in millions of R$, except percentages) (in millions of R$, except percentages)
Securities sold under agreements to repurchase
As of December 31 112,477 1.90 % 123,941 5.00 % 99,379 7.34 % 115,964 1.76 % 112,477 1.90 % 123,941 5.00 %
Average during the period (1) 112,096 2.71 % 100,473 4.84 % 102,051 9.67 % 114,484 2.58 % 112,096 2.71 % 100,473 4.84 %
Maximum month-end balance 155,174 123,941 113,691 155,484 155,174 123,941
Total short-term borrowings at year end 112,477 123,941 99,379 115,964 112,477 123,941

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

Allowance for Loan Losses
Changes in Allowances for Impairment Losses on the Balances of “Loans and receivables”
The following tables analyze changes in our allowances for impairment losses for the periods indicated. For further information regarding these changes, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 ~~2019~~ and ~~2018—~~2019—Results of Operations—Impairment Losses on Financial Assets (Net).”
As of December 31, As of December 31,
2020 2019 2018 2017 2016 2021 2020 2019 2018 2017
(in millions of R$) (in millions of R$)
Balance at beginning of year 22,625 22,969 18,262 18,191 15,412 25,640 22,626 22,969 18,262 18,191
Initial adoption of IFRS 9 - - 2,461 - - -   -   -   2,461 -
Balance adjusted 22,625 22,969 20,723 18,191 15,412 25,640 22,626 22,969 20,723 18,191
Impairment losses charged to income for the year 18,311 14,361 13,540 13,493 14,383 16,987 18,311 14,361 13,540 13,493
Write-off of impaired balances against recorded impairment allowance (15,297 ) (14,705 ) (11,294 ) (13,422 ) (11,605 ) (12,904 ) (15,297 ) (14,705 ) (11,294 ) (13,422 )
Balance at end of year 25,640 22,625 22,969 18,262 18,191 29,723 25,640 22,626 22,969 18,262
Of which:
Loans and advances to customers 24,054 20,557 20,242 15,409 16,435 28,511 24,053 20,557 20,242 15,409
Loans and amounts due from credit institutions 9 14 14 69 201 22 9 14 14 69
Debt Instruments 1,577 2,055 2,714 2,784 1,555 1,191 1,577 2,055 2,714 2,784
Recoveries of loans previously written off(1) 861 991 827 1,154 994 1,536 861 991 827 1,154
(1) Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off.

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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, For the Year Ended December 31,
2020 2019 2018 2017 2016 2021 2020 2019 2018 2017
(in millions of R$) (in millions of R$)
Recoveries of loans previously charged off(1) 861 991 827 1,154 994 1,536 861 991 827 1,154
Commercial and industrial 422 520 345 413 563 463 422 520 345 413
Real estate – construction 56 47 103 210 103 64 56 47 103 210
Installment loans to individuals 370 417 370 521 314 1,002 370 417 370 521
Lease finance 13 8 9 10 14 7 13 8 9 10
Impairment losses charged to income for the year(1) 18,311 14,361 13,540 13,492 14,383 16,987 18,312 14,361 13,540 13,491
Commercial and industrial 6,919 2,377 3,620 5,499 6,523 3,340 6,919 2,377 3,620 5,499
Real estate – construction 81 95 193 471 369 116 81 95 193 471
Installment loans to individuals 11,309 11,866 9,708 7,461 7,617 13,532 11,309 11,866 9,708 7,461
Lease finance 3 23 19 61 (125 ) (1 ) 3 23 19 61
Write-off of impaired balances against recorded impairment allowance (15,297 ) (14,705 ) (11,294 ) (13,422 ) (11,605 ) (12,904 ) (15,297 ) (14,705 ) (11,294 ) (13,422 )
Commercial and industrial (4,617 ) (5,713 ) (3,981 ) (5,716 ) (4,553 ) (5,153 ) (4,617 ) (5,713 ) (3,981 ) (5,716 )
Real estate – construction (232 ) (108 ) (191 ) (342 ) (190 ) (167 ) (232 ) (108 ) (191 ) (342 )
Installment loans to individuals (10,433 ) (8,834 ) (7,100 ) (7,312 ) (6,811 ) (7,576 ) (10,433 ) (8,834 ) (7,100 ) (7,312 )
Lease finance (15 ) (49 ) (22 ) (52 ) (51 ) (8 ) (15 ) (49 ) (22 ) (52 )
(1) Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off.

The table below shows a breakdown of allowances for credit losses by type of borrowers and the percentage of loans in each category as a share of total loans at the date indicated.
As of December 31,
2021 % of Total Loans 2020 % of Total Loans 2019 % of Total Loans
(in millions of R$, except percentages)
Borrowers
Commercial and industrial 8,325 28.0 9,757 38.1 7,455 33.0
Real estate 154 0.5 194 0.8 345 1.5
Installment loans to individuals 21,240 71.5 15,676 61.1 14,800 65.4
Lease financing 4 - 14 0.1 26 0.1
Total 29,723 100 25,640 100.0 22,626 100.0

As of December 31,
2020 % of Total Loans 2019 % of Total Loans 2018 % of Total Loans
(in millions of R$, except percentages)
Borrowers
Commercial and industrial 9,757 38 7,455 33 10,792 47
Real estate 194 1 345 2 358 2
Installment loans to individuals 15,676 61 14,800 65 11,768 51
Lease financing 14 0 26 0 51 0
Total 25,640 100 22,625 100 22,969 100

Internal Risk Rating
The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:
As of December 31,
2021 2020 2019
(in millions of R$)
Internal Risk Rating
Low 374,505 347,315 257,133
Medium-low 79,217 24,277 56,549
Medium 14,590 26,232 11,755
Medium-high 9,413 3,896 8,512
High 15,630 16,101 13,307
Loans and advances to customers, gross 493,355 417,822 347,257

As of
December 31,
2020 2019 2018
(in millions of R$)
Internal Risk Rating
Low 347,315 257,133 240,440
Medium-low 24,277 56,549 50,486
Medium 26,232 11,755 11,967
Medium-high 3,896 8,512 7,722
High 16,101 13,307 11,318
Loans and advances to customers, gross 417,819 347,257 321,933
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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, ~~2020~~2021 amounted to R$2021.7 billion, compared to R$1520.5 billion for the same period in ~~2019,~~2020, an increase of R$~~5,008~~1,193 million or ~~32.8%.~~5.8%, This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.
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The renegotiation portfolio was covered by allowances for impairment losses of 44.7% as of December 31, 2021 and 44.0% as of December 31, ~~2020 and 48.5% as of December 31, 2019.~~2020. These levels are considered appropriate for the characteristics of these loans and advances to customers.
The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:
2020 2019 2018 2021 2020 2019
(in millions of R$, except percentages) (in millions of R$, except percentages)
Renegotiation Portfolio by type of customer
Commercial and industrial 5,862 5,141 5,949 5,322 5,862 5,141
Installment loans to individuals 14,623 10,102 7,492 16,356 14,623 10,102
Financial leasing 5 239 75 5 5 239
Total 20,490 15,482 13,516 21,683 20,490 15,482
Allowances for impairment losses 9,019 7,501 7,279 9,698 9,019 7,501
Coverage ratio 44.0 % 48.5 % 53.8 % 44.7 % 44.0 % 48.4 %

Balances are deemed to be impaired when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts on the dates indicated in the loan agreement, after taking into account the collateral guarantees received to secure (fully or partially) collection of the related balances.
As established in our internal renegotiation policy, in order for renegotiated products to be classified as performing, we must, receive an amount equivalent to at least 10% of the total amount outstanding in the six months which follow the renegotiation date (note that these transactions will remain classified as renegotiated operations even after receiving such payments). Renegotiated loans that are more than 60 days overdue are also accounted for as impaired.
We increased our efforts regarding the collection of loans that are less than 60 days past due and also in relation to written off loans. We are also continuing with our strategy of granting loans to persons with low risk profile and higher levels of collaterals and guarantees.
Impaired Assets
The following table shows our impaired assets, excluding country risk.
As of December 31, As of December 31,
2020 2019 2018 2017 2016 2021 2020 2019 2018 2017
(in millions of R$, except percentages) (in millions of R$, except percentages)
Impaired assets
Past due and other impaired assets(1) 23,176 23,426 22,426 19,145 18,887 26,923 23,176 23,426 22,426 19,145
Impaired assets as a percentage of total loans 5.5 % 6.7 % 7.0 % 6.7 % 7.0 % 5.5 % 5.5 % 6.7 % 7.0 % 6.7 %
Net loan charge-offs as a percentage of total loans 3.7 % 4.3 % 3.5 % 4.7 % 4.3 % 2.6 % 3.7 % 4.2 % 3.5 % 4.7 %
Net loan charge-offs as a percentage of average total loans 3.8 % 5.3 % 3.8 % 4.8 % 4.5 % 2.8 % 3.8 % 4.6 % 3.8 % 4.8 %
(1) Includes as of December 31, ~~2020,~~2021, R$~~2,028~~2,528 million of doubtful loans (R$2,028 million in 2020, R$2,788 million in 2019, R$3,754 million in 2018 and R$5,439 million in ~~2017 and R$5,576 million in 2016)~~2017) that were not past-due.

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Evolution of Impaired Assets
Our impaired assets ~~decreased~~increased by ~~1.1%~~16.2%, or R$~~250~~3,747 million, to R$26,923 million as of December 31, 2021, compared to R$23,176 million as of December 31, ~~2020, compared to R$23,426 million as of December 31, 2019.~~2020. Provisions for impairment losses, including total recoveries of loans previously charged off, increased ~~13.3%~~15.9%, or R$~~3,015~~4,083 million, to R$ 29,723 million as of December 31, 2021, compared to R$ 25,640 million as of December 31, ~~2020, compared to R$ 22,625 million as of December 31, 2019.~~2020. Offsetting these effects were recoveries of R$~~861~~1,536 million on loans previously written off as of December 31, ~~2020~~2021 and R$ ~~991~~861 million as of December 31, ~~2019.~~
2020.
We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, ~~2020.~~2021.
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The following table shows the changes in our impaired assets at the dates indicated:
As of December 31, As of December 31,
2020 2019 2018 2017 2016 2021 2020 2019 2018 2017 2016
(in millions of R$) (in millions of R$)
Balance at beginning of year 23,426 22,426 19,145 18,887 18,599 23,176 23,426 22,426 19,145 18,887 18,599
Initial Adoption of IFRS9 ⁽¹⁾ - - 703 - - -   -   -   703 -   -
Adjusted Balance 23,426 22,426 19,848 18,887 18,599 23,176 23,426 22,426 19,848 18,887 18,599
Net additions 14,672 16,001 13,872 13,679 11,893 18,429 14,758 16,001 13,872 13,679 11,893
Write-offs (14,922 ) (15,001 ) (11,294 ) (13,422 ) (11,605 ) (14,681 ) (15,008 ) (15,000 ) (11,294 ) (13,422 ) (11,605 )
Balance at end of year 23,176 23,426 22,426 19,145 18,887 26,923 23,176 23,426 22,426 19,145 18,887
~~(1)~~(1) Further information, see ~~Financial Statements~~ notes 1 and 9.9 to our audited consolidated financial statements included elsewhere in this annual report.

The amount of “net additions” for any period is assets that became impaired in that period less assets that were impaired but became performing in that period. In ~~2020,~~2021, the debt restructuring options were improved to maintain consistent levels of “net additions” and ~~“write-offs”.~~
“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,
2020 2019 2021 2020
(in millions of R$) (in millions of R$)
Commercial and industrial 10,558 10,073 11,440 10,558
Real estate 456 827 470 456
Installment loans to individuals 12,144 12,497 14,996 12,144
Financial leasing 17 29
Lease financing 17 17
Total 23,176 23,426 26,923 23,176

Commercial and Industrial
Impaired assets in ~~our~~the commercial and industrial loans portfolio amounted to R$11,440 million as of December 31, 2021, an increase of R$881 million, or 8.3%, compared to R$10,558 million as of December 31, ~~2020, an~~2020. The increase in impaired assets in this portfolio was the result of ~~R$485 million, or 4.8%, compared to R$10,073 million as~~growth of ~~December 31, 2019. This increase was mainly due to~~ the ~~collective assessment of R$1,660 million performed by Santander Brasil which was based on forecasts of senstivity to macroeconomic conditions which indicate staged transfers following a~~credit portfolio and the deterioration of the ~~portfolio.~~
macroeconomic situation caused by the COVID-19 pandemic.
Real Estate
Impaired assets in the real estate lending portfolio totaled R$~~456~~470 million on December 31, ~~2020, a decrease~~2021, an increase of R$~~371~~14 million, or ~~44.8%~~3.1%, compared to R$~~827~~456 million as of December 31, ~~2019.~~2020. The ~~decrease~~increase in impaired assets in this portfolio was the result of the ~~measures that Santander Brasil put in place to manage it, including collection practices with respect to our borrowers.~~recurrent growth of the credit portfolio.
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Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$~~12,144~~14,996 million as of December 31, ~~2020~~,2021, with ~~a decrease~~an increase of R$~~353~~2,852 million, or ~~2.8%~~23.5%, compared to ~~2019~~.2020. The ~~decrease~~increase in impaired assets in this portfolio was the result of growth of the ~~measures that Santander Brasil put in place to manage it, including collection practices with respect to our borrowers whereby we offered certain customers~~credit portfolio and the ~~chance to negotiate a restructuring~~deterioration of ~~their debts, especially during~~the macroeconomic situation caused by the COVID-19 ~~pandemic, or asset disposals.~~
pandemic.
Financial Leasing
Impaired assets in the lease financing lending portfolio totaled R$17 million on December 31, ~~2020, a decrease of R$12 million compared~~2021, remaining similar to December 31, ~~2019. This decrease in impaired assets was mainly due to asset write-offs in an amount of R$15.6 million in~~ 2020.
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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 between in default between the balance sheet date and the residual maturity date of the transaction. The standard requires that future information relevant to the estimation of these parameters should be considered.
·● Loss Given Default (LGD): is the loss produced in the event of default. In other words, this reflects the percentage of exposure that could not be recovered in the event of a default. It depends mainly on the collateral, which is considered as credit risk mitigants associated with each financial asset, and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation.
·● Discount rate: the rate applied to the future cash flows estimated during the expected life of the asset, and which is equal to the net present value of the financial instrument at its carrying value.
In order to estimate the above parameters, the Bank has applied its experience in developing internal models for parameters calculation both for regulatory and management purposes.
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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:
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As of December 31, As of December 31,
2020 % of total 2019 % of total 2021 % of total 2020 % of total
(in millions of R$, except percentages) (in millions of R$, except percentages)
Commercial and industrial 5,132 25.8 3,517 15.4 4,892 20.7 5,132 25.8
Mortgage loans 3,085 15.5 5,782 25.3 3,606 15.2 3,085 15.5
Installment loans to individuals 11,661 58.6 13,489 59.1 15,150 64.0 11,661 58.6
Lease financing 13 0.1 24 0.1 11 0.1 13 0.1
Total (*) 19,891 100.0 22,812 100.0 23,659 100.0 19,891 100.0

(*) Refers only to loans past due between 1 and 90 days.

Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$~~74.5~~74.8 billion to R$540.9 billion as of December 31, 2021, compared to R$466.1 billion as of December 31, ~~2020, compared to R$391.6 billion as of December 31, 2019.~~2020. Our impaired assets ~~decreased~~increased by approximately R$~~0.2~~3,747 billion in the same period, from R$~~23.4~~23.2 billion to R$~~23.2~~26.9 billion. The default rate decreased by 1030 basis points in ~~2020~~2021 in comparison to ~~2019,~~2020, primarily due to the recurrent growth of the credit ~~portfolio and the measures that Santander Brasil put in place to manage impaired assets, including collection practices.~~
portfolio.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.
As of December 31,
2021 2020 2019 2018 2017
(in millions of R$ except percentages)
Loans and advances to customers, gross 493,355 417,822 347,257 321,933 287,829
Impaired assets 26,923 23,176 23,426 22,426 19,145
Provisions for impairment losses 29,723 25,640 22,626 22,969 18,262
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 540,873 466,104 391,569 364,194 330,474
Ratios
Impaired assets to credit risk exposure 5.0 % 5.0 % 6.0 % 6.2 % 5.8 %
Coverage ratio ⁽²⁾ 110.4 % 110.6 % 96.6 % 102.4 % 95.4 %
Impairment losses (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )
Losses on other financial instruments not
  measured at fair value ⁽³⁾ -   -   -   -   -
Impairment losses on financial assets (net) ⁽⁴⁾ (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )

As of December 31,
2020 2019 2018 2017 2016
(in millions of R$ except percentages)
Loans and advances to customers, gross 417,822 347,257 321,933 287,829 268,438
Impaired assets 23,176 23,426 22,426 19,145 18,887
Provisions for impairment losses 25,640 22,626 22,969 18,262 18,191
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 466,104 391,569 364,194 330,474 301,703
Ratios
Impaired assets to credit risk exposure 5.0 % 6.0 % 6.2 % 5.8 % 6.3 %
Coverage ratio ⁽²⁾ 110.6 % 96.6 % 102.4 % 95.4 % 96.3 %
Impairment losses (17,451 ) (13,370 ) (12,713 ) (12,339 ) (13,388 )
Losses on other financial instruments not
measured at fair value ⁽³⁾ - - - - 88
Impairment losses on financial assets (net)⁽⁴⁾ (17,451 ) (13,370 ) (12,713 ) (12,339 ) (13,300 )
~~(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$417,822 million as of December 31, 20 and guarantees and documentary credits amounting to R$48,282 million as of December 31, 2020. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk.
(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$540,873 million as of December 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
(2) Provisions for impairment losses as a percentage of impaired assets.
(3) Corresponds to the registration of losses of a permanent character in the realization value of bonds and securities classified as “securities available for sale” currently accounted for in “earnings on financial assets (net).”
(4) As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial ~~assets (net)~~instruments included R$1,191 million, R$1,577 million and R$2,055 million, respectively, relating to debt instruments.

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The following chart shows our impaired assets to credit risk ratio from ~~2016~~2017 through ~~2020:~~2021:
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-Selected Credit Ratios

The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2021, 2020 and 2019.
The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”

As of December 31,
2019 2020 2021
(in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding
Allowance for credit losses 22,626 25,640 29,723
Total loans outstanding 347,257 417,822 493,355
Credit ratio 6.52 % 6.14 % 6.02 %
Nonaccrual loans to total loans outstanding
Total nonaccrual loans outstanding 23,426 23,176 26,923
Total loans outstanding 347,257 417,822 493,355
Credit ratio 6.75 % 5.55 % 5.46 %
Allowance for credit losses to nonaccrual loans
Allowance for credit losses 22,626 25,640 29,723
Total nonaccrual loans outstanding 23,426 23,176 26,923
Credit ratio 96.6 % 110.6 % 110.4 %
Net charge-offs during the period to average loans outstanding
Net charge-offs during the period (14,705 ) (15,297 ) (12,904 )
Average amount outstanding 324,190 394,542 471,068
Credit ratio 4.5 % 3.9 % 2.7 %
Commercial and industrial:
Net charge-offs during the period (5,713 ) (4,617 ) (5,153 )
Average amount outstanding 132,372 176,750 214,286
Credit ratio 4.3 % 2.6 % 2.4 %
Real estate:
Net charge-offs during the period (108 ) (232 ) (167 )
Average amount outstanding 38,107 42,368 51,883
Credit ratio 0.3 % 0.5 % 0.3 %
Installment loans to individuals:

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Net charge-offs during the period (8,834 ) (10,433 ) (7,576 )
Average amount outstanding 151,735 173,336 202,578
Credit ratio 5.8 % 6.0 % 3.7 %
Lease financing:
Net charge-offs during the period (49 ) (15 ) (8 )
Average amount outstanding 1,975 2,089 2,321
Credit ratio 2.5 % 0.7 % 0.3 %
Allowance for credit losses to total loans outstanding
In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.
In 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.
Nonaccrual loans to total loans outstanding
In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of December 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the growth in total loans outstanding over nonaccrual loans.
In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a decrease of 1.1% in the nonaccrual loans outstanding.
Allowance for credit losses to nonaccrual loans
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.
In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$3,200 million for potential loan losses in connection with the COVID-19 pandemic.
Net charge-offs during the period to average loans outstanding
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by 66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.
Commercial and Industrial Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.
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Real Estate Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in average loans outstanding and a decrease of 28.0% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of December 31, 2019 to 0.5% as of December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.
Installment Loans to Individuals
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of December 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.
Lease Financing Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.
4C. Organizational Structure
Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V., or ~~“Sterrebeeck”,~~“Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, ~~2020,~~2021, Santander Spain held, directly and indirectly, ~~89.5%~~89.53% of our voting stock.
As of December 31, 2020, Santander Spain was the largest bank in the euro zone by market capitalization, with a market capitalization of approximately €44,011 million. As of December 31, 2020, Santander Spain’s attributable profit totaled €-8,771 million, 234.6% lower than the previous year, and the total shareholder remuneration on account of the earnings for the 2020 financial year is €-0.538 per share. 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, 2020, Santander Brasil contributed €2,113 million of the profit attributable to the Santander Group.
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:
Activity Country of Incorporation Ownership Interest

Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. (1)
~~Banco Bandepe S.A.~~ ~~Bank~~ ~~Brazil~~ ~~100.00%~~
~~Santander Leasing S.A. Arrendamento Mercantil~~ ~~Leasing~~ ~~Brazil~~ ~~99.99%~~
~~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 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 100.00%
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Santander Corretora de Seguros, Investimentos e Serviços S.A. Holding Brazil 100.00%
~~Getnet Adquirência e Serviços para Meios de Pagamento S.A.~~ ~~Payment Institution~~ ~~Brazil~~ ~~88.50%~~
~~SANB Promotora de Vendas e Cobrança Ltda.~~ ~~Other Activities~~ ~~Brazil~~ ~~100.00%~~
Sancap Investimentos e Participações S.A. Holding Brazil 100.00%
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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%~~
~~Santander~~F1RST Tecnologia e Inovação Ltda. ~~Other Activities~~Technology 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 S.A. Other Activities Brazil 100.00%
~~Toque Fale Serviços de Telemarketing Ltda.~~ ~~Other Activities~~ ~~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%
Paytec Tecnologia em Pagamentos Ltda. Other Activities Brazil 100.00%
SX Negócios Ltda. Other Activities Brazil 100.00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.)
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) Credit Recovery Services Brazil 100.00%
Liderança Serviços Especializados em Cobranças Ltda. Credit Recovery Services Brazil 100.00%
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)
Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.) Asset Management Brazil 100.00%
Controlled by Sancap Investimentos e Participações S.A.
Santander Capitalização S.A. Savings and annuities Brazil 100.00%
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%~~
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. Other Activities Brazil 80.00%
Controlled by Santander Leasing S.A. Arrendamento Mercantil
PiBanco Bandepe S.A. Bank Brazil 100.00%
PI Distribuidora de Títulos e Valores Mobiliários S.A. ~~(current name of Santander Finance Arrendamento Mercantil)~~ Leasing Brazil 100.00%
~~Consolidated Investment Funds~~Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A.
~~Santander FIC FI Contract I Referenciado DI~~Toro Corretora de Títulos de Valores Mobiliários Ltda. ~~Investment Fund~~Broker Brazil ~~(a)~~60.00%
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda.
Toro Investimentos S.A. Broker Brazil 100.00%
Controlled by Sancap
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Santander Auto S.A. Other Activities 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)
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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 ~~(1)~~(2) Investment Fund Brazil (a)
Santander FI Hedge Strategies Fund ~~(1)~~(2) Investment Fund Brazil (a)
~~Prime 16~~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)
~~Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos~~ ~~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) This table reflects the Spin-Off of Getnet. For additional information on the Spin-Off, see “—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
(2) Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund.

4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own ~~405~~385 properties for the activities of our banking network and rent ~~2,276~~1,719 properties for the same purpose. Furthermore, in 2014, we transferred our operation to a new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at ~~Av.~~Avenida Presidente Juscelino Kubitschek, ~~2,041 and 2,235~~2041, Suite 281, Block A, Condomínio WTORRE JK, Vila ~~Olímpia, City~~Nova Conceição, 04543-011, in the city of São Paulo, ~~State~~state of São Paulo, Federative Republic of Brazil.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5A. Operating Results
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019 and the related notes thereto, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected Financial Data” included elsewhere in this annual report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated ~~as a result~~because of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors,” and other factors discussed elsewhere in this annual report. Our consolidated financial statements for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018,~~2019, prepared in accordance with IFRS as issued by the IASB and the report of our independent registered public accounting firm are included in “Item 18. Financial Statements.”
Financial Presentation
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~~Table~~We have prepared our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of ~~Contents~~Financial and Other Information” for additional information.
The Getnet Spin-Off
We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.
Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.
For additional information on the Spin-Off, see “Item 4. Information on the Company–A. History and Development of the Company–The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations

Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—~~Important Events—~~Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The ~~current~~ global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.”
Brazilian Macroeconomic Environment
Overview
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil, which ~~suffered a severe impact as a result of~~has been severely affected by the COVID-19 ~~pandemic,~~pandemic. While Brazilian GDP grew in 2021, due in part to Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” ~~below.~~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:
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For the year ended December 31, As of and For the Year Ended December 31,
2020 2019 2018 2021 2020 2019
GDP growth (1) (4.1 %) 1.2 % 1.1 %
CDI rate (2) 2.1 % 6.0 % 6.4 %
GDP growth(1) 4.6 % (4.1 %) 1.2 %
CDI Rate 4.4 % 2.1 % 6.0 %
TJLP ~~(3)~~ 4.6 % 5.6 % 7.0 % 5.3 % 4.6 % 5.6 %
SELIC rate ~~(4)~~ 2.0 % 4.5 % 6.5 % 9.25 % 2.0 % 4.5 %
Selling exchange rate (at period end) R$ per U.S.$1.00 5.20 4.03 3.87 5.58 5.20 4.03
Decrease (increase) in real rate against the U.S. dollar 28.9 % 4.0 % 17.1 % 7.4 % 28.9 % 4.0 %
Average exchange rate R$ per U.S.$1.00 (5) 5.16 3.94 3.65
Average exchange rate R$ per U.S.$1.00(2) 5.40 5.16 3.94
Inflation (IGP-M) ~~(6)~~ 23.1 % 7.3 % 7.6 % 17.8 % 23.1 % 7.3 %
Inflation (IPCA) ~~(7)~~ 4.5 % 4.3 % 3.8 % 10.06 % 4.5 % 4.3 %

Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) GDP growth for ~~2020~~2021 is based on Santander Brasil’s internal estimates. For ~~2019 and 2018~~2020 the source is the IBGE’s revised series.
(2) ~~The overnight interbank deposit rate (~~~~Certificado de Depósito Interbancário~~~~), or “CDI” is the average daily interbank deposit rate in Brazil (at the end of each month and annually). This is the average rate for the given year.~~
~~(3)~~ ~~Represents the interest rate applied by the BNDES for long-term financing (at the end of the period).~~
~~(4)~~ The benchmark interest rate payable to holders of some securities, such as treasury financial letters, issued by the Brazilian government and traded on the SELIC rate at the end of the applicable period.
~~(5)~~ Average of the selling exchange rate for the business days during the period.
~~(6)~~ ~~The inflation rate is the general index of market prices (~~~~Índice Geral de Preços-Mercado~~~~, or “IGP-M”), as calculated by FGV.~~
~~(7)~~ ~~The inflation rate is the consumer price index (~~~~Índice de Preços ao Consumidor – Amplo~~~~, or “IPCA”), as calculated by the IBGE.~~

General economic stability in Brazil following the onset of the global financial crisis in 2009 allowed the Brazilian Central Bank to continue its policy of reducing interest rates. Due to inflation and other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a benchmark interest rate, reaching 10.00% at the end of December 31, 2013, 11.75% at the end of December 31, 2014 and 14.25% at the end of December 31, 2015. The Brazilian Central Bank ~~has been reducing~~reduced interest rates ~~since then,~~between 2015 and early 2021, with the SELIC reaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, 4.50% as of December 31, 2019 and 2.0% as of December 31, 2020. In ~~2020,~~2021, in response to the ~~negative fallout~~widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the monetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and it has increased the ~~Brazilian Central Bank reduced the base interest~~SELIC rate to ~~its historical low at 2.00% in August 2020 and it kept it at this level through to~~10.75% p.a. as of the date of this annual report.^.
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The ~~resolution~~lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s ~~political~~already high public. This has resulted in a significant risk premium, a depreciation of the real and ~~economic crisis depends on approving reforms that are expected to be promoted~~volatility in financial asset prices. Brazil’s economy has been severely affected by the ~~President~~COVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a result of ~~Brazil (elected in October 2018). In addition,~~Brazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as ~~further detailed below~~set out under “—Impact of ~~COVID-19,”~~COVID-19” below, but considerable uncertainty remains as to the duration and severity of the COVID-19 pandemic and ~~ensuing~~its economic ~~crisis caused a steep decrease in Brazilian GDP in~~effects. Combined with the ~~first half~~emergence of ~~2020 before a gradual recovery from~~new variants and the third quarter of 2020 onwards. This will place additional demands for spending on the public sector going forward, which may adversely affect investor sentiment and lead Brazil’s economy to grow more slowly than it was expected to do priorcontinuing limitations to the ~~COVID-19 pandemic. The economic and political crisis in Brazil may adversely affect the performance~~normal working of ~~the Brazilian economy. As~~activities has led to a ~~result, our Brazil-focused credit portfolio may not grow or could decrease and our loan loss provisions could increase.~~
slow recovery cycle.
Any deterioration in Brazil’s rate of economic growth, changes in interest rates, the unemployment rate or price levels generally may adversely affect our business, financial conditions and results of operations. ~~As previously mentioned,~~Any aggravation in the ~~economic fallout from~~ COVID-19 ~~increased~~pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment.
Impact of COVID-19
on the Brazilian Economy
The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to mitigate the effects of the pandemic in the economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of 2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. ~~A negative consequence~~The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal ~~package was~~support has led to a sharp increase in the fiscal deficit and public debt. ~~Moreover,~~Progress on structural reforms of the ~~structural reform agenda was delayed, while the government~~Brazilian economy has ~~kept the commitment with the fiscal adjustment once the crisis is over. Finally,~~also been slow. As a result, financial markets have ~~reacted very negatively~~become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December
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31, 2021 from 145 basis points as of December 31, 2020 and the ~~crisis. The Brazilian currency was negatively affected by a higher global risk aversion, drop in commodity prices and deterioration~~depreciation of the ~~fiscal scenario.~~real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.

Interest Rates
AAn increase in the SELIC rate may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have a positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.
The following table presents the low, high, average and period-end SELIC rate since 2016, as reported by the Brazilian Central Bank:
Low High(1) Average(2) Period-End
Low
High(1)
Average(2)
Period-End
Year
2016 13.75   14.25   14.15   13.75   13.75 14.25 14.15 13.75
2017 7.00 13.75   9.83 7.00 7.00 13.75 9.83 7.00
2018 6.50 7.00 6.75 6.50 6.50 7.00 6.75 6.50
2019 4.50 6.50 6.13 4.50 4.50 6.50 6.13 4.50
2020 2.00 4.50 2.81 2.00 2.00 4.50 2.81 2.00
2021 (through February 24, 2021) 2.00
2021 2.00 9.25 4.81 9.25
2022 (through February 22, 2022) 9.25 10.75 9.86 10.75

(1) Highest month-end rate.
(2) Average of month-end rates during the period.

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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, ~~2020,~~2021, a ~~100 basis~~100-basis point increase in the yield curve would have resulted in R$~~432~~ 553 million decline in the net interest income over a one-year period.
Credit Volume and Quality in Brazil

In 2015, outstanding credit grew 7.0%, while the ratio of nonperforming loans to individuals stood at 4.2% and the household debt burden amounted to 20.4% of household income. In 2016, outstanding credit contracted 3.5% in nominal terms, but delinquency fell slightly: the ratio of nonperforming loans to individuals reached 4.0% (as compared to 4.2% in 2015). Subsequently, in 2017, 2018 and 2019, the ratio of nonperforming loans to individuals reached 3.5%~~, 3.2%~~ and ~~3.5%, respectively. After having fluctuated around the 19% level (19.1% in 2017, and 19.2% in 2018),~~ the household debt burden reached ~~20.0%~~23.9% of household ~~income in 2019.~~income. In 2020, outstanding credit increased ~~15.5%~~15.6% as a result of credit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which ~~also helped to keep the~~resulted in a ratio of nonperforming loans atof 2.8%, in 2021, while further increasing the household debt burden to ~~20.9%~~24.4% of household income. In 2021, given the extension of some government support programs and the relaxation in certain mobility restrictions which enabled certain businesses to resume their activities, the volume of outstanding credit continued to expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of nonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 27.9% of household income).

2020 2019 2018
2021
2020
2019
(in billions of R$) (in billions of R$)
Total Credit Outstanding (*) 3,261 3,471 3,261 4,684 3,261 3,471
Earmarked credit 1,500 1,465 1,500 1,881 1,500 1,465
Non-earmarked based credit 1,761 2,006 1,761 2,803 1,761 2,006
of which:
Corporate    814    905    814 1,291 814 905
Individuals (retail)    948 1,101    948 1,513 948 1,101

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

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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 ~~2020,~~2021, we recorded foreign exchange ~~expenses~~exposure of R$~~24,697~~117,400 million, foreign exchange ~~expenses~~exposure of R$~~2,789~~ (124,437) million in ~~2019~~2020 and foreign exchange ~~expenses~~exposure of R$~~2,806~~11,208 million in ~~2018.~~2019. These results are due to the variation of the U.S. dollar against the real on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”
, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”
The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. During 2016, the real appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December 31, 2016, the exchange rate was R$3.26 per U.S.$1.00. In 2017 the realremained 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.$1.00. In 2021, ~~and through to the date of this annual report,~~ the realhas continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As of ~~February 24,~~December 31, 2021, the exchange rate was R$~~5.42~~5.58 per U.S.$1.00.
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~~Table~~ In 2022 through the date of ~~Contents~~this annual report, the real appreciated against the U.S. dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of February 22, 2022, the exchange rate was R$5.06 per U.S.$1.00.
Depreciation of the real relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian ~~government.~~government, Depreciation of the real may also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of the real could make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.
Inflation
In recent years, inflation ~~has~~had been oscillating around the target, which is set by the ~~CMN.~~CMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target the last couple of years. From 2005 to 2018, the targeted level was 4.5%, with a tolerance interval of 2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for 2019 by the CMN was lowered to 4.25% and additional 0.25 percentage point decreases ~~have already 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, the impact of adjustment of tariffs and the impact of the depreciation of the realon 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 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 ~~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
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increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the beginning of 2018, the Brazilian monetary authority sent a letter to the ~~date of this annual report,~~CMN explaining why it failed to meet the inflation ~~has increased~~target and what are the actions to ~~4.56%~~be implemented in ~~year-on-year terms.~~
order to ensure that inflation will converge to the targeted levels in the coming years.
The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are ~~significantly~~ affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in ~~2020,~~2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$~~432~~553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.
Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, ~~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.”~~IGPM. For example, considering the amounts in ~~2019,~~2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$9490 million and R$7783 million, respectively.
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Reserve and Lending Requirements
The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the ~~operational~~ results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our ~~operational~~ results of operations by limiting or expanding the amounts available for commercial credit transactions.
The table below shows the requirements for reserves and credit to which we are subject for each financing category:
Product As of December 31, 2020 As of December 31, 2019 Form of Required Reserve Yield As of December 31, 2021 As of December 31, 2020 Form of Required Reserve Yield
Demand deposits
Rural credit loans (1) 27.50 % 30.00 % Loans Cap rate: 6.0% 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
Rural credit loans(1) 25.00 % 27.50 % Loans Cap rate: 7.5% p.a.
Microcredit loans(2) 2.00 % 2.00 % Loans Cap rate: 4.0% p.m.
Reserve requirements(3) 21.00 % 21.00 % Cash Zero
Additional reserve requirements 0.00 % 0.00 % Cash n/a 0.00 % 0.00 % Cash n/a
Free funding (4) 49.50 % 47.00 %
Free funding(4) 52.00 % 49.50 %

Savings accounts
Savings Accounts
Mortgage loans 65.00 % 65 % Loans Cap rate (SFH): TR + 12.0% p.a. 65.00 % 65.00 % Loans Cap rate (SFH): TR + 12.0% p.a.
Reserve requirements (3) 20.00 % 20.00 % Cash TR + 70.0% of the target SELIC
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 0.00 % 0.00 Cash n/a
Free funding (4) 15.00 % 15.00 %
Free funding(4) 15.00 % 15.00 %

Time deposits
Reserve requirements (3) 17.00 % 31 % Cash SELIC
Reserve requirements(3) 20.00 % 17.00 % Cash SELIC
In cash or other instruments 0.00 % 0.00 % Cash or other instruments n/a 0.00 % 0.00 % Cash or other instruments n/a
In cash 0.00 % 0.00 % Cash n/a 0.00 % 0.00 % Cash n/a
Additional reserve requirements 0.00 % 0.00 % Cash n/a 0.00 % 0.00 % Cash n/a
Free funding(4) 83.00 % 69.00 % 80.00 % 83.00 %

(1) Rural credits are credits granted to farmers in the amount of R$13.6 ~~billion and R$12.9~~ billion on December 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.
(2) Microcredit is a credit granted to very small businesses, with an open position of R$1.3 billion ~~and R$1.2 billion~~ on December 31, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.
(3) Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular ~~Nos.~~Nos, 3,917, 3,975 and ~~4,001.~~145.
(4) Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category.

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Taxes
See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and ~~Regulation —Taxation.~~Regulation—Taxation.”
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~~Hedging~~Acquisition of residual equity stake in ~~Foreign Investments~~Getnet
~~We operate two foreign branches, one~~On December 19, 2018, the minority shareholders of Getnet exercised their right to sell all of their shares to Santander Brasil, or the “Put Option,” pursuant to the Share 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, in the ~~Cayman Islands,~~amount of R$1.4 billion. The transaction was approved by the Brazilian Central Bank on February 18, 2019 and ~~another one in Luxemburg.~~closed on February 25, 2019. We previously operated an independent wholly-owned subsidiary in Spain, named Santander Brasil Establecimiento 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 extendedsubsequently spun-off Getnet to our ~~customers for working capital and trade-related financings. Under Brazilian income tax rules, the gains or losses resulting from the impact of appreciation or devaluation of the~~ ~~real~~ on foreign investments are non-taxable or non-deductible. This tax treatment results in volatility of the income tax line item in our income statement. This asymmetry is offset through a derivative position in U.S. dollar futures, which generates gains or losses dependent on any devaluation or appreciation of the ~~real~~, which is our strategy to protect our after-tax results. The reconciliation of our effective tax rate to the statutory tax rate is set forth in note 23b to our consolidated financial statements as of and for the year ended December 31, 2020. 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~~shareholders 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 2020, 2019 and 2018, the recoverable goodwill amounts are determined from “value in use” calculations. For this purpose, we estimate cash flow forwhich Getnet is no longer 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.~~
2020 2019 2018
(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) 4.3 % 4.8 % 5.1 %
Discount rate(3) 12.4 % 12.5 % 13.6 %
~~(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 2020.~~
~~(3)~~ ~~The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 19.56% in 2020, 17.78% in 2019 and 19.33% in 2018.~~
~~(*)~~ The recoverability test was performed during the second half of 2020. Goodwill is tested for impairment on an annual basis or whenever there is any indication of a potential impairment. At the end of each year, a qualitative assessment is carried out in order to check the existence of signs of impairment. For the years 2020, 2019 and 2018, no indication of impairment was identified.
We performed a sensitivity test in the goodwill impairment analysis considering the main assumptions that could reasonably be expected to possibly change, as required by the IFRS. Accordingly, we applied such a test considering the discount rate and perpetuity growth rate as the main assumption subject to reasonably possible change and we did not identify any impairment to goodwill.
~~Other Factors Affecting the Comparability of Our Results of Operations~~
~~Dissolution and liquidation~~subsidiary 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.
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~~Disposal of the equity interest held in Super Payments and Administration of Means of Electronic Media S.A.~~
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 ~~“See “Item 4. Information on the Company—4A.~~“—A. History and Development of the Company—~~Important Events.~~The Getnet Spin-Off.”
Put option of the remaining equity interest in Banco Olé Consignado S.A. against Aymoré Crédito, Financiamento e Investimento S.A.
On March 14, 2019, the minority shareholder of Banco Olé Consignado S.A., or “Banco Olé” formalized its interest in exercising the put option right provided in the Investment Agreement executed with Aymoré CFI on July 30, 2014, to sell its 40% equity interest in Banco Olé to Aymoré CFI, a controlled entity of Santander Brasil. On January 31, 2020, Santander Brasil and the shareholders of Bosan Participações S.A. (a holding company whose single asset is the shares representing 40% of the corporate capital of Banco Olé) entered into the definitive agreements and performed the closing acts related to the purchase and sale of all shares issued by Bosan, upon the transfer of Bosan’s shares to Santander Brasil and payment of the total price of R$1,608.8 million to the sellers. As a result, Santander Brasil became, both directly and indirectly, the holder of all shares issued by Banco Olé.
Acquisition of ~~direct~~Summer Empreendimentos Ltda.
On May 14, 2019, we and our wholly-owned subsidiary Santander Holding Imobiliária S.A., or “SHI,” entered into a binding document with the shareholders of Summer Empreendimentos Ltda., or “Summer,” for the acquisition of Summer’s issued share capital. The acquisition was approved by the Brazilian Central Bank on September 16, 2019 and concluded on September 20, 2019. We now hold, directly and indirectly through SHI, 100% of Summer’s share capital. Initially, Summer was not consolidated in our financial statements because it was treated as a temporary investment (non-current assets for sale). However, the investment is no longer considered temporary, and therefore Summer is included in our consolidated financial statements.
Sale of equity stake in CIBRASEC – Companhia Brasileira de Securitização
On July 24, 2019, we completed the sale of our entire equity interest in ~~Toque Fale Serviços~~CIBRASEC – Companhia Brasileira de ~~Telemarketing LTDA~~
~~On March 24, 2020, we acquired all of the outstanding share of Toque Fale Serviços de Telemarketing Ltda.~~Securitização, or “Cibrasec,” to ISEC Securitizadora S.A., or ~~“Toque Fale,~~“ISEC.” ~~held by our subsidiaries Getnet Adquirência e Serviços para Meios de Pagamento S.A.~~Our interest amounted to 4,000 common shares and ~~Auttar HUT Processamento de Dados LTDA for~~50 Class A preferred shares, representing, in the aggregate, approximately 9.72% of Cibrasec’s total capital stock. The transaction was effected pursuant to the Shares Purchase and Other Covenants Agreement executed on the same date among Santander Brasil, the other shareholders of Cibrasec, ISEC and Cibrasec, who acted as an ~~amount~~intervening party. We received consideration of R$~~1.1~~9.8 million ~~corresponding to the equity value of the quotas on February 29, 2020.~~for our interest in Cibrasec. As a result, we ~~became the direct holders~~are no longer a shareholder of ~~100% of Toque Fale’s share capital.~~Cibrasec.
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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,~~2017, Santander Brasil, through its wholly-owned subsidiary Atual Companhia Securitizadora de Créditos Financeiros, or “Atual,” acquired a direct equity interest in Return Credit Management, and an indirect equity interest in Return Asset corresponding to 70% of Return Entities’ share capital.
On October 16, 2019, Atual informed the remaining shareholders of the Return Entities of its decision to exercise its call option for shares representing the remaining 30% of the Return Entities’ total voting capital owned for a value of approximately R$17 million. The transaction was completed on November 1, 2019. As a result of this transaction, Atual currently owns 100% of the Return Entities’ issued and outstanding share capital. The Return Entities are active in the credit recovery intelligence sector, providing services such as credit portfolio evaluation and pricing, collection, management and recovery of non-performing loans.
Incorporation of the spun-off portion of Integry Tecnologia e Serviços A.H.U Ltda.
On October 31, 2019, we approved a spin-off of Integry Tecnologia e Serviços AHU Ltda, or “Integry,” a then wholly-owned subsidiary of Getnet (which was itself a subsidiary of Santander Brasil until the completion of the Getnet Spin-Off). Subsequently on December 20, 2019, Getnet and Santander Merchant Platform Solutions, S.L., or “SMPS Global,” a company based in Spain and controlled by Santander Spain, entered into a share purchase agreement as a result of which SMPS Global now holds 100% of Integry’s share capital. On December 23, 2019, Integry changed its name to Santander Merchant Platform Solutions Brasil Ltda.
Sale of equity stake in Super Pagamentos e Administração de Meios Eletrônicos S.A.
On February 28, 2020, we sold our entire equity interest in Super Pagamentos e Administração de Meios Eletrônicos S.A., or “Superdigital,” to Superdigital Holding Company, S.L., a company indirectly controlled by Santander Spain, for the amount of R$270 million as consideration. As a result of such transaction, we are no longer a shareholder of Superdigital.
Disclosure of Projections
On July 29, 2020, we informed the market that we 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 ~~Summer Empreendimentos Ltda.~~
direct equity interest in Toque Fale Serviços de Telemarketing LTDA
On ~~May 14, 2019,~~March 24, 2020, we ~~and our wholly-owned subsidiary Santander Holding Imobiliária S.A.~~acquired all of the outstanding share of Toque Fale Serviços de Telemarketing Ltda., or ~~“SHI,~~“Toque Fale,” ~~entered into a binding document with the shareholders of Summer Empreendimentos Ltda, or “Summer,”~~held by our then subsidiaries Getnet and Auttar HUT Processamento de Dados LTDA for the acquisition of Summer’s issued share capital. The acquisition was approved by the Brazilian Central Bank on September 16, 2019 and concluded on September 20, 2019. We now hold, directly and indirectly through SHI, 100% of Summer’s share capital. Initially, Summer was not consolidated in our financial statements because it was treated as a temporary investment (non-current assets for sale). However, the investment is no longer considered temporary, and therefore Summer is included in our consolidated financial statements.
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~~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 amountsan amount of R$~~14.7~~1.1 million, ~~and R$19.9 million, respectively.~~corresponding to the equity value of the quotas on February 29, 2020. As a result, we ~~ceased to be shareholders~~became the direct holders of ~~the Norchem Companies.~~
~~Purchase~~100% of ~~Equity Interest over Toro Controle e Participações S.A.~~
On September 29, 2020 Santander Brasil’s subsidiary, PI DTVM , entered into an investment and other covenant agreement with the shareholders of Toro Controle e Participações S.A. , or “Toro Controle” to invest in Toro Controle. Toro Controle, an investment platform, operating as a securities broker focused on the retail market was founded in Belo Horizonte in 2010. Toro Controle is the holding company of Toro Corretora de Títulos e Valores Mobiliários Ltda, or “Toro Corretora,” and Toro Investimentos S.A., or “Toro Investimentos.” We refer to Toro Controle, Toro Corretora and Toro Investimentos as “Toro,” Upon completion of the transaction, PI DTVM will hold 60% of Toro Controle’sToque Fale’s share capital.
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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 ~~Gira (Gestã~~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.
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Merger of Banco Olé Consignado S.A. into Banco Santander (Brasil) S.A.
Following the acquisition of the remaining equity interest over Banco Olé Consignado S.A., through the holding company Bosan Participações S.A., together referred to as “Olé Companies,” the shareholders of Santander Brasil and the Olé Companies approved the merger of Olé Companies into Santander Brasil, as provided by the general meetings held on August 31, 2020. As a result, the Olé Companies ceased to exist and were succeeded by Santander Brasil. The incorporation of the Olé Companies has been approved by the Brazilian Central Bank and is in the process of being registered with the applicable commercial registries (juntas comerciais).
~~Execution~~Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários Ltda.
On September 29, 2020, Santander Brasil’s subsidiary, PI DTVM, entered into an investment and other covenant agreement with the shareholders of Toro Controle e Participações S.A., or “Toro Controle,” to invest in Toro Controle. Toro Controle is the holding company of Toro Corretora de Títulos e Valores Mobiliários Ltda, or “Toro Corretora,” and Toro Investimentos S.A., or “Toro Investimentos,” which jointly run an investment platform focused on the retail market, founded in Belo Horizonte in 2010. We refer to Toro Controle, Toro Corretora and Toro Investimentos as “Toro.” As a ~~contract~~result of the transaction, and the subsequent merger of Toro Controle into Toro Corretora, PI DTVM holds 60% of Toro Corretora’s share capital.
In addition, PI DTVM and Toro Corretora combined their market experiences to develop a complete platform of fixed and variable income products. This platform is based on shared expertise, technology and operate in the growing Brazilian investment market. The completion of the transaction occurred in April, 2021, following the execution of certain customary agreements between the parties, the fulfillment of customary conditions precedent and the receipt of certain regulatory approvals, including the approval of the Brazilian Central Bank.
Capital reduction of Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A.
On October 8, 2020, the shareholders of Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A., which we refer to jointly as the “Norchem Companies,” approved a capital reduction in the two Norchem Companies, in the amounts of R$14.7 million and R$19.9 million, respectively. As a result, we ceased to be shareholders of the Norchem Companies.
Dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A.
On November 12, 2020, we approved the dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A., a Spanish entity wholly-owned by us, which we used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our 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 of Paytec Tecnologia em Payments Ltda, and Paytec Logística e Armazém EIRELI
On December 8, 2020, we entered into a quota purchase agreement with the owners of Paytec Tecnologia em Payments Ltda, and Paytec Logística e Armazém Eireli (jointly “Paytec”)~~. Once~~ for the ~~transaction is completed, we will hold 100%~~acquisition of the entirety of Paytec’s issued share capital. Paytec is a logistics operator with Brazil-wide coverage which focuses on the payments market. The ~~completion~~transaction closed on March 12, 2021.
Buyback Program
On February 2, 2021, our board of directors approved, in continuity with the buyback program that expired on November 4, 2020, 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 36,956,402 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 is up to 18 months beginning on February 3, 2021 and expiring on August 2, 2022.
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Corporate reorganization Santander Leasing S.A. Arrendamento Mercantil and Banco Bandepe S.A.
On May 11, 2021, Santander Brasil and Banco Bandepe SA, or “Bandepe,” entered into an Agreement for the Purchase and Sale of Shares through which Santander Brasil acquired the entire equity interest held by Bandepe in Santander Leasing S.A. Arrendamento Mercantil, or “Santander Leasing,” which amounted to 21.42% of Santander Leasing’s share capital. As a result, Santander Brasil became the sole shareholder of Santander Leasing. On May 27, 2021, an incorporation of all the shares of Bandepe by Santander Leasing was approved, in order to convert Bandepe into a wholly-owned subsidiary of Santander Leasing. As a result, the capital stock of Santander Leasing increased by approximately R$5.4 billion.
Acquisition of Equity Interest in Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda.
On June 15, 2021, Pi DTVM, Toro Corretora and Toro Investimentos SA, or “Toro Investimentos” entered into an investment agreement and other covenants with the partners of Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda., or, collectively, “Monetus,” by means of which Toro Investimentos will hold, upon the closing of the transaction, 100% of the capital stock of Monetus. Monetus, originally from Belo Horizonte in the state of Minas Gerais, carries out its activities through an automated investment application. Taking into account a customer’s needs and risk profile, this application automatically creates, executes and tracks a diversified and personalized investment strategy to provide optimal service to customers. The transaction is subject to the execution of the definitive agreements and the occurrence of certain conditions usual to this type of transaction, including the applicable regulatory approvals.
Acquisition of Equity Interest in Mobills Labs Soluções em Tecnologia Ltda. and Mob Soluções em Tecnologia Ltda.
On June 15, 2021, Pi DTVM, Toro Corretora and Toro Investimentos S.A. executed an investment agreement and other covenants with the partners of Mobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda (jointly “Mobills”), by which, once the transaction is concluded, Toro Investimentos will hold 100% of the capital stock of Mobills. Domiciled in Ceará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning. After the conditions precedent established in the investment agreement were fulfilled, the transaction closed on January 4, 2022.
Acquisition of Equity Interest in Solutions 4 Fleet Consultoria Empresarial Ltda.
On July 13, 2021, Aymoré Crédito, Financiamento e Investimento S.A., or “Aymoré,” and the partners of Solution 4 Fleet Consultoria Empresarial Ltda., or “Solution4Fleet,” executed a certain Investment Agreement and Share Purchase and Sale Agreement, by means of which Aymoré will hold, upon the closing of the transaction, 80% of the capital stock of Solution4Fleet, or “Solution4Fleet Transaction.” Solution4Fleet specializes in structuring vehicle rental and subscription businesses – long-term rental for individuals. The transaction closed on October 8, 2021 after the applicable conditions precedent were fulfilled.
Acquisition of equity interest in Car10 Tecnologia e Informação S.A. and Pag10 Fomento Mercantil Eireli.
On July 13, 2021, Webmotors S.A., or “Webmotors,” the shareholders of Car10 Tecnologia e Informação S.A., or “Car10 Tecnologia,” and Pag10 Fomento Mercantil Eireli, or “Pag10,” and, together with Car10 Tecnologia, “Car10,” entered into certain agreements for the acquisition by Webmotors of 66.7% of the capital stock of Car10 Tecnologia, which is the sole holder of Pag10. Car10 acts as a marketplace that brings together more than 7,000 service providers such as workshops and autocenters, auto body and paint, and cleaning and sanitizing, as well as emergency assistance and towing. The transaction closed on September 20, 2021.
Acquisition of equity interest in Liderança Serviços Especializados em Cobranças Ltda. and Fozcobra Agência de Cobranças Ltda.
On August 4, 2021, Atual Serviços de Avaliação de Créditos e Meios Digitais S.A., or “Atual,” a wholly-owned subsidiary of Santander Brasil and the shareholders of Liderança Serviços Especializados em Cobranças Ltda., or “Liderança,” entered into a certain Agreement for the Assignment of Quotas and Other Covenants, for the acquisition by Atual of 100% of the capital stock of Liderança. Liderança operates in the industry of overdue credit recovery, providing extrajudicial collection services to financial institutions and other industries, and has a subsidiary: Fozcobra Agência de Cobranças Ltda. The transaction closed on October 1, 2021. Subsequently, Fozcobra Agência de Cobranças Ltda. was merged into Liderança on October 4, 2021.
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Acquisition of Equity Interest in Apê11 Tecnologia e Negócios Imobiliários Ltda.
On September 2, 2021, Santander Holding Imobiliária S.A., or “SHI,” a wholly-owned subsidiary of Santander Brasil, entered into a Share Purchase and Sale Agreement and Investment Agreement with the shareholders of Apê11 Tecnologia e Negócios Imobiliários Ltda., or “Apê11,” for the acquisition of 90% of the capital stock of Apê11. Apê11 acts as a collaborative marketplace, pioneering the digitization of the purchase journey of houses and apartments. After the conditions precedent established in the agreement were fulfilled, the closing of the transaction occurred on December 16, 2021.
Issuance of Notes
In November and December 2021, Santander Brasil issued Financial Bills with a subordination clause, to be used to compose our Tier 2 regulatory capital, in the total amount of R$5.5 billion. The Financial Bills have a term of ten years, and redemption and repurchase options in accordance with the applicable regulations. The Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.
Acquisition of Equity Interest in CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A.
On January 21, 2022, Santander Corretora de Seguros, Investimentos e Serviços S.A., or “Santander Corretora,” together with other investors (including Banco BTG Pactual S.A. and CBOE III, LLC) entered into an investment agreement with CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A., or “CSD BR,” and its shareholders for the acquisition of a minority equity interest in CSD BR. CSD BR operates as a register of financial assets, derivatives, securities and insurance policies, authorized by the Brazilian Central Bank, the CVM and the SUSEP. Subject to closing, Santander Corretora’s interest in CSD BR will be 20%. The closing of the transaction is subject to the conclusion of definitive agreements and the implementation of certain customary conditions precedent, including the receipt of applicable regulatory approvals.
The Getnet Spin-Off
On February 25, 2021, further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, we announced that our Board of Directors approved the spin-off of our merchant acquiring business, which was undertaken by our then-subsidiary Getnet, in order to concentrate the technology and payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. On March 31, 2021, the shareholders of Santander Brasil approved the Spin-Off. As a result of the Spin-Off, each holder of our common shares, preferred shares and Santander Brasil units, including the custodian for the Santander Brasil ADS facility, received Getnet common shares, preferred shares and Getnet units, at the rate of 0.25 common share, preferred share or Getnet Unit, as the case may be, for each one common share, preferred share or Santander Brasil Unit issued by us held at close of trading on the B3 on the relevant record date. Additionally, each holder of Santander Brasil ADSs representing Santander Brasil units received Getnet ADSs, each representing two Getnet units, at a rate of 0.125 Getnet ADS for each Santander Brasil ADS held at the close of trading on the NYSE on the relevant ADS record date. The Getnet common shares, preferred shares and Getnet units are traded on B3, and Getnet ADSs are traded on Nasdaq under the symbol “GET.” The Spin-Off was completed on October 26, 2021.
As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021. On April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “ Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.”
The charts below set forth a summary of our simplified corporate structure before and after the Spin-Off and after the reorganization of the PagoNxt group, of which Getnet forms part:
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Corporate Structure Prior to the Spin-Off
Corporate Structure After the Spin-Off
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Corporate Structure After the Reorganization of the PagoNxt Group
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. Based on the information available as of the date of this annual report, we present below a summary of the main effects of the COVID-19 pandemic on our business and results of operations:
● As the COVID-19 pandemic escalated in Brazil starting March 2020, we adjusted our operations to be able to continue providing our products and services to our customers while ensuring the health and safety of our employees. We have prioritized the safety and health of our employees and customers by adhering to prevention and care measures recommended by the Brazilian health and labor ministries, while striving to minimize the impact on our business. From the beginning, we implemented remote working arrangements to safeguard employees most at risk from COVID-19. We have also provided telemedicine services in addition to standard medical support to support the care of our employees and their families. Furthermore, we have instituted a protocol for mapping, protecting, and monitoring all contaminated individuals and those in contact with them, as well as a remote working strategy that evolved in lockstep with the pandemic. We supported our employees throughout the COVID-19 pandemic by offering them and their dependent remote medical care through an agreement with a leading Brazilian hospital. We also provided advance payment of thirteenth salary installments in April 2020 (these are normally paid in April and November of each year).
● From March 2020 to October 2021, our branches operated with reduced service hours; from 9:00 a.m. to 2:00 p.m. from March 2020 to July 2020 and then from 9:00 a.m. to 3:00 p.m. until October 2021. From November 2021 through to the date of this annual report, we have been expanding our service hours in our branches from 9:00 a.m. to 4:00 p.m. We adopted a staggered entry system in branches with heavy customer traffic in order to reduce the total number of customers in the branch at any given time. We also reserved the period from 9:00 a.m. to 10:00 a.m. for customers who would are more vulnerable to COVID-19. To provide continuous service and meet the increased demand of our call centers, we temporarily relocated retail employees to our call centers to help deal with the increased demand for remote banking services. In line with our commitment to clear customer communication, we launched the “Overcome Together” and “Santander Supports You” websites, which gathered resources and initiatives related to our business.
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● We have offered individual, microentrepreneur and SME customers the possibility of deferring their loan payments for up to 60 days. In May 2020, we allowed an extension for an additional 30 days, as a result of which our deferred loan portfolio reached a total of R$49.8 billion as of June 30, 2020, R$40.6 million as of December 31, 2020 and R$25.9 million as of December 31, 2021. At the same time, we continuously monitored our loan quality indicators, which remained at acceptable levels throughout the COVID-19 pandemic and through the date of this annual report. We also participated in government programs created in 2020 that granted special credit lines for businesses, particularly in retail, to minimize the negative effects of the pandemic including CMN Resolution No. 4,846, which was published on August 24, 2020 and regulated lending under the Emergency Employment Support Program, initially established by Provisional Measure No. 944/2020. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” As a result, our total portfolio balance of government-sponsored loans reached R$10.3 billion as of December 31, 2021.
● The onset of COVID-19 had a negative impact on our net fee and commission income, especially in the first half of 2020, due to a lower volume of customer transactions, which adversely affected the total amounts we were able to charge in credit and debit card fees. As a result, we experienced reductions in the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2019 to the six months ended June 30, 2020, as compared to the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2018 to the six months ended June 30, 2019. These reductions were due to the abovementioned lower transaction volumes, a higher share of global wholesale banking in the loan portfolio, alongside a shift in the product mix, with a decreased share of higher risk products, such as credit cards and overdrafts. In 2021, in particular in the second half of the year, there was a recovery in economic activity. As a result, in the year ended December 31, 2021, our net interest income increased by 15.5% compared to the year ended December 31, 2020 (although our net fee and commission income decreased by 5.9% in the same period), our sales through physical distribution channels increased (by 46% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and so did our sales through digital channels (which increased by 45% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and we added 784,000 new customers in December 2021 (which is 78% more than in December 2020). For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Interest Income” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Fee and Commission Income.”
● In 2020, we constituted an additional provision in the amount of R$3,200 million. This provision was calculated based on the analysis of the potential macroeconomic effects and took into account not only quantitative and qualitative indicators, but also the adequate and accurate identification of risks and a collective assessment of exposures. In 2021 as a response to the macroeconomic shock of the COVID-19 pandemic, we used a part of the provision overlay on expected credit losses created in 2020, as further explained under “Item 5. Operating and Financial Review and Prospects—A. Operating Results— Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Impairment Losses on Financial Assets (Net).” However, we also experienced an improvement in our loan portfolio, in particular with respect to individuals as loans to individuals increased by 17% in the year ended December 31, 2021 compared to the year ended December 31, 2020. For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019— Results of Operations—Impairment Losses on Financial Assets (Net).”
● In 2020, the National Monetary Council, or “CMN,” and the Brazilian Central Bank introduced measures to minimize the impact of COVID-19 on the financial system. With respect to liquidity, these changes included: (i) a reduction in the time deposit reserve requirement from 31% to 17%; and (ii) an increase in the additional limit on the reserve requirement treated as High Quality Liquidity Assets from 15% to 30%, ensuring greater liquidity in a stress scenario. In addition, a temporary suspension on dividends and other distributions was enacted through Resolution No. 4,820, limiting the distributions to shareholders 30% of adjusted net profit (following amendments enacted on December 23, 2020). As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This suspension on the payment of dividends was not renewed in 2021. The CMN also published Resolution No. 4,783, which temporarily reduced the capital conservation buffer (where all rates relate
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to the total amount of risk-weighted assets) required from financial institutions from 2.5% to 1.25% as of the second quarter of 2020, leading our Basel ratio to reach 15.3% as of December 31, 2020. In 2021, the time deposit reserve requirement increased from 17% to 20% as of November 2021, and the capital conservation buffer required from financial institutions rose from 1.25% to 1.625% as of April, 2021, with this percentage increasing gradually until April 2022, when it will reach 2.5%. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” and “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”
● We experienced an increase in digital business. Specifically, we recorded an increase of 45% in the number of new contracts originated through digital channels in the year ended December 31, 2021 compared to the year ended December 31, 2020.
See also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business— The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”
Capital Expenditures and Divestitures
Our main capital expenditures include investments in our information technology platform. Our information technology platform focuses on our customers and supports our business model. In 2021, 2020 and 2019, total investments in information technology were R$1,905 million, R$1,432 million, and R$1,858 million, respectively.
In 2021, 2020 and 2019, we continually improved in our technology platforms by means of investment in our digital applications, especially through the implementation of new solutions in the areas of artificial intelligence (machine learning, AIOPs), micro services, blockchain technology, cyber insurance, facial recognition and cloud-based technologies, among others. The application of these new technologies improved our interaction with our customers enabled us to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness, investments to better address client needs. We also continued to invest in our physical distribution network (branches, PABs and PAEs), including: biometric identification for corporate customers, digital purchase and payment of exchange, among other initiatives. For more details about our technology and infrastructure, see the item “—B. Business Overview—Technology and Infrastructure.”
Our ongoing capital expenditures consist primarily of investments in information technology. We expect to fund our ongoing capital expenditures principally from our cash flow from operations.
Our major divestitures in the past three fiscal years and until the date of this annual report were the Spin-Off of Getnet and the sale of Super Pagamentos.
For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations.”
4B. Business Overview
Our Strategy
Our strategy is centered on endeavoring to generate profitable, recurring, and sustainable growth. We believe the expansion of our customer base over the years is due to our ability to capture new customers and increase their loyalty. We have achieved this by offering a comprehensive portfolio of products and services, with a particular emphasis on quality and a constant drive to improve customer satisfaction. We serve our customers through multi-channel solutions which we believe enable us to provide a tailored and human service which is responsive to the needs of our customers. We rely on our four integrated service channels to do offer our services to our customers: digital, remote, physical and external channels.
We recorded net income of R$15,559 million, R$13,451 millionand R$16,631 million in the years ended December 31, 2021, 2020 and 2019, an increase of 15.7% in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the years ended December 31, 2021, 2020 and 2019 we achieved capital adequacy ratios of 14.9%, 15.3% and 15.0% respectively. In the years ended December 31, 2021, 2020 and 2019, we have achieved efficiency ratios of 27.1%, 35.5% and 28.8%, and adjusted efficiency ratios of 28.2%, 27.7% and 28.2%, respectively. In addition, we achieved an adjusted return on average stockholders’ equity of 20.2%, 18.4% and 24.6% in 2021, 2020 and 2019, respectively. Adjusted return on average stockholders’ equity is a non-GAAP financial measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” We believe these metrics demonstrate our track record of consistent performance and the results of our constant efforts to improve our productivity.
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In recent years, we have undergone significant transformations, thereby enabling us to identify and capitalize on business opportunities. We have expanded our platform to diversify our offering of products and services:
● In 2016, we initiated our commercial transformation by implementing new work models, streamlining processes and digitalizing our operations. We have sought to introduce a culture of innovation, while remaining cognizant of our surroundings and customer demands. This led us to expand our vehicle financing offering at a time when the market was moving in the opposite direction.
● In 2017, we took steps to improve service quality and we placed customer satisfaction to the core of our strategy. We believe we were industry pioneers in implementing and publicly disclosing our net promoter score, or NPS, as a measure of customer satisfaction.
● In 2018, alongside our culture of service, we advanced our pursuit of efficiency by bringing an industrial cost approach into our banking business, covering three critical fronts: organization, technology, and culture. We believe this strategy has already yielded positive results and that it will enable us to further optimize our productivity while also improving customer experience on our platforms.
● In 2019, we expanded our ecosystem by introducing new, innovative products into the market. We launched Sim, emDia, Santander Auto, Auto Compara and Ben Visa Vale while repositioning ourselves in the card market, as well as refocusing our efforts on customer and account holder loyalty.
● In 2020, we focused our efforts on assisting customers in facing the challenges posed by the COVID-19 pandemic by providing products and services adapted to the new reality brought in by the pandemic. We did so by improving and expanding our digital channels in order to deliver to our customers robust self-service banking at a time when in-person service delivery was not possible. We also reaffirmed our commitment to efficiency and rapid response to emerging market trends by launching SX Santander to offer customers exclusive benefits, differentiating ourselves from the Brazilian Central Bank’s PIX instant payment solution.
● Finally, in 2021 we redoubled our efforts to improve customer experience and satisfaction across all channels. Our strategy is to convert new customers into loyal customers (we define loyal customers as those who purchase six or more products), thus, generating profitability for the bank and satisfaction in using the bank for our customers. We seized on the opportunities we saw in the market and managed to reach 53.4 million customers as of December 31, 2021, including adding more than 784,000 new customers in December 2021. We achieved this while also maintaining high levels of customer loyalty, reaching eight million loyal customers as of December 31, 2021 (an increase of 32% compared to December 31, 2020). The combined effect of the growth in our customer base and our levels of customer loyalty enabled us to increase our customer base by 11% as of December 31, 2021 compared to December 31, 2020. We also further improved our digital operations by expanding our offerings through this channel, which has grown significantly, as evidenced by an increase of 45% in financial products and services purchased through this channel in the year ended December 31, 2021 compared to the year ended December 31, 2020. In addition, we continued to focus on streamlining processes, digitalizing our operations, and reducing paper consumption to enable us to operate faster and more efficiently. As a result, we have achieved: (i) faster service, as the lead time to open a business current account decreased by 78% in the year ended December 31, 2021 compared to the year ended December 31, 2020 and (ii) improved efficiency, with 87.0% of credit card bills issued in digital or email format in the year ended December 31, 2021, an increase of 13 p.p. compared to the year ended December 31, 2020.
● We strive to continuously improve our customer experience through the addition of new services, the expansion of our offering, and the enhancement and deeper integration of our channels.
We have consolidated and improved our four service channels through which customers can select the product or solution that best meets their needs. Our digital channel averaged 442 million total visits per month in 2021, adding 554,000 new accounts in December 2021. Similarly, the physical channel, which consists of our branch network that is expanding into Brazil’s rural areas, recorded a monthly average of more than 15 million visits by customers and potential customers, serving as a crucial pillar for business origination. In the remote channel, with the implementation of SX Negócios, a new service model, we have redefined our model to move away from a call center and toward a business channel. We have built a platform to capture new business, processing over 25 million support requests per month in the year ended December 31, 2021, 4.6 million of which are handled by humans. The external channel is comprised of bank correspondents, which are entities allowed to provide specific services to customers, including customer services, on behalf of another financial institutions, and our business verticals, such as payroll-deductible loans, Prospera and Olé Consignado.
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We believe that our digital platform enables us not only to offer our customers a comprehensive set of services but also to benefit from the business generation potential which arises from the ease with which customers are able to purchase our products and services through our digital sales channels. Sales of our products and services through our digital channels increased by 45% in the year ended December 31, 2021, compared to the year ended December 31, 2020, including an increase in the number of premium bonds (capitalização) contracts of 360% and 23% in premiums written in open insurance contracts (considering life insurance, personal accident insurance, home insurance, and other types of insurance) in each case in the year ended December 31, 2021 compared to the year ended December 31, 2020. GENT&, our artificial intelligence channel, recorded over 18.5 million interactions in December 2021 and is currently capable of answering more than 26,000 questions.
We believe that our business has the potential to grow by means of innovation and technology, in conjunction with user experience enhancements and steady evolution in the quality of our services. Our products, services, and businesses form part of the daily lives of all our customers, whether businesses or individuals, and include, among others, payment solutions (i.e., payment platforms), investment and advisory services, vehicle and consumer goods financing, mortgage loans, payroll-deductible and agribusiness loans, as well as the products and services offered through our wholesale unit. We also endeavor to maintain sound risk management, which entails continuously improving our credit granting models to maintain our credit risk indicators at acceptable levels.
In order to strengthen our platform, we have launched new businesses that continue to evolve and support our customer loyalty strategy, such as (i) Ben, which grew its customer base to 565,000 cards as of December 31, 2021 along with 2,675 human resources customers and 365,432 partner establishments as of the same date; (ii) Sim, which surpassed the five million customer mark and reached a loan portfolio of R$1.6 billion as of December 31, 2021; (iii) emDia, which increased recovered credit volume by 12% in the year ended December 31, 2021 compared to the year ended December 31, 2020, and (iv) Santander Auto, where the percentage of new consumer finance contract purchasers who also acquired insurance reached 20% in 2021, resulting in over R$210 million in written premiums in 2021. In 2020, we also announced the acquisition of securities brokerage firm Toro Corretora to complement our investment platform and broaden our product offering. Finally, in 2021, we launched Auto Compara, a fully online auto insurance comparison and offering platform that is now also available to non-customers. Auto Compara had an average of 350,000 website visits in the year ended December 31, 2021 and we increased by 26% in premiums written during the year. Additionally, we reinforced our position in the automotive and real estate industries by completing acquisitions of businesses and solutions to expand our business and build a more comprehensive platform.
As a result of our efforts to constantly improve our business, we were recognized the Best Bank in Brazil in 2021 by The Banker Magazine.
Our People
Our people are a key pillar of our strategy, supported by a culture that values employees, promotes diversity, encourages efficiency, and fosters innovation, while also preparing us for a new cycle and enabling us to continue anticipating market trends. Our performance is the embodiment of our culture, with our people serving as the catalyst for the transformation. Thus, we have built a diverse and engaged team. We value meritocracy, diversity, and inclusion, as evidenced by the fact that, as of December 31, 2021, 31% of our leadership positions were held by women, 27% of our employees were black employees, and 5% were held by people with disabilities. We also place a premium on proactive knowledge acquisition: in 2021, over 3,200 courses were held on the Santander Academy platform, with 78% of them being taught by employees. Close leadership and open communication are ingrained in our DNA. Our actions are backed by a culture that is increasingly centered on our people – 94% of whom are proud to work for Santander, according to the Great Place to Work, or “GPTW,” survey from 2021. As a result of our efforts, we have been named one of the top 10 best companies to work for in Brazil by GPTW 2021, appearing in the following categories: Ethnic-Racial, Women, LGBTQI+, Early Childhood, 50+, and Healthy Management. Additionally, we were honored with the following awards: (i) Ethnic-Racial by Exame magazine’s Diversity Guide, (ii) Diversity and Inclusion by Euromoney’s Awards for Excellence, and (iii) Bloomberg’s Gender Equality Index. Finally, we were also included on the GPTW B3 index.
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Social and Environmental Initiatives
Similarly, and consistent with our strategy of responsible growth, we recognize our role as a financial institution in Brazil’s development. Hence, for twenty years, we have sought to foster sustainable businesses. We highlight our Amigo de Valor program, one of the main social programs in Brazil today, started in 2002. In 2021, we continued to advance initiatives that reflect how sustainability and social issues are embedded in every layer of our organization:
● In the social realm, we lead initiatives that have impacted more than one million people over the last three years. For the past 19 years, we have worked to protect, promote, and defend the rights of children and adolescents in vulnerable situations through the Amigo de Valor program, benefiting thousands of people and raising R$20 million in 2021 through employee and customer contributions. Since 2002, we have been promoting financial inclusion by means of Prospera Santander Microfinance (Prospera Santander Microfinanças), which had 708,000 active customers and a R$1.9 billion portfolio as of December 31, 2021, with the goal of helping microentrepreneurs thrive and thereby develop the communities in which they operate, while also providing business management guidance. Likewise, for more than two decades, we have consistently invested in education, as we believe that it is the foundation for societal transformation. Finally, we have awarded higher education scholarships since 2005, including 33,000 scholarships in 2021 alone.
● With respect to our environmental initiatives, we offer a comprehensive suite of financing solutions for the development of sustainable businesses, both for individuals and businesses, which we accelerated in 2021, generating R$ 51.6 billion in sustainable businesses in the year ended December 31, 2021. We pioneered green financing, with over R$ 1.3 billion loans linked to environmental, social and governance, or “ESG,” goals and green loans in our portfolio as of December 31,2021, in addition to being among the leaders in CBIOs (decarbonization credit). We are also active solar energy loans, financing photovoltaic panels for individuals, companies, and agribusinesses, disbursing R$ 2.3 billion in the year ended December 31, 2021. In 2021, we also launched a financing facility exclusively for bicycles.
We implement routine socioenvironmental risk assessment, for which we rely on a Socioenvironmental Questionnaire, or “QSA,” by means of which we collect information on customers that have environmental practices, including data on carbon emissions, management of offsets and extreme weather events. The QSA is applied to the Wholesale and Business 3 segments, as well as to Retail customers. This analysis is part of the annual credit review for 14 sectors in which we operate, all of which are potentially affected by climate change according to the Task Force on Climate-related Financial Disclosures, or “TCFD.”
Since 2016, we have taken climate change issues into consideration in the credit rating of Wholesale customers, and, since 2020, we have used a water stress calculator in our socioenvironmental assessments. This tool considers our customers’ economic activity, watershed location and measures taken to save water. It has been developed considering customer vulnerability to climate change in general, even as a result of changes in legislation or consumer preferences.
Regarding decarbonization targets, in 2021 we announced our intention to achieve net zero carbon emissions by 2050 to support the goals of the Paris Agreement on climate change using 100% renewable energy sources by 2025 and eradicating single-use plastic from all our operations. We have been carbon neutral since 2010, fully offsetting our emission sources.
In July 2021, we established a forum with the goal of preventing greenwashing by seeking to ensure that operations which we describe as green, social, or sustainable comply with Santander Group’s taxonomy and market standards. The forum, which is composed of senior executives from the Sustainability, Risk, Social and Environmental Risk, Business, Compliance, and Legal departments, also assesses reputational risks associated with our operations. Out of a total of 40 proposals to label a particular service of product as being “green” which were reviewed by the forum in 2021, 31 have been approved.
In addition, we have developed products that contribute to lowering the impact on climate change, such as:
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● Low Carbon CDB, we launched the Low Carbon CDB, a sustainable, low risk investment aimed at companies that want to have more sustainable investments in their portfolio capable of reducing their greenhouse gas emissions. The resources of the investments in CDB will be used to finance sustainable projects of companies that promote actions to reduce greenhouse gas emissions.
● Carbonômetro (Carbon meter), a tool that calculates the daily greenhouse gas emissions of our operations.
● Carbon Calculator, which encourages employees of Santander Brasil and affiliates to calculate their carbon footprint.
● "The Future of the Carbon Market in Brazil” live video. We produced a live video to discuss the future of the carbon market in Brazil and the challenges and opportunities for the business sector.
In July 2020, we announced a plan to promote sustainable development in the Amazon, in collaboration with two other largest private-sector banks in Brazil. Part of this plan, named “Plano Amazônia,” aims to eliminate deforestation in the supply chain for cattle farms for beef processors in the Amazon, aiming to finance the cultivation of local crops, such as açaí, Brazilian nuts and cocoa, and to identify opportunities for the development of bioeconomy chains. In 2021, we also launched the new commercial network Rede Norte Amazônica, in order to expand our operations in the region, and we have established the North Amazon Network, a business unit comprised of four Brazilian states (Amazonas, Acre, Rondônia, and Roraima), with the objective of fostering business in the region and a particular focus on sustainability. Since its creation, we have made over R$ 270 million in credit lines available to cooperatives and agribusinesses, as well as to producers of Amazonian products who adopt sustainable practices.
In 2021, we inaugurated Brazil’s first sustainable train station in partnership with the State Government of São Paulo, maximizing on-site natural resource efficiency by means of solar energy panels and a water reuse system. Furthermore, in collaboration with the International Finance Corporation, a World Bank Group institution, and the State Government of São Paulo, we supported the Pinheiros River clean-up program.
We also use ESG as one of the criteria for evaluating our executives, evidencing how deeply embedded the subject is in our culture.
In recognition of our efforts, we have received several ESG accolades in 2021, including Exame magazine’s Best ESG Bank, the Eco Brazil Award, Época Negócios 360°’s Most Sustainable Company, in addition to being named to Fortune magazine’s Change the World list.
Our Business
We provide our complete portfolio of products and services to our 30 million active customers as of December 31, 2021 through the following business segments:
● Commercial Banking: provides services and products to individuals and companies (except for global corporate customers who are managed by our Global Wholesale Banking). The revenue from this segment is derived from the banking and financial products and services available to our account and non-account holders.
● Global Wholesale Banking: offers a wide range of national and international tailored financial services and structured solutions for our global corporate customers, comprised mostly of local and multinational corporations.
We outline below the business divisions for each of our operating segments, as well as the breakdown of our net interest income and operating income before tax by segment:
Commercial Banking
Global Wholesale Banking
●Retail Banking ●Santander Corporate & Investment Banking (“SCIB”)
●Individuals
●SMEs
●Consumer Finance
●Corporate
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For the Year Ended December 31,
Net interest income Operating income before tax
2021 2020 2019 2021 2020 2019
(R$ millions)
Commercial Banking(1) 46,236 41,457 42,044 19,491 4,666 18,375
Global Wholesale Banking 5,082 2,985 2,277 5,260 4,998 3,898
Total 51,318 44,443 44,321 24,750 9,664 22,273
(1) Operating income before tax reported under commercial banking includes the effects of the hedge for investments held abroad (offset in the same amount in the “Income Tax” line). The effect of the hedge for investments held abroad in 2021, 2020 and 2019 amounted to loss of R$2,512 million, R$13,583 million and loss of R$1,264 million, respectively.
The following table shows a managerial breakdown of our loans and advances by customer type at the dates indicated:
As of December 31,
Change between
2020 and 2021

Change between
2019 and 2020
2021 2020 2019
(R$ millions)
Individuals 203,678 174,042 156,177 17.0 % 11.4 %
Consumer Finance 55,441 51,637 48,421 7.4 % 6.6 %
SMEs 59,602 54,525 53,119 9.3 % 2.6 %
Corporate(1) 174,634 137,618 89,539 26.9 % 53.7 %
Total Credit Portfolio 493,355 417,822 347,257 18.1 % 20.3 %
(1) For purposes of loan portfolio presentation, “corporate” includes companies with annual gross revenues exceeding R$200 million, including our Global Corporate Banking customers.
Commercial Banking
Retail
Individuals
We have structured the individual customer service segment as follows:
● Private Banking – is responsible for customers with at least R$5.0 million in assets available for investment. In this segment, we offer a complete and tailored portfolio of financial products and services, investment advice, loans and asset management through a dedicated manager for investments and banking services.
● Santander Select – is responsible for customers with a monthly income above R$10,000, and R$30,000 in investments, or more than R$100,000 in investments. The offer here consists of a value proposition with differentiated products and services, exclusive service spaces, relationship managers who serve a small number of customers and provide asset management advisory services,
● Santander Van Gogh – is responsible for customers with a monthly income ranging from R$4,000 to R$10,000, or with investments above R$40,000. Our goal is to understand the needs of our customers at each stage of their lives and provide them with financial advice through a multi-channel solution, including financial products and services, as well as financial advice,
● Santander Especial – is responsible for customers who earn up to R$4,000 per month. Our business model offers simple and efficient solutions with an attractive cost benefit to the customer, primarily through electronic channels.
Furthermore, we also support our Select and Van Gogh customers through our Santander Direct channel, Santander Direct is suited to customers who want more flexible service hours, from 8:00 a.m., to 10:00 p.m. and who prefer using a remote method, such as telephone, e-mail or chat, as well as access to digital channels. This service complements our offering and broadens our capillarity by catering to regions where we do not have a physical presence.
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We launched the following products or functionalities for retail customers in 2021:
● Santander Especial – New customers who opened their accounts on our digital channels have access to Santander Direct.
● New account digital process - We endeavor to simplify the account opening process using internal and external information and making the experience quick and simple for new customers.
Small and Medium Enterprises (SMEs)
We serve SMEs under the “Santander Negócios e Empresas” brand, with the following customer service segmentation model:
● Empresas 3 Núcleos (Core Companies) – responsible for companies with annual revenues between R$30 million and R$200 million. Our service model is based on dedicated relationship managers, a team of experts for more complex demands and loan managers specializing in risk management. We also provide specialized services to multinational, technology companies and other major corporations in order to meet their specific needs.
● Empresas 2 Polo (Hub Companies) – responsible for companies with annual revenues between R$3 million and R$30 million. We offer these customers a comprehensive range of products and services through a user-friendly interface, as well as dedicated relationship managers that work in specialized hubs.
● Empresas 1 Agência (Branch Businesses) – responsible for companies with annual revenues of up to R$3 million. We offer these customers a simple banking solution through an integrated account that combines a corporate account with a point of sale, or “POS,” terminal hosted by our former subsidiary Getnet. Through this arrangement, our customers receive benefits for using the Getnet solution to process their credit card sales, with receipts being posted to a Santander Brasil checking account.
● Negócios Direct - for companies with annual revenues of up to R$300 thousand. We offer these customers direct access to a relationship manager who is available during extended service hours and via remote channels, such as telephone, e-mail or chat, as well as access to digital channels that facilitate the client’s day to day needs.
● Empresas MEI (Individual Microentrepreneur) – responsible for companies with annual revenues of up to R$81 thousand. We offer these customers a simplified and cost-effective option through our Santander Conta MEI, a remote service, and digital solutions such as Gent& Santander – the artificial intelligence solution for service and sales.
Consumer Finance
We provide consumer credit to finance motor vehicles, goods and services directly or through intermediate agencies, Santander Financiamentos is our main service channel, but we also operate under multiple brands.
The following table sets forth certain key financial and operating data regarding our consumer finance business for the periods indicated:

As of December 31,
Change between 2020 and 2021
Change between 2019 and 2020

2021
2020
2019
Individual consumer finance loan portfolio market share (1) (%) 24.4% 25.1% 25.0% (1.1) p.p. 0.1 p.p.
(1) Source: Brazilian Central Bank.
Corporate
Our corporate banking segment aims to be the main distribution channel of the Santander Group to Brazilian and foreign and/or multinational corporate clients. The product offering ranges from simple cash accounts to
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mergers and acquisitions advisory services. We leverage our strength in consumer finance, asset and wealth management, payments and markets to serve our clients and their shareholders, employees, clients and suppliers. We serve companies with annual gross revenues in excess of than R$200 million located across Brazil by physical and digital channels. Our corporate banking segment has been constantly evolving as a segment relying on a disciplined analytical toolkit, consistent communication and workforce upskilling.
Global Wholesale Banking
Santander Corporate & Investment Banking (SCIB)
SCIB is the global business unit that serves customers, who, due to their size and complexity, require tailored services or high-value-added wholesale products. In this segment, we provide a wide range of domestic and international financial services to large Brazilian and multinational companies. Our customer portfolio comprises a range of industries, including telecommunications, retail, aviation, real estate and logistics, power, construction and infrastructure, natural resources, food, agribusiness and financial institutions.
Our customers in the SCIB segment benefit from Santander Group’s global structure of services, which is supported by its worldwide-integrated wholesale banking network and global services solutions, as well as local market expertise and provision of integrated services.
Our Portfolio of Products and Services
Payments
Credit and Debit Cards
We operate in the credit and debit card market by issuing these products to our customers (including both account and non-account holders), with the majority of customers being individuals. Our strategy is to offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.
In order to reach a greater number of customers and remain competitive, we launched the SX card in November 2020, as part of the SX strategy detailed below. This product benefits highly engaged and transactional customers, facilitating the exemption from annual card fees. In addition, we also took the opportunity with the SX card to launch a more modern and ambitious card design for our customers.
To improve customer experience for the high-income segment, where we are aiming to increase market share and brand awareness, we launched the Gold, Platinum and Centurion products with American Express which include NFC technology, the accumulation of Esfera points that do not expire and still allow access to Membership Rewards, an exclusive American Express program.
In line with Santander Brasil’s global purpose of becoming NetZero by 2050, we launched cards made from recycled material in July 2021. The new cards made of recycled material were issued to customers who already had an SX or Elite card, close to expiry. We expect to make the official launch for the first quarter of 2022, with the issuance of 100% of SX and Elite cards with recycled material. Currently, we are the only bank in Brazil that issues cards made from recycled material.
In the SMEs segment, believing in the great potential of microentrepreneurs, or “MEI,” who represent more than half of the companies in Brazil, we developed an exclusive card for this segment. The MEI card grants customers discounts on purchases made with partners, chosen according to the microentrepreneurs field of activity, as a result of which cardholders have access to exclusive offers for the purchase of input for their companies. In addition, there is the possibility of an annual fee waiver by binding the card by using the card on a monthly basis or by registering with the PIX system.
In line with the objective of becoming an open financial services platform, in November 2021 we launched a partnership with Samsung, a solution that offers digital account opening, card sales and SIM loans on the first screen of Samsung pay. The objective is to provide a simple and fluid journey within the app that is already used on a daily basis to pay for on-the-go purchases.
We also improved our digital journey to provide better customer self-service, which we believe is a key component for higher customer engagement. A recent novelty is “Clique e Retire,” a new physical card delivery system that provides a quick, autonomous solution for customers by allowing them to opt to collect their cards from self-service machines.
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The following table sets forth certain key financial and operating data regarding our credit card business for the periods indicated.
As of and For the Year Ended
December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 2020 2019
Credit card portfolio market share (1) 12.4 % 13.4 % 12.9 % (1.0 p.p.) 0.5 p.p.
Credit card portfolio (R$ billion) (2) 48 37.8 36.1 27.0 (100.0 %)
Total card turnover (R$ billion) (2) 306.0 242.0 236.4 26.4 2.4 %
Credit card turnover (R$ billion) (2) 203 158.7 161.0 27.9 (1.4 %)
Total card transactions (in millions) (2) 3,555.3 2,570.8 2,725.4 38.3 (5.7 %)
Credit card transactions (in millions) (2) 1,859.1 1,300.0 1,450.9 43.0 (10.4 %)
Participation of credit card in the household consumption (only debit)– Market overview (2)(%) 24.1 % 17.4 % 13.8 % 6.7 p.p. 3.6 p.p.
Participation of credit card in the household consumption (only credit) – Market overview (2)(%) 42.1 % 25.2 % 24.0 % 16.9 p.p. 1.2 p.p.
Participation of credit card in the household consumption (total, debit and credit) – Market overview (2)(%) 69.3 % 43.5 % 38.2 % 25.8 p.p. 5.3 p.p.
(1) Source: Brazilian Central Bank, as of September 31, 2021. Data for the year ended December 31, 2021 was not available as of the date of this annual report.
(2) Source ABECS – “Monitor bandeiras,” The data relating for the year ended December 2021 has been revised as a consequence of the restatement of the methodology of monitoring issued by ABECS.
Santander Way
Santander Way is an app available to our cardholders that allows them to manage their Santander Brasil cards at any time and place. This complete payment platform also works as a digital wallet, enabling customers to conduct instant contactless payments. The app is frequently updated with new features. Some of the most notable features launched in 2021 included: (i) extra loan and installment offers, (ii) virtual cards that allow purchases before the physical card arrives, (iii) functions for safer online purchases without a physical card, (iv) possibility for the customer to update his or her income to obtain a higher credit limit, and (v) chargeback from unrecognized purchases. In 2021, we have nine million active customers using Santander Way.
Merchant Acquiring Market | Getnet
Getnet is a technology company that offers payment solutions to a range of merchants, from large businesses to the small entrepreneurs, both physically and digitally. Getnet was our subsidiary until the completion of the Spin-Off on October 26, 2021. For more information on the Spin-Off of Getnet, see “—A. History and Development of the Company—The Getnet Spin-Off.”
The following table sets forth certain historical key financial and operating data regarding Getnet’s business for the periods indicated.
As of and For the Year Ended December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 (1) 2020 2019
(R$ millions, except as otherwise indicated)
Market share of total turnover (2) 15.3 % 14.9 % 11.3 % 0.4 p.p. 3.6 p.p.
Debit turnover (3) 105.8 105.8 80.9 0 % 30.8 %
Credit turnover (3) 182.7 167.9 126.6 8.8 % 32.6 %

(1) We completed the Spin-Off of Getnet on October 26, 2021 and, as a result, Getnet is no longer a subsidiary of Santander Brasil. We stopped consolidating Getnet within our results of operations on March 31, 2021. For additional information on the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
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(2)   Source: Data for 2021 relates to the nine-month period ended September 30, 2021 and is based on ABECS Monitor Bandeiras - Acquirers. Data for the year ended December 31, 2021 was not available as of the date of this annual report. For comparison purposes, the difference between September 30, 2021 and September 30, 2020 would be an increase of 1.7 percentage points.
(3) Considers data until September, 2021.
We completed the Spin-Off of Getnet in October 2021, and Getnet is no longer our subsidiary. However, on April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.
Following the Spin-Off, Getnet is operating as the Brazilian leg and regional acquirer of the Santander Group’s PagoNxt merchant solutions. PagoNxt is a strategic initiative that seeks to promote sustainable and profitable growth by integrating various payment solutions for businesses and consumers using the latest technology. PagoNxt is an autonomous company within the Santander Group. Through its three lines of business, namely merchant solutions for businesses, trade solutions for international trade and consumer solutions for consumers, it provides solutions not only to banking clients of the Santander Group but also to third-party customers, financial institutions and fintechs.
Esfera
Esfera is our loyalty program, which can be accessed through its own website and mobile app. Our loyalty platforms enable our credit card holders to exchange their reward points for many products, services and travel benefits, including exclusive deals and discounts with a broader selection of partners such as some of Brazil’s largest retailers and a cinema chain, among others. Esfera also operates a marketplace offering cashback to is clients on purchases of products that aggregate more than sixty partners as of the date of this annual report.
Ben
Ben is an employee benefits company that provides greater flexibility, purchasing power and quality of life to its users by creating, supplying and managing types of employee benefit vouchers (e.g. meals, such as Vale Alimentação and Vale Refeição, as well as transportation) in the form of magnetic cards. These benefits are offered through an integrated digital platform.
Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.
Ben is currently working on development of new products, such as fuel cards and other benefit options to expand its portfolio.
Ben added Ben Único to its portfolio. This product allows customers to have two kinds of benefits in a single card, reducing the cost with card emission and logistics, contributing with ESG metrics,
According with new products developing planning, Ben submitted a request to the Brazilian Central Bank to issue a license to operate as a payment institution (instituição de pagamento) and it was granted in December 2021.
The following table sets forth certain key financial and operating data regarding Ben´s business for the periods indicated.
As of and For the Year Ended December 31,
2021 2020 2019
(in R$ millions, except as otherwise indicated)
Card Purchases 1,484 946 560
Number of Cards (in thousands) 565 217 98
Number of Transactions (in thousands) 20,477 12,192 9,534
Merchant accredited (in thousands) 365 338 253
For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
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Payroll Loans
Payroll loans support both account and non-account holders in the execution of projects and financial organization. Under these loans, monthly installments are deducted directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, significantly reducing our credit risk. We offer these payroll loans to our customers through our mobile banking platform and our branches. Our customers can refinance their payroll loans, as well as choose from other options to help them manage their debts. Furthermore, these loans are also offered to non-account holders through Olé Consignado. For further information on relevant events, relating to Olé Consignado’s corporate events, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
The following table sets forth certain key financial and operating data regarding our payroll loans as of the dates indicated.
As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 2020 2019
Market share in origination (1) 16.96 % 18.90 % 13.2 % (1.94) p.p 9.09 p.p
Payroll loan portfolio (R$ billion) 53.3 48.1 43.0 10.85 % 11.9 %
(1) Source: Brazilian Central Bank, as of December 31, 2021, 2020 and 2019, as applicable
SIM
SIM is a digital lending platform for individuals through which customers can apply, and be approved, for a loan completely online. After two years of operation, SIM has already achieved a positive net profit, a loan portfolio of R$1.6 billion as of December 31, 2021 and a market share of 0.7%, in the year ended December 31, 2021, as well as a total of 6.5 million registered users as of December 31, 2021. SIM also has a high level of customer satisfaction, with an NPS of 80 points in the year ended December 31, 2021.
emDia
emDia is an online debt renegotiation platform. It provides customers with a simple platform to access debt renegotiation services on a 24/7 basis, As of December 31, 2021, emDia had 6.5 million customers and had contributed to the recovery of R$78 million in credit volume in 2021.
Mortgages
We offer long-term financing to our customers for real estate purchases, secured by deeds of trust. We consider mortgages to be a strategic product due to their lower risk (since the acquired property serves as collateral) and their ability to increase our customer loyalty (especially since we offer customers more attractive rates if they choose to bank with us). In this market, our customers, and those of our competitors, are primarily individuals.
We do not offer mortgage loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 90% of the value of the property to be purchased, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of the borrower’s monthly gross income,
To facilitate the process for our customers, we provide a real estate digital platform where customers can obtain mortgages completely online. We were the first bank in Brazil to offer customers the opportunity to secure a mortgage without being physically present, except for the signing of ~~definitive~~the agreement and returning it duly registered. We have a partnership with the largest real estate platform in Brazil in order to improve our sales network and strengthen our digital presence.
The following table sets forth certain key financial and operating data regarding our mortgage business for the periods indicated:
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As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 2020 2019
(in R$ billions, except percentages)
Mortgage loan portfolio 54.8 45.8 39.7 19.7 % 15.4 %
Individual sector mortgage loans 53.0 44.0 37.2 20.5 % 18.3 %
Loan to value(1) – Production (% quarterly average) 65.5 % 64.9 % 62.9 % 0.06 p.p. 2.0 p.p.
Loan to value – Portfolio (%) 52.5 % 52.2 % 49.4 % 0.30 p.p. 2.75 p.p.
(1) Ratio between loans and the value of the collateral, excluding home equity.
Home Equity
In our portfolio of loan products, we also offer a “home equity” financing product called “UseCasa” in which clients can receive a loan if they provide real estate as collateral. This product enables clients to access financing to pursue their personal objectives. “UseCasa” has increased its market share to 23.5% in 2021, maintaining our position as the leading private sector bank for these types of loans in Brazil. Our portfolio was R$3.2 billion in 2021, an increase of 27% in the year ended December 31, 2021 compared to the year ended December 31, 2020. Efficiency has also improved as approximately 50% of loans are now approved in less than 10 days. We do not offer home equity loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 60% of the value of the property, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of borrowers’ monthly gross income.
To facilitate the process, customers can obtain home equity loans completely online through our real estate digital platform. When using this option, customers only need to be physically present when signing the contract and when returning it once it is duly registered.
Tailored Products and Services
As mentioned above, we offer a complete set of services and products worldwide. In this way, we have a portfolio that ranges from basic to tailor-made and highly complex solutions in the following areas:
● Global Transaction Banking – Responsible for the sale and management of local transactional banking products, which include local loans, commercial financing such as on-lending of funds from development banks, structuring of local loans and cash management solutions).
● Global Transactional Services – Responsible for the sale of global transactional products, financing for export and import, guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks.
● Global Debt Financing – Responsible for the provision of financing and financial advice on infrastructure projects, origination, and distribution of fixed income instruments in capital markets both locally and internationally, financing for acquisitions and syndicated loans in local and foreign currency.
● Investment Banking – Advice on mergers and acquisitions and equity transactions in the capital markets.
● Equities – It operates brokerage services for individual, corporate and institutional investors in stocks, listed derivatives and research.
● Treasury Customers – Responsible for structuring and offering foreign exchange products, derivatives and investments to clients in our various segments, including institutional investors, corporate clients and individuals.
● Market Making – Responsible for the pricing of operations (foreign exchange and derivatives) for customers originating from the sales efforts of our corporate, institutional, corporate, private banking and retail. This area is also responsible for managing our proprietary books.
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● Energy Trader – Performs transaction with qualified customers and end consumers, and also acts as a hedge and market making provider in the energy markets.
We are one of the leading banks in capital markets and financial advisory services in the Brazilian and international markets as evidenced by the awards we have received, of which the most significant are listed in the table below.
Company
Acknowledgments
Dealogic
Full Year 2021
#8 Latin America & Caribbean ECM Revenue
#9 Latin America ECM Volume by Bookrunner
#10 Brazil M&A Revenue by Advisor
#6 Brazil M&A Volume by Advisor
#4 Latin America & Caribbean DCM Volume by Bookrunner
#8 Latin America and Caribbean Loans Volume by Bookrunner
#8 Latin America and Caribbean IB Revenue by Bookrunner
#5 Brazil Investment Banking by Bank¹
#1 Latin American & Caribbean Project Finance Loans Volume by MLA²
#1 Americas Project Finance Volume by Finance Adviser to Consortium²
#1 Americas Project Finance Volume by Finance Adviser²
#4 Americas Renewable Energy Project Finance Volume by MLA²
¹ For the third quarter of 2021
² For the first half of 2021
Global 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 Provider of Short-Term Investments Money 2021
Market Funds in Latin America 2020
Best Trade Finance Bank in LatAm 2020
World’s Best Payment Hub Solution 2020
Best Trade Finance Provider for LatAm 2020
Institutional Investors
#1 The Latin America Strategy Team
#4 The Latin America Sales Team
# Sales Trading Institutional Team
#5 Research Team
First Quarter of 2020
TMI Awards Best Trade & Supply Chain Finance Bank in South America 2020
Euromoney
The Best Bank for SMEs Award in LatAm.
October 2020
FX Markets
Best Bank for emerging LatAm currencies 2020
Best Bank for LatAm 2020
Best Bank for USD/BRL 2020
Global Trade Review
Best Trade Finance Bank in LatAm 2020
Best Deal Award Route 2020
Best Supply Chain Bank 2020
First Quarter of 2020
Bond Radar
#1 DCM Distributed in the International Market
Brasil Bonds & Corporate Bonds
Full Year 2020
Trade Finance an IJ Global
Best Supply Chain Finance Bank 2020
Best Receivables Financier 2020
PFI Awards
Global Adviser of the year
First Quarter of 2020
Anbima
#2 DCM Distributed in the Local Markets
#4 DCM Originated in Local Markets– Fixed Income Consolidation
Project Finance
Financing advisory #1 Announced value
First Quarter of 2021
Full Year 2020
Risk Net
Risk Solutions House of the Year 2020
Deals: Cosan (EDQ) / Syngenta (Special Sits)
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Latin Finance
Corporate High-Grade Bond of the Year: Suzano FY2020
Equity Follow-On of The Year: Via Varejo
Infrastructure Bank of the Year – Brazil
Syndicated Loan of the Year: LD Celulose
Domestic M&A Deal of the Year: Grupo Notre Dame Intermédica purchases Clinipam
Corporate High-Yield Bond of the Year: Braskem
Bank of the Year: Southern Cone
Bacen
#1 Total FX
September 2021
The Banker Best Transaction Bank for Latam 2021
Customer Solutions
Agribusiness
Agribusiness remains one of our key areas of expansion, and we believe that expanding our agribusiness network will help broaden our reach into the Brazilian countryside to strategic areas in which we are not yet present. We provide a full range of products and services focused on the agribusiness sector. Our approach towards rural producers differs from the one taken with our other customers in that we offer a specialized relationship to our rural producers. We believe that a network of physical stores and digital solutions will result in a more agile and efficient communication with these customers.
The following table sets forth certain key financial and operating data regarding our agribusiness for the periods indicated.
As of and For the Year Ended December 31,
Change between
2020 and 2021
Change between 2019 and 2020
2021 2020 2019
Number of agribusiness-focused stores 42 40 34 5 % 6 %
Agribusiness loan portfolio (R$ billion) 13.9 13.7 10.9 1.5 % 26.2 %
Microfinance
We believe that Prospera Santander Microfinance is a leading microcredit-oriented operation among privately owned banks in Brazil, based on market share and portfolio value. This product aims to support formal and informal microentrepreneurs by generating business and income with a 100% digitalized service process, in addition to products intended to improve business management skills, we have customers who hire us for services previously not available to them, because they do otherwise have access to financial services, such as property finance, consortium and investment services.
As of and For the Year Ended December 31, Change between 2020 and 2021
Change between
2019 and 2020
2021 2020 2019
Number of Prospera stores 119 99 100 20.02 (1.0 %)
Microfinance loan portfolio (R$ billion) 1.9 1.3 1.2 49.2 % 8.3 %
Webmotors
Webmotors is the first and largest Brazilian technology company focused on providing automotive purchase and sale solutions for dealers, original equipment manufacturers and private sellers, holding the largest online automotive listing in Brazil.
Webmotors received an average of more than 30 million visits per month in 2021. Through Cockpit, a pioneering and disruptive platform for utilities, which brings together solutions for the entire network described above, we offer the following solutions: business management/ performance, buyer profile (CRM), data intelligence, predictive pricing models and market data (AutoGuru).
Webmotors endeavors to be a platform that accompanies private and corporate users throughout the life of their vehicle, from purchase, to use and sale. In order to do so, Webmotors reformulated the business of its subsidiary Loop, which was a traditional auctioning business, into an omnichannel dealer which is able to increase the sale value of demobilized fleets in its digital and physical stores. Webmotors also launched “Agenda Fácil,” a product focused on scheduling services through WhatsApp.
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Santander Auto
In 2019, we launched Santander Auto, a fully digital car insurance solution which relies on the use of big data analytics for pricing.
The Brazilian insurance market is characterized by: (i) low insurance penetration in proportion to its GDP; (ii) low technological evolution, dominated by companies with low innovation rates, still focused on financial results (due to a history of high interest rates); and (iii) retail brokers as the main distribution channel. As a result, the subscription process still requires that the customer complete a question form (approximately 40 questions). As a result, only approximately 20% of Brazilian vehicles are insured.
Actuarial techniques and behavioral models enable Santander Auto to make an insurance proposal, without making additional information requests from the customer, based on information already available to us.
During 2019, its first year of operation, almost 110 thousand policies were sold, which represents a penetration rate of 16% (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos). These results are based on a pricing system based on information bureaus which provides have a more accurate price, which makes it possible to make an offer at the time the vehicle is purchased, and which enables customers to include insurance in their purchase with a single click.
During 2020, we focused on consolidating our insurance offer, by ensuring that all customers have at least one insurance offer, while also covering the most diverse types of risk. We intend to expand the business through the optimization of our ecosystem and penetration in our customer base.
In 2021, Santander Auto expanded its product offering to cover 95% of all vehicles financed by Santander Financiamentos, reaching a penetration rate of 20% in the year ended December 31, 2021 (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos), and registering an increase of 80% in the number of policies sold in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the fourth quarter of 2021, Santander Auto started to offer car insurance to customers who are not financing their vehicle with Santander Financiamentos in order to expand its distribution channel further.
Solution4fleet and Car10
In 2021, we acquired Solution4fleet, a company specialized in leasing vehicles to third parties. Solution4fleet offers services such as assistance, fleet management, inspection, vehicle maintenance and fine management. It is the only company in the Brazilian market that has a complete ecosystem for fleet management and leasing operations.
We also acquired Car10, a company which provides a marketplace to simplify auto repair shops and services with over 7,000 registered garages across Brazil.
+ Negócios and +Vezes | Santander Financiamentos
In 2017, we launched “+Negócios,” which we believe to be an innovative digital trading platform. This simple and intuitive platform enables faster execution of loan simulations, receipt of credit approval and proposal formalization for vehicles, in addition to providing portfolio management reports. In the same year, we also introduced “+Vezes,” a digital trading platform allowing retailers to offer installment payment options for the sale of goods and services.
In 2021, approximately 15 million separate Brazilian individual taxpayer identification numbers were used to simulate vehicle leasing through the “+Negocios” platform, which makes it one of the most widely used platform in Brazil’s vehicle leasing market.
+Vezes has a strong focus on digital channels. With the use of +Vezes website, two editions of “Decora +” and “Energia +” have been launched, both focused on the development of digital showcases to bring main resellers closer to the end customers, mostly on the furniture and photovoltaic segments. Additionally, Crédito Pessoal +Vezes has also been launched, which is a complementary offer of credit for end customers in their checking account, without a specifically required purpose. We have also advanced multiplying +Vezes presence and service throughout the national territory for the implementation of the CONSULTANT + Model, strengthening the relationship with intermediary customers.
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Moreover, “+Fidelidade” is a loyalty program with the objective of offering incentives to agents based on their relationship with Santander Brasil and Webmotors. Accordingly, we have sought to improve the customer’s post-sales experience by implementing several features on +Fidelidade’s online portal.
Cash Management
We offer cash management solutions to corporate customers and SMEs online through our Internet banking and mobile banking services.
Our revenues from cash management include fees charged for offering the following products: (i) collections, in which we assist customers in carrying out commercial transactions using printed or online payment slips; (ii) payments, consisting of simple and automatic management of our customers’ accounts payable activities through individual transactions or via electronic file transfer; (iii) instant Payments, in which our customer pays and receives funds online with an immediate credit or debit to the account (this can be added to our collection, payments or acquiring products); (iv) payroll, which is intended to facilitate the management of salary and benefits payments to our customers’ employees via an online tool;(v) collection of values, which consists of the payment of cash values and checks at the customer’s points of sale; and (vi) custody, by which we perform the custody, control and deposit of predated checks up to the date of clearing.
In addition, we also provide other revenue-generating products which are structured and tailored to the customer’s operation.
Customer Funding
Our main sources of liquidity are customer funding through deposits and other bank funding instruments. These deposits, combined with equity and other instruments, enable us to meet most of our liquidity and legal reserve requirements.
For further information, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”
Investments
Our investment process for retail customers seeks to provide qualified guidance and help them achieve their financial objectives based on five major pillars:
● Client investment profile – We assess our customer’s situation to understand their level of financial knowledge, investment horizons, liquidity needs and the levels of risk they are willing to assume, among other factors. This analysis is reviewed periodically, according to the customer’s needs and local regulations;
● Investment strategy – Our investment philosophy aims to provide long-term returns through a structured asset allocation process and mitigate market risks by diversifying among different asset classes;
● Model Portfolio – We define strategic portfolios for each customer profile and build our “Model Portfolio” on a monthly basis according to market conditions and trends. This tactical view arises from the Asset Allocation Committee, which consists of our advisory team and economists from our economics department, our Santander Asset Management division, our Private Banking unit and our brokerage house (Santander Corretora);
● Execution and implementation – To assure a successful execution of investment strategy, we provide a complete array of financial products, ranging from banking instruments, bonds, stocks, structured notes, investment funds with an open architecture and selected investment providers, real estate funds and exchange traded funds, among other capital markets instruments. Our partnership with Zurich Santander completes this offering with a wide range of private pension plans. Furthermore, our recent acquisition of Toro Corretora has further enhanced our PI DTVM investment platform by expanding our product offering. For more information regarding this acquisition, see “—A. History and Development of the Company—Important Events—Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários Ltda.;” and
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● Follow-up – Our advisory team performs a thorough and frequent review of our clients’ profile, objectives and results alongside each client in order to maintain the client’s investment within the parameters established and the guidance provided by the model portfolio.
In order to identify possible deviations from the investment profile’s recommended positions, we also rely on automated monitoring systems. These controls alert customers of any transactions that compromise the suitability of their portfolio and are in line with our commitment to protect our customers’ interests.
Furthermore, each customer has direct access to their positions through a private access on the internet and mobile app, where they can view the evolution of their investment strategies.
Programa Avançar
We also have a non-financial solution, known as “Programa Avançar,” which is aimed at entrepreneurial customers. By means of this solution, SMEs can access content and solutions related to management and innovation, internationalization, team building, and other topics relevant to businesses via a web platform. We see this program as a key component of our offering to Brazilian entrepreneurs.
In addition, we offer a digital account solution where individual entrepreneurs can purchase banking products and services in a 100% digital experience.
Similarly, we offer “Santander Copiloto,” an enterprise resource planning tool designed for our SME customers. This tool is integrated with the Santander Digital channels, and provides solutions such as e-commerce, sales point software and tax compliance.
Service Channels
We offer our financial services and products to our customers through our multichannel distribution network composed of: (i) physical channels, such as branches, mini-branches and ATMs; (ii) call centers; and (iii) digital channels, such as Internet banking and mobile banking.
Physical Distribution Network
Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network as of the dates indicated.
As of December 31,
2021 2020 2019
Branches 1,987 2,153 2,328
Mini-branches 1,384 1,411 1,512
Own ATMs 12,561 12,949 13,296
Shared ATMs 24,255 23,798 23,780
Branch Network
Our branch network offers our entire portfolio of products and services to our customers through a personal and customized approach. The table below shows the geographic distribution of our branch network as of the dates indicated.
As of December 31,
2021 2020 2019
Northeast 9.74 % 9 % 9 %
North and Midwest 8.42 % 7 % 7 %
Southeast 67.31 % 70 % 70 %
South 14.53 % 14 % 14 %
PABs (Mini-branches)
We offer daily banking services to our SMEs, as well as corporate customers and their employees through our PABs (“Postos de Atendimento Bancário”), which are exclusive sales points located at our customers’ buildings, as well as in hospitals and universities. The presence of PABs in our customers’ offices strengthens our relationship and builds loyalty with those customers, who benefit from the convenience of conducting their banking transactions at their workplace.
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ATMs
We operate an extensive network of 12,561 ATMs, including those located in our branches and mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates 24,255 ATM units. Through this network, our customers can access their accounts and conduct banking transactions, as well as purchase most of the products and services available in our portfolio.
Remote Channel
Our remote channel consists of call centers, online messaging services and contact emails available to all our customers. These allow customers to solve issues, engage new products and services and generally interact with us to fulfil their banking requirements. We received over 25 million contacts per month through our remote channel in the year ended December 31, 2021.
In, we began a process to reshape the way in which we interact with customers through our remote channel. In 2021, this transformation allowed us to achieve more than 740,000 sales in December 31, 2021.
Digital Channels
Our digital channels include Internet banking, mobile banking and other digital solutions aimed at facilitating our customers’ access to the products and services that we offer.
The last few years have been marked by a significant digital transformation for us. We believe that in 2021 we have strengthened our focus on customers with a digital mindset while also leveraging digital tools to enhance our efficiency and scalability. In this context, we highlight the following:
● We have created an online store to receive and serve our customers on an ongoing basis. In the year ended December 31, 2021 we recorded an average of approximately 442 million total visits per month and we increased the number of digital buyers in comparison with the year ended December 31, 2020.
● We added 557,000 new accounts in December 2021, an increase of 190% when compared to December 2020. We believe this growth is due to our streamlined account opening process, which improved our customers’ experience, and to an increase in our approval rates as a result of improvements in our fraud detection and offline processes.
● We have performed an average of approximately 3.2 million sales per month in the year ended December 31, 2021, an increase of 45% when compared to the year ended December 31, 2020. This increase has been primarily driven by an increase in credit cards sales, representing an average of 297,000 sales per month in the year ended December 31, 2021, an increase of 99% when compared to the year ended December 31, 2020. We have consolidated our position as a leading credit and digital recovery platform in Brazil, with more than 2.4 million contracts per quarter in the year ended December 31, 2021 (considering only individuals) an increase of 69% when compared to the year ended December 31, 2020, and with a share of sales amounting to 64% in loans in the year ended December 31, 2021.
● We have also taken steps to improve our digital customer service, in the form of Gent&, our virtual assistant. Gent& is an artificial intelligence launched in 2020. This solution offers a more personalized digital service that provides greater autonomy for our customers.
The following table provides certain key operating information with regards to our digital channels as of the dates indicated.
For the Year Ended December 31,
2021 2020 2019
(in millions)
Number of digital customers (1) 18.8 15.6 13.4
Number of digital channel transactions (2) 7,482 5,262 4,311
(1) We define digital customers as those who used at least one of Santander Brasil’s digital channels (e.g., mobile banking and internet banking) in the 30 days preceding the end of the applicable year.
(2) Refers to transactions carried out through internet banking, mobile banking and other digital platforms. The data refers to the year ended December 31.
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The following table provides an overview of the weight of each key distribution channel in our overall distribution system.

For the Year Ended
December 31,
2021 2020 2019
(%)
Internet banking 27.7 37.8 39.7
ATMs 3.6 5.9 8.9
Mobile (1) 62.3 46.9 39.0
Branch 1.1 2.2 4.1
IVR (2) 4.6 6.4 7.4
Call Center 0.7 0.9 0.9
(1) Refers to total transactions (account holder and unique product-holder).
(2) Interactive voice response is an automated telephone system in which a computer interacts with callers (who can use their voice or the telephone keypad to communicate with the computer), gathers information and transfers caller to the appropriate representative.
Technology and Infrastructure
In 2021, we have performed significant investments in our technology systems. We put customers at the center of our strategy. We are continuously seeking improvements in customer experience and satisfaction by launching new services, as well as combining self-service features with human and personalized services and channels.
Therefore, we have strengthened our technological culture and our business systems capacity, which supports an intense flow of more than 53 million customers as of December 31, 2021 and an average of 442 million total visits per month to our digital channels in the year ended December 31, 2021, along with an efficient and secure processing of an average of more than 367 million transactions per day in the year ended December 31, 2021. We believe that this continuous improvement of our customer services, combined with the offer of new solutions and the expansion of the range of our channels contributed to the growth of our customer base by 11% in the year ended December 31, 2021 compared to the year ended December 31, 2020.
We have increased our operational efficiency and scalability, expanding the use of computing to over 75% of operations, and improving the time-to-market of products and services, by using Agile and DevOps methodologies in the execution of 85% of our projects. Furthermore, we have reduced the number of relevant incidents (which we define as high priority incidents, i.e., those that could result in the unavailability of a wide range of critical services) in the last three years by more than 90% on average, ensuring greater availability of our products and services to our customers. We have listed below other initiatives carried on throughout 2021:
● Investments: We have launched the Algo+ service (stands for “algorithm”), which simplifies the investment process to our customers, allowing them to invest in stocks from the bank’s recommended portfolios without having to sign-in to the home broker. This initiative ensures diversification and time saving in investments, also protecting investors from cognitive biases and human failures.
● Open Banking: We have started to provide the “Open Finance” service to our customers, which allows them to authorize the sharing of their financial data to other financial institutions. This enables us to understand customers’ profiles better, so we can offer personalized products, services, and other benefits, such as increases in credit card limits and competitive banking fees. Customers can also concentrate the management of their finances in a single place, and they will soon be able to manage all their accounts from other banking institutions (e.g., balance and statement checking, making payments and investments) by means of our digital channels. We have also implemented resources and mechanisms to ensure data privacy and security to conform to government regulations.
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● Security: Aiming to provide our customers with a streamlined digital experience, we have offered authentication via facial recognition, eliminating the need to authorize mobile devices at an ATM in order to use all the features of our digital channels. The new security system recognizes the customer with the use of artificial intelligence, including legitimacy checks through advanced Machine and Deep Learning models developed internally, ensuring proof of life and facial verification. Customers only need to register face biometrics when opening an account and afterwards in their mobile application, which grants our customers with a more digital and secure experience.
● Individual Bank Account (Mobile): We have added new resources and features in order to provide a better experience for our customers. Regarding customer service, we provide the DialMyApp service. When the customers access our call center, they are guided to online services (App, Website and Virtual Assistant) through a graphic menu displayed on his cell phone concurrently with the phone call they have placed, which improves engagement and reduces customer service costs. With respect to foreign exchange, we have included a new feature for uploading documents through the OnePay service, optimizing the time of carrying out exchange transactions, in addition to improvements in exchange rates checking for the main currencies. With respect to investments, we have offered our customers a new feature to monitor and analyze the evolution of their investment portfolio for a given period of time by means of the Investment Profitability Chart (GRENT).
● Corporate Bank Account (Mobile): In order to ensure greater support to our corporate customers, we offer new assistance service channels, such as our AI virtual assistant, as well as direct contact with one of our managers in our corporate mobile App. This service also includes a feature that enables our customers to contract our business management system (Santander CoPilot), by means of which they can control their business sales and inventory. Moreover, the Open Banking feature gives customers an opportunity to share their company data, which ensures a better understanding of their business profiles.
● Credit Cards: In the context of the COVID-19 pandemic, we have expanded the digitalization of our card transactional services, enabling customers to self-serve through digital channels for acquisition and post-sales purposes, such as invoice checking via WhatsApp. Another disruptive initiative is the generation of the online card before the physical card, allowing customers to make their purchases in e-commerce and also by cell phone approximation before they receive their physical card by mail.
● Customer Service: Combining entrepreneurship, technology and focus on customer experience, we developed a Voice Analytics solution to scale our capabilities of listening to our customers by means of the use of machine learning, Graphics Processing Units (GPU) and cloud computing, which accelerates our deliveries and adds value to our shareholders. Currently, we have already studied and addressed the needs of our customers going through credit recovery processes and with reduced investments.
● Software Development Agility: We have transformed our software deployment process through the adoption of a new solution focused on the integration of software development lifecycle tools, providing greater autonomy to the development teams, in addition to ensuring production environment stability through automatic deploy and rollback processes without manual interventions (Zero Touch). As a result, our development teams are able to better meet customer needs, delivering new features with more assertiveness, speed and quality. In just nine months after the process was implemented, twice as many software deploys were made compared to the entire year of 2020.
● Cloud: In order to improve the availability and resilience of our main applications, we expanded the use of our computing capacity with two public cloud services providers, extended our on-premises datacenter network using these cloud providers, and created a full mesh connectivity model. Using this model, we have updated software applications to use cloud capabilities adopting an abstraction strategy for the providers’ Cloud products (for example: accessing products through open and common protocols), ensuring code standardization and reduction of lock-in (dependency on a single cloud provider technology implementation), in addition to the implementation of normal/peak/special day auto-scaling strategies and the creation of automated capacity to balance applications in multi-cloud service.
Communications and Marketing
We use and monitor several tools in order to communicate effectively with our customers. These include not only traditional media, such as television and printed media, but also the internet, mobile advertising and social networks.
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We regularly provided information through all available media, seeking to make a real and positive difference in the lives of our clients. Such information includes guidance on what open finance is, i.e., an ecosystem that allows financial institution customers to share their information to other banks which enables banks to develop more tailored products. We publicized updated solutions, like Gent& and Algo+, an algorithm that helps investors to follow our monthly portfolio recommendations. Internally, we released more than 200 videos aimed at instructing our teams on how to best-serve our customers, and guidelines to prevent COVID-19 in the workplace. Externally, we ran 297 video advertisements on TV and social networks. Our communications campaign generated significant feedback, with 100,000 articles published in newspapers and magazines, and 120 stories featured in Brazilian national media outlets as well. On social media, we averaged 10 posts per day, with 2.6 million impressions. We have also joined new media formats on networks such as Telegram, WhatsApp and games. Additionally, we conducted more than 120 live broadcasts and events where our senior management, as well as experts and government officials were invited to address several topics, including the current economic scenario, social investment, sustainability, diversity, women’s leadership, entrepreneurship, and culture and entertainment, The Fourth Edition of Global Citizen, organized in collaboration with newspaper Valor Econômico and featuring Al Gore, the 2007 Nobel Peace Prize winner, received more than 935,338 views. Also, the 22^nd Annual Santander Conference showed discussions on politics, sustainable businesses, health and technology, with the participation of major chief executive officers, public authorities and our leadership. The conference was broadcasted on YouTube, garnering a total of 7.1 million views.
Sustainability
In Brazil, sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through the Board of Directors, the Executive Committee and the Sustainability Executive Superintendents. The Sustainability Committee is responsible for providing clarification and recommendations to the Board of Directors regarding the development of sustainability-related guidelines.
Our sustainability strategy is based on three pillars: (i) strategic and efficient use of environmental resources, (ii) developing potential and (iii) resilient and inclusive economy. Our vision, based on these three pillars, is to contribute to a better society, while maintaining management excellence and responsibility, in accordance with our ethical values and using our technology to serve people and businesses.
Resilient and Inclusive Economy
Our broad commercial activity allows us to advise and support of our customers and projects. We believe we can play a role as facilitator and contribute to the generation of jobs and income, and the improvement of logistics and infrastructure for Brazil’s development.
Through this pillar, for example, we offer access to banking services, products and non-financial initiatives. We have specific products to support microentrepreneurs and SMEs, such as the “Prospera Santander Microfinanças,” “Programa Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include the topic of financial management in the client's relationship with the Bank, using tools such as Santander On.
In 2021, we helped 341,000 people through financial inclusion products and financial education guidance.
Development of Potentials
Our commitment to the development of potential begins with our employees. We have ranked as one of the best companies to work for in the GPTW survey since 2016, ranking top ten in 2021. Guided by our corporate culture and internal policies, we offer opportunities that promote development and professional growth, in order to build a culture of delivering results, respect, innovation, inclusion and diversity.
We work to create a culture of respect, inclusion and equity, where everyone can develop their talents with their unique attributes. Diversity is one of the five principles of our Code of Ethical Conduct. Our priorities are gender and racial equity, inclusion of LGBTI+ and people with disabilities, as well as diversity of experience and generational diversity. Since 2018, we have set inclusion targets for black employees in the bank and female employees in leadership, which in 2021, were 27.3% and 31.4%, respectively. Additionally, in 2021, we received two diversity awards from GPTW: one for our ethnic-racial practices and another, for the fourth time, as one of the best companies for women to work.
Through the Santander Universities Program, we offer initiatives focused on granting national and international scholarships, programs for entrepreneurial development, as well as internship and employment programs.
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As of December 31, 2021, about 33,000 scholarships and entrepreneurships were granted with a total investment of approximately R$33 million.
We maintained our actions to support society and continued with our private social investment strategy with our programs to support children, teenagers, the elderly and entrepreneurs.
● In the 19th edition of the Amigo de Valor Program, we raised R$19.8 million to support 100 initiatives throughout Brazil, benefiting over 12,400 people.
● Campanha Brasil sem Fome: we are responsible for the donation of 200,351 baskets of staple food.
Our initiatives, including Amigo de Valor, Parceiro do Idoso, Blood Donation Campaign and Volunteer Program, had an impact on 542,545 people in 2021.
Efficient and Strategic Use of Natural Resources
We are implementing changes to our business that contribute to a responsible and more efficient use of our national environmental resources, including with respect to a reduction in carbon emissions. In this sense, in addition to the responsible environmental management of our operations, we finance and advise companies in the fields of infrastructure and renewable energy, while also providing support for sustainable agribusiness.
In the year ended December 31, 2021, we have destined R$ 51.6 billion to foster sustainable businesses, 96% more than in the year ended December 31, 2020. We believe these operations are in line with market benchmarks and include the issuance of green bonds, advisory services to sanitation businesses and financing for renewable energy (such as CDC Solar). For instance, we have transformed the Vila Olímpia station, at the city of São Paulo, into the first sustainable station in Brazil, increasing its efficiency in the use of natural resources on site. As a consequence of our investments, 70% of the energy now used by the station derives from solar panels and it has implemented a system to recycle its water usage.
One year after the launch of Plano Amazônia, a commitment signed by Santander Brasil, Bradesco and Itaú in connection with measures to enhance and scale up solutions that promote the sustainable regional development, we highlight the following initiatives from Santander Brasil:
● We made available over R$ 270 million in credit lines directed to cooperatives and agribusinesses in the Amazon region.
● We held the Bioeconomy in the Spotlight conference that has promoted a debate related to bioeconomy, preservation and sustainable development of the Amazon region, with market specialists and the CEOs of Santander, Bradesco and Itaú.
● We have been in contact with regional meatpacking companies to inform them about credit restrictions starting in 2025.
● In early 2021, we have announced our commitment to achieve zero net carbon emissions by 2050. The commitment applies to the Santander Group’s and also to Santander Brasil’s activities, as well as to all emissions from customers from any financial, advisory or investment service the bank offers.
Since 2002, we have adopted social and environmental parameters in the credit risk analysis for projects and companies. Our analyses seek to identify issues such as contaminated land, deforestation, labor practices in conditions analogous to slavery and child labor, among other matters that would prevent us from doing business with such projects and companies.
We have been carbon neutral since 2010, by completely offsetting our Scope 1 and 2 emissions. Since 2013, we follow a methodology for selecting projects from which to purchase Verified Emission Reductions, or “VERs,” in order to ensure the social and environmental benefits for the Amazon region. In recent years, we bought VERs from reforestation and renewable energy ventures.
In addition, we have made a commitment to supply 100% of our operations with renewable energy by 2025, establishing specific metrics for electricity, water, paper and internal renewable energy consumption. In the year ended December 31, 2021, 53% of our energy consumption came from renewable sources.
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In 2021, we will renew our ISO 14,001 certification in our administrative buildings, including our headquarters, Campinas radar and data center, and we will also implement the Zero Landfill Program, with the objective of giving a more sustainable destination for our waste.
Socio-Environmental Responsibility Policy
Our Socio-Environmental Responsibility Policy, or “PRSA,” meets the requirements of CMN Resolution No. 4,327/14 and SARB Regulation 14 of FEBRABAN. These regulations define guidelines and consolidate specific policies for socio-environmental practices in business and relationships with certain parties. These practices include socio-environmental opportunities and impacts, and risk management such as suitability in granting and using credits, management of suppliers and socio-environmental risk analysis. We also have a PRSA Senior Group, which consists of our vice-presidents of Risks, Legal Issues, Corporate, Human Resources, Finance and Communication, Marketing, Institutional Relationships and Sustainability, and officers of Agribusiness and Compliance. This Group is involved in decision-making related to the PRSA and operates in connection with our Executive Committee.
On September 2021, the Brazilian Central Bank published the new CMN Resolution No. 4.945, which provides for the Social, Environmental and Climate Responsibility Policy (PRSAC) and the actions aimed at its effectiveness. As of July 1, 2022, the PRSA will be revoked and the PRSAC will come into effect.
Competition and Industry Transformation
Currently, there are five commercial financial institutions at the forefront of the Brazilian financial industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal, Together, these financial institutions accounted for 71.7% of the credit and 73.9% of the deposits available in Brazil as of September 30, 2021, according to the Brazilian Central Bank and the financial statements of the aforementioned banks,
The following table shows the total loans and deposits of the five leading financial institutions in Brazil at the dates indicated:
Santander Brasil Bradesco Itaú
Unibanco Banco
do Brasil Caixa Econômica Federal Financial System
September 2021 (R$ billion)
Total loans (1) 450.3 581.3 567.4 745.3 842.0 4,442.0
Total deposits (1) 389.8 559.8 792.6 475.2 472.5 3,641.7

(1) According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 2021).
Insurance Coverage
We maintain insurance policies that are renewed annually in order to protect our assets. All of our branches, affiliates and administrative buildings are insured against losses caused by fire, lightning, explosions and other risks. Such coverage establishes reimbursement for the asset replacement value.
● In addition, we also maintain the following insurance policies:
● policies against material and/or bodily damage caused to third parties for which we are held responsible;
● policies against financial losses due to fraud or employee misconduct, among others;
● directors’ and officers’ insurance policy for our management against third-party complaints regarding management acts. There are insurance policies against crimes, employee dishonesty and damages arising out of public offerings; and
● policies against hacker attacks and cyber-crimes.
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Dependence on Patents, Licenses, Contracts and Processes
The major trademarks we use, including, among others, the “Santander” trademark, are owned by Santander Investment Bank. Santander Brasil has a license to use this trademark. All trademarks of our business are registered or applied through the Brazilian Patent and Trademark Office (Instituto Nacional de Propriedade Industrial, or “INPI”), the agency responsible for registering trademarks, patents and designs in Brazil. After registration, the owner has exclusive rights to use of the trademark in Brazil for a 10-year period that can be successively renewed for equal periods.
As of the date of this annual report, we own a total of 568 trademarks in Brazil, with Santander Brasil owning over 117 of these trademarks, while the remaining are owned by other companies of the Santander Group.
REGULATION AND SUPERVISION
The basic institutional framework of the Brazilian financial system was established by Law 4,595/64, as amended from time to time, or the “Banking Reform Law.” The Banking Reform Law created the CMN, responsible for establishing the general guidelines of monetary, foreign currency and credit policies, as well as regulating the institutions of the financial system.
Principal Regulatory Agencies
CMN
The CMN oversees the Brazilian monetary, credit, budgetary, fiscal and public debt policies. The board of the CMN is composed of the president of the Brazilian Central Bank, the Minister of Planning and the Minister of Finance, who also chairs the Board, Pursuant to the Banking Reform Law, the CMN is the highest regulatory entity within the Brazilian financial system, and is authorized to regulate the credit operations of Brazilian financial institutions, to regulate the Brazilian currency, to supervise Brazil’s gold reserves and foreign exchange, to determine Brazilian savings and investment policies and to regulate the Brazilian capital markets with the purpose of promoting the economic and social development of Brazil. In this regard, the CMN also oversees the activities of the Brazilian Central Bank and the CVM.
Brazilian Central Bank
The Brazilian Central Bank is an autonomous authority responsible for the implementation of CMN policies related to foreign currency and credit, the regulation of Brazilian financial institutions, particularly in regards to the minimum capital and compulsory deposit requirements, as well as the disclosure of the transactions carried out by financial institutions and their financial information. The Brazilian Central Bank addresses specific issues through the Monetary Policy Committee (COPOM), a committee responsible for adopting measures to meet inflation targets defined by the CMN and establishing monetary policy guidelines. In order to meet inflation targets, the COPOM must set the target for the SELIC rate (the average rate for daily financing, backed by federal instruments, as assessed under the SELIC) and publish reports on the Brazilian economic and financial environment and projections for the inflation rate.
CVM
The CVM is responsible for the implementation of CMN policies related to securities, with the purpose of regulating, developing, controlling and inspecting the securities market and its participants (companies with securities traded in the market, investment funds, investors, financial agents, such as custodians of instruments and securities, asset managers, independent auditors, consultants, as well as instruments and securities analysts).
Self-Regulating Entities
The Brazilian financial and capital markets are also subject to the regulation of self-regulating entities that are divided by field of activity. These self-regulating entities include, among others, the ANBIMA, the ABECS, the FEBRABAN, the Brazilian Association of Publicly-Held Companies – ABRASCA and the B3.
Principal Limitations and Obligations of Financial Institutions
In line with leading international standards of regulation, Brazilian financial institutions are subject to a series of limitations and obligations. In general, such limitations and obligations concern the offering of credit, the concentration of risk, investments, operating procedures, loans and other transactions in foreign currency, and the
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administration of third-party funds and microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:
● No financial institution may operate in Brazil without the prior approval of the Brazilian Central Bank, In December 2017, the CMN enacted a new rule establishing that all such requests submitted to the Brazilian Central Bank must be approved within 12 months (subject to suspension of the term in some instances);
● A Brazilian financial institution may not hold direct or indirect equity interests in any company located in Brazil or abroad registered as permanent assets without prior approval of the Brazilian Central Bank. The corporate purpose of such company shall be complementary or subsidiary to the activities carried out by the financial institution;
● Brazilian financial institutions must submit for prior approval by the Brazilian Central Bank the corporate documents that govern their organization and operation, such as capital increases, transfer of headquarters, opening, transfer or closing of branches (whether in Brazil or abroad), election of the members of the statutory bodies and any corporate restructuring or alteration in the composition of their equity control. The requests for changes in control submitted to the Brazilian Central Bank must be approved within 12 months and requests for changes to organizational documents must be approved within three months (in both cases subject to suspension of the term in some instances);
● Brazilian financial institutions must fulfill minimum capital and compulsory deposit requirements and must comply with certain operational limits;
● A Brazilian financial institution may not own real estate, except for properties it occupies and subject to certain limitations imposed by the CMN. If a financial institution receives real estate, for example, in satisfaction of a debt, such property must be sold within one year, unless otherwise authorized by the Brazilian Central Bank;
● Brazilian financial institutions must comply with the principles of selectivity, guarantee, liquidity and risk diversification;
● A Brazilian financial institution belonging to the S1 segment, as is the case of Santander Brasil, cannot lend more than 25% of its Tier 1 Regulatory Capital (patrimônio de referência) to a single person or a group and the maximum exposure to concentrated individual customers or group of connected customers of such Segment 1 financial institution is 600% of its Tier 1 Regulatory Capital (a concentrated individual client would mean, for the purpose of the proposed rule, as any one client to which exposure is equal to or higher than 10% of its Tier 1 Regulatory Capital);
● According to the Banking Reform Law, a Brazilian financial institution cannot carry out credit transactions with (i) its controlling shareholders, directors and members of other statutory bodies (fiscal, advisory and other) and their respective spouses and relatives up to second degree, (ii) the individuals or legal entities that hold a qualified interest (15% of the capital stock) in their capital, (iii) the legal entities in which they have qualified interest (direct or indirect), (iv) the legal entities in which they have effective operational control or preponderance in the deliberations, regardless of the equity interest, and (v) the legal entities with common directors or members of the board of directors. Such prohibition does not apply, subject to limits and conditions established by the CMN through the enactment of Resolution No. 4,693 in October 2018, to: (i) transactions with a counterparty that has an officer or director in common with the financial institution providing credit, provided that the officer or director is considered an independent member in both entities; (ii) transactions carried out under market-compatible conditions, without additional benefits or different benefits when compared to the operations deferred to the institution to other customers with the same profile, (iii) credit operations that have as counterparty a financial institution that is part of the institution prudential conglomerate, provided that they contain contractual clauses of subordination, except in the case of overnight and loan transactions with other financial institutions specified by the law, (iv) the interbank deposits, according to the law, (v) the obligations assumed by related parties under the compensation and settlement services authorized by the Brazilian Central Bank or by the CVM and their respective counterparties, and (vi) other cases authorized by the CMN; the management of third-party assets must be segregated from other activities and must follow the regulations issued by the CVM;
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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 which it deems useful in performing its supervisory functions, which includes supervising changes in solvency and capital adequacy of banks.
The main principle that guides the directives set forth in the Basel Committee is that a bank’s own resources must cover its principal risks, including credit risk, market risk and operational risk.
Brazilian financial institutions are subject to capital measurement and standards based on a risk weighted asset ratio. The parameters of this methodology resemble the international framework for minimum capital measurements adopted by Basel III.
Basel III
On December 16, 2010, the Basel Committee issued its Basel III framework, which was revised and republished on June 1, 2011. The Basel III framework increases minimum capital requirements, creates new conservation and countercyclical buffers, changes risk-based capital measures, and introduces a new leverage limit and new liquidity standards in comparison to the former framework. The rules were phased in gradually and were fully implemented by January 1, 2019. Regulatory Capital is composed by Core Capital and two additional tiers:
Tier I capital will have to reach a minimum ratio of 6.0% (according to the schedule established by the Brazilian Central Bank), divided into two portions: (i) Core Capital consisting mainly of corporate capital and profit reserves (shares, units of ownership, reserves and earned income) of at least 4.5%, and (ii) Additional Tier I consisting mainly of perpetual hybrid securities and capital instruments authorized by the Brazilian Central Bank (but excluding amounts relating to funding instruments issued by other local or foreign financial institutions) and any of our own shares purchased by us and the integration of which into the Additional Tier I Capital is permitted. To improve the quality of the capital of financial institutions, Basel III restricts the acceptance of financial instruments that fail to demonstrate effective capability of absorbing losses and requires the reduction of assets that in certain situations could jeopardize the financial institution’s capital value due to the instruments’ low liquidity, dependence on future profits for realization or difficulty of value measurement.
There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid subordinated debt approved by the Brazilian Central Bank as additional capital requirements, or Tier II, are expected to be maintained if they also comply with requirements introduced by Basel III, including the mandatory conversion clauses into equity or write-off upon the occurrence of triggering events provided for in the regulations.
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In accordance with the Basel III standards, the Brazilian Central Bank created the Additional Core Capital buffer (Adicional de Capital Principal), which is composed by the sum of three buffers:
● Core Capital Conservation buffer (Adicional de Capital Principal de Conservação), which was introduced to ensure that banks have an additional layer of usable capital that can be drawn down when losses are incurred. Whenever the buffer falls below 2.5%, automatic constraints on capital distribution (for example, dividends, share buybacks and discretionary bonus payments) will be imposed so that the buffer can be replenished. Countercyclical capital buffer (Adicional Contracíclico de Capital Principal), which aims to protect the banking sector from periods of excess aggregate credit growth that have often been associated with the build-up of system-wide risks. The countercyclical capital buffer is fixed by the Financial Stability Committee (Comitê de Estabilidade Financeira) based on discussions about the pace of credit expansion, and currently is set zero (Brazilian Central Bank Communication No. 36,830/21). Should the requirement increase, the new percentage takes effect twelve months after the announcement,
● Core Capital Systemic buffer (Adicional de Importância Sistêmica de Capital Principal), which is applicable to the S1 bank segment (banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity).
On March 16, 2020, due to the challenging macroeconomic environment resulting from the COVID-19 pandemic, the Brazilian Central Bank issued Resolution No. 4,783 which establishes the percentage to be applied to the risk-weighted assets value for the purpose of calculating the capital conservation buffer. This percentage increases gradually until April 2022, when it reaches 2.5%.
This level will phase-in towards the 2019 level by 2022, as shown in the image below. This buffer change decreased the minimum Core Capital requirements, reaching 6.75% to 10.5%, as of December 31, 2021.
The Basel III rules also provide for the implementation of a leverage ratio calculated by dividing the Tier I capital by the bank’s total exposure. In early 2015, the Brazilian Central Bank issued a new regulation governing the calculation and reporting of the leverage ratio of Brazilian financial institutions in line with the Basel III rules, which became effective in October 2015. Financial institutions classified as segment 1 (S1), as is the case for Santander Brasil, or segment 2 (S2), for purposes of the application of prudential rules, are required to maintain a minimum RA of 3% as from January 1, 2018.
Additionally, in order to enable the implementation of the Basel III framework in Brazil, certain legislative changes were made. Among others, Law No. 12,838, enacted on July 9, 2013, granted powers to the Brazilian Central Bank to limit the payment of dividends by financial institutions in case of non-compliance with the prudential capital requirements defined by the CMN.
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In 2015, the CMN and the Brazilian Central Bank also issued a set of rules for the implementation of the liquidity coverage ratio or “LCR,” a short-term liquidity index. The purpose of the LCR is to demonstrate that financial institutions have sufficient liquid assets to make it through a stress scenario lasting one month. According to these rules, the largest Brazilian banks were required to maintain an LCR of at least 60% since October 2015. This ratio increased 10% annually until it reached 100% in 2019. The Brazilian Central Bank also released, in 2015, the local methodology for calculating the LCR so as to align the existing rules with the guidelines of the document “Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools” issued by the Bank for International Settlements in January 2013. In January 2017, the Brazilian Central Bank enacted a new rule amending the calculation method and procedures for disclosure of LCR information. The new regulation establishes a new possible stress scenario and, for purposes of LCR retail, includes spot and forward deposits.
As mentioned above, the LCR is a short-term liquidity ratio for a 30-day stress scenario. It represents the ratio of high-quality liquidity assets to net outflows. High Quality Liquidity Assets are composed mainly of Brazilian federal government bonds and reserve requirement returns. Net Outflows are mainly composed of losses on deposits, offset in part by Inflows, which are mainly credits.
In November 2017, the CMN established a minimum limit for the Net Stable Funding Ratio (Índice de Liquidez de Longo Prazo, or “NSFR”) and the Leverage Ratio (Razão de Alavancagem, or “RA”) with which Brazilian financial institutions are required to comply. The NSFR corresponds to the ratio between the Available Stable Funds (Recursos Estáveis Disponíveis, or “ASF”) and the Required Stable Funds (Recursos Estáveis Requeridos, or “RSF”) of the financial institution. The financial institutions classified as “segment 1” for purposes of the application of prudential rules, as we are, must maintain, as from October 1, 2018, a minimum NSFR of 1.00. Regarding the leverage ratio, the financial institutions classified as “segment 1,” as we are, or “segment 2” for purposes of the application of prudential rules are required to maintain a minimum RA of 3% as from January 1, 2018.
Other Applicable Laws and Regulations
Consolidated Enterprise Level (conglomerado prudencial)
Financial institutions must submit to the Brazilian Central Bank, monthly and semiannually, consolidated financial statements based on the “consolidated enterprise level” (conglomerado prudencial) of which the financial institution is a member. Such information serves as the basis for calculation of the required Regulatory Capital of the Brazilian institutions. The “consolidated enterprise level” includes data relative to the financial institutions and other institutions authorized to operate by the Brazilian Central Bank, consortium administrators, payment institutions and credit factoring companies, including real estate credit, or of credit rights, such as mercantile foment companies, securitization companies and specific purpose companies, located in Brazil or abroad, as well as other legal entities headquartered in Brazil that have equity participation in the mentioned entities as their exclusive business purpose.
On January 29, 2020, the CMN published Resolution No. 4,818, which requires financial institutions categorized as S1, S2 and S3 to publish IFRS financial statements. The requirement is already in force for publicly held financial institutions and financial institutions which are leaders of a prudential conglomerate and came into effect for all remaining financial institutions on January 1, 2022.
New accounting criteria applicable to financial instruments, hedging and leasing agreements
On November 25, 2021 and December 16, 2021, the CMN issued Resolution No. 4,966/2021 and Resolution No. 4,975/2021. These rules establish, respectively, new accounting principles and criteria applicable to financial instruments, as well as to hedging and financial leasing transactions contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank.

~~Sale~~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.
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CMN Resolution No. 4,966/2021 and Resolution No. 4,975/2021 will enter into effect on January 1, 2025, ensuring a transition period for the institutions subject to the changes.
Segmentation for the Proportional Application of Prudential Regulation
In January 2017, the CMN enacted a resolution establishing segmentation for financial institutions, financial institution groups, and other institutions authorized to operate by the Brazilian Central Bank for the purposes of proportional application of the prudential regulation. The segmentation is based on the size, international activity and risk profile of members of each segment. Pursuant to the resolution, the segments are as follows:
● Segment 1 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base equivalent or superior to 10% of Brazil’s GDP; or (b) which perform relevant international activities, irrespective of the size of the institution;
● Segment 2 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base lower than 10% of Brazil’s GDP; and (b) other institutions with an asset base equivalent to or greater than 1% of Brazil’s GDP;
● Segment 3 comprises institutions with an asset base lower than 1% and equivalent to or greater than 0.1% of Brazil’s GDP;
● Segment 4 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP; and
● Segment 5 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP, that apply a simplified optional method for verifying the regulatory capital’s minimum requirements, except for multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks.
We have been categorized by the Brazilian Central Bank in segment 1, the highest level for application of regulation for banks in Brazil.
Regulation of Risk and Capital Management Structure
The rules enacted by the CMN and the Brazilian Central Bank provide that risk management must be conducted through an integrated effort by the relevant entity (i.e., not only must risks be analyzed on an individual basis, but must also control and mitigate the adverse effects caused by the interaction between different risks). The rules set out different structures for risk and capital management, which are applicable for different risk profiles. This means that a financial institution of limited systemic importance can have a simplified structure of management, while institutions of larger complexity have to follow stricter protocols.
Compulsory Reserve Requirements
Currently, the Brazilian Central Bank imposes a series of compulsory reserves requirements. Financial institutions must deposit these reserves with the Brazilian Central Bank. The Brazilian Central Bank uses these reserve requirements as a mechanism to control the liquidity of the Brazilian financial system for both monetary policy and risk mitigation purposes. Reserves imposed on time deposits, demand deposits and saving accounts represent almost the entirety of the amount that must be deposited at the Brazilian Central Bank.
● Time Deposits (CDBs), The Brazilian Central Bank imposes a reserve requirement of 20% in relation to time deposits. Financial institutions must deposit an amount equivalent to the surplus of (i) R$3.6 billion for financial institutions with consolidated Tier 1 capital under R$3 billion; (ii) R$2.4 billion for financial institutions with consolidated Tier 1 capital between R$3 billion and R$10 billion; (iii) R$1.2 billion for financial institutions with consolidated Tier 1 capital between R$10 billion and R$15 billion; and (iv) zero for financial institutions with a Regulatory Capital greater than R$15 billion.
Additionally, as from the issuing of Brazilian Central Bank Resolution No. 145 on September 24, 2021, collateral deposit for the new funding mechanism for financial institutions (called Linhas Financeiras de Liquidez) can be used to deduct up to three percentage points of this type of reserve requirements.
● Demand Deposits. As a general rule, the Brazilian Central Bank imposes a reserve requirement of 21% in relation to demand deposits.
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● 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, ~~stake~~calculated in ~~CIBRASEC~~accordance with the criteria established by the Brazilian Central Bank.
Brazilian financial institutions, as a general rule, may not have more than 25% of their Tier 1 Regulatory Capital allocated to credit and leasing transactions and guarantees extended to the same customer or group of customers acting jointly or representing the same economic interest. In addition, Brazilian financial institutions must comply with an exposure limit of 25% of their Regulatory Capital in connection with underwriting for or investments in securities of the same entity, its affiliates, or controlled or controlling companies. Repurchase transactions executed in Brazil are subject to operational capital limits based on the financial institution’s Regulatory Capital, as adjusted in accordance with Brazilian Central Bank regulations. A financial institution may carry out repurchase transactions in an amount of up to 30 times its Regulatory Capital. Within that limit, repurchase transactions involving private securities may not exceed five times the Regulatory Capital. Limits on repurchase transactions involving securities backed by Brazilian governmental authorities vary in accordance with the type of security involved in the transaction and the perceived risk of the issuer as determined by the Brazilian Central Bank.
The regulation issued by the Brazilian Central Bank with respect to the classification and valuation of securities and derivative financial instruments - including government securities - owned by financial institutions, based on the investment strategy of the financial institution, determined that securities and derivatives are to be classified into three categories: (i) trading; (ii) available for sale; and (iii) held to maturity.
“Trading” and “available for sale” securities are to be marked-to-market with effects in income and stockholders’ equity, respectively. Securities classified as “held to maturity” are recorded at amortized cost, Derivatives are marked-to-market and recorded as assets and liabilities in the balance sheet. Changes in the market value of derivatives are generally recognized in income with certain modifications, if these are designated as hedges and qualify for hedge accounting under the regulations issued by the Brazilian Central Bank. Securities and derivatives in the “held to maturity” portfolio may be hedged for accounting purposes but their increase or decrease in value as derived from the marked-to-market accounting method should not be taken into account.
On June 31, 2018, the CMN enacted a rule providing that financial institutions categorized as “Segment 1” as per the Brazilian Central Bank’s classification system established in 2017 (which is our case) (1) may not have more than 25.0% of their Regulatory Capital allocated to a single legal or natural person, and (2) that the total exposure of such financial institutions to one individual customer may not exceed 600% of their Regulatory Capital allocated to focused exposure, that is 10% of their Regulatory Capital – ~~Companhia Brasileira~~Tier 1. The rule also subjects financial institutions categorized as segment 2, segment 3 or segment 4 to less restrictive rules.
Centralized Registration and Deposit of Financial Assets and Securities
Law No. 13,476/17 consolidates the provisions on creation of liens over financial assets and securities, CMN Resolution No. 4,593/2017, as amended, regulates the registration and deposit of financial instruments and securities by financial institutions as well as the provision of custody services by such institutions.
Resolution 4,734/19 sets out the guidelines applicable to the establishment of liens and encumbrances on credit and debit payment instruments due to credit operations with financial institutions and regulates credit operations guaranteed by receivables from payment arrangements. The amount of receivables perfected into guarantees for a certain credit transaction will be reduced, whenever applicable, so that they are limited to the outstanding balance of the transaction or to the maximum limit extended, in the case of an extension of a non-dischargeable credit facility by a financial institution on an absolute and unilateral basis.
Circular 3,952/19, deals in particular with the procedures for the registration of receivables, and requires a convention between market infrastructures to guarantee the uniqueness of the receivables as financial assets that can be registered, interoperability, exchange of information between registration systems and participants in the structure. Circular 3,952/19 came into effect on June 7, 2021.
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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 ~~Securitizaç~~Pagamentos Brasileiro or the “SPB”). The Brazilian Central Bank and CVM (in relation to transactions with securities) have the power to regulate and supervise this system, SPB is composed of systems for the clearing of checks, clearing and settlement of debit and credit electronic orders, transfer of funds and other financial assets, clearing and settlement of transactions involving securities, clearing and settlement of transactions carried out in commodities and futures, and others, collectively designated as Financial Market Infrastructures, as well as the payment arrangements and payment institutions.
Within the scope of SPB, the Brazilian Central Bank operates the Reserves Transfer System, or “STR,” and the SELIC. STR is a system of transfer of funds with real-time gross settlement, which means that transfers are made at the processing time, one by one, and are subject to the existence of outstanding balance in the account. STR is composed of financial institutions, clearing and settlement houses and the National Treasury Office. SELIC is the Brazilian Special Settlement and Custody System (Sistema Especial de Liquidação e Custodia), a system intended for custody of book-entry securities issued by the National Treasury Office and for the registration and settlement of transactions involving such securities.
Instant Payment System
The Brazilian Central Bank also implemented an instant payment ecosystem in November 2020. The settlement of the system is centralized at the Brazilian Central Bank. In addition to increasing the speed at which payments or transfers are made and received, available 24 hours a day, seven days a week in all days of the year, the ecosystem has the potential to increase market competitiveness and efficiency; lower costs; and enhance customer experience.
On June 12, 2020, the Brazilian Central Bank issued Circular 4,027/20, which established the Brazilian Instant Payment System (Sistema de Pagamentos Instantâneos, or “SPI”). Circular 4,027/20 also approved the regulation with which the direct and indirect participants in the SPI must comply, and provided that the SPI started operating on November 3, 2020 with certain features and becoming available gradually until it was fully operational on November 16, 2020. Brazilian Central Bank Normative Ruling No. 47/20 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 129/21, in turn, establishes the procedures for the adherence to the instant payment arrangement (PIX).
According to the by-laws of the SPI, the participation in the SPI is mandatory for the participants of the PIX arrangement, and optional for (i) the clearing houses and other providers of clearing services, and (ii) the National Treasury Department.
There are two types of participation in the SPI: (i) direct, in which the participant holds an instant payment account and is directly connected to the SPI; and (ii) indirect, in which the participant institution does not hold an instant payment account and its participation occurs via a direct participant to the SPI, responsible for registering the indirect participant in the SPI and to act as its clearing agent in the SPI for instant payments, Circular 4,027/20 came into effect on July 1, 2020.
On August 12, 2020, the Brazilian Central Bank issued Central Bank Resolution No. 1, or “Central Bank Resolution 1/2020,” establishing the PIX System payment arrangement and approving the regulation governing it, or (the “PIX Regulation”).
Pursuant to Central Bank Resolution 1/2020, participation in the PIX System is mandatory for financial institutions and payment institutions authorized to operate by the Brazilian Central Bank that have more than 500,000 active customer accounts, considering cash deposit accounts, savings deposit accounts and prepaid payment accounts. Participation in the PIX System is optional for financial institutions and payment institutions that do not meet this threshold, as well as for the National Treasury Secretariat.
The PIX Regulation applies to all PIX System participants. According to the PIX Regulation, there are three types of participation: (i) transactional account provider, which is a financial institution or a payment institution that offers deposit accounts or payment accounts to end users; (ii) government entity, which is the National Treasury Secretariat, with the exclusive purpose of making collections and payments related to its activities; and (iii) special clearing houses, that are the financial institutions and payment institutions that (a) within the scope of the PIX System, have the exclusive purpose of providing settlement services to other participants, (b) meet the requirements to act as settlement participant in the Brazilian Central Bank’s SPI, and (c) do not meet the criteria of mandatory participation in the PIX System.
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Brazilian Central Bank Resolution 1/2020 came into effect on September 1, 2020. PIX System transactions started operating on a restricted basis through to November 3, 2020 and was fully as of November 16, 2020.
Furthermore, on September 2, 2021, the Brazilian Central Bank issued Resolutions No. 135 and 136, which regulate the offering of the PIX Withdrawal and PIX Change services by regulated institutions that participate in the Brazilian Instant Payments System. Both rules came into effect on November 1, 2021. The new services were established by the Brazilian Central Bank on August 24, 2021, in a meeting of its Collegiate Board, which approved changes to the PIX Regulations.
PIX Withdrawal will allow all the clients of any participating institution to make a withdrawal in kind at one of the points that offer the service. Merchants, shared ATM networks and PIX participants, through their own ATMs, may offer the service. In order to withdraw funds in kind through PIX, the client simply executes a PIX transaction to the withdrawal agent, in a similar dynamic to a normal PIX transaction, by reading a QR Code or through the service provider's API.
With the PIX Change, the dynamic is almost identical. The difference is that the withdrawal of cash can be carried out during a purchase transaction with a merchant that offers PIX as a mean of payment. In this case, the PIX transaction is executed for the total amount (purchase + cash withdrawal). The customer's invoice will show the amount corresponding to the cash withdrawal and the purchase amount.
The offer of the two new products on PIX’s evolving agenda to users is optional, and the final decision to implement PIX Withdrawal and PIX Change is up to the merchants that accept PIX, the companies that own ATM networks, and the financial institutions that have their own ATMs.
Further, on September 23, 2021, the Brazilian Central Bank issued Resolution No. 142, introducing security measures to be adopted by institutions under its regulation and supervision to prevent frauds in the provision of payment services.
Resolution No. 142 establishes that financial and payment institutions must limit the provision of payment services for the period from 8 p.m. to 6 a.m. to a maximum of R$1,000 per deposit or prepaid payment account, as applicable. This limit may be increased at the client's request, which must be submitted formally through the relevant electronic service channels, but the institution must establish a minimum period of 24 hours for the change to take effect. Resolution No. 142 required payment service providers to implement the new transaction limit by October 4, 2021.
Pursuant to Resolution No. 142, financial and payment institutions must also implement, by November 16, 2021: (i) procedures aimed at evaluating the customer prior to offering the anticipation of the settlement of payment receivables on the same date of the execution of a payment transaction within the scope of payment schemes in which the institutions participate; and (ii) daily registration of the occurrence of fraud or attempted fraud in the rendering of payment services, including the corrective measures adopted by the institution. Based on these records, the institutions must prepare a monthly report consolidating the occurrences and the preventive and corrective measures adopted. This report must be forwarded to the institution audit and risk committees (if instituted), internal audit unit, Executive Board and Board of Directors (if instituted).
Furthermore, on September 28, 2021, the Brazilian Central Bank issued Resolution No. 147, which established security mechanisms specific to PIX transactions. The rule also details, within the scope of PIX, the measures established by Resolution No. 142, which applies to all electronic payment methods (including other types of electronic transfers available in Brazil, such as Transferência Eletrônica Disponível – TED or Documento de Ordem de Crédito – DOC). The security measures came into effect on November 16, 2021, with the exception of the new transaction limits, which came into effect on October 4, 2021.
Open Banking Regulation in Brazil
On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open banking. Open banking consists of the sharing of data and payment initiation services and forwarding credit transaction proposals, by financial institutions and other authorized entities (with customers permission) and the integration of information systems.
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Among other topics, the resolution sets forth the mandatory and voluntary participating institutions, the data and services covered, the requirements for sharing, the responsibilities for sharing, the implementation schedule and the form of agreement to be entered into by the participating institutions.
According to the resolution, financial institutions and prudential conglomerates belonging to the S1 and S2 segments, as is our case, are required to participate in open banking.
Open banking has a four-stage implementation plan, as follows:
● Stage 1 (completed on February 1, 2021): public access to participating institutions’ data on their access channels and product/service channels related to checking, savings, prepaid payment accounts and to lending transactions.
● Stage 2 (completed on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
● Stage 3 (completed October 29, 2021): start of PIX transactions by payment transaction initiators, as well as the gradual entry of other payment arrangements.
● Stage 4 (starting on December 15, 2021): sharing of customer transactional data related to additional products, pursuant to the following deadlines: (i) insurance, open-end private pension and capitalization products: until March 4, 2022; (ii) merchant acquiring services: until March 11, 2022; (iii) foreign exchange transactions: until March 18, 2022; and (iv) time deposit accounts and other investment products: until March 25, 2022.
On October 29, 2020, the Brazilian Central Bank issued Central Bank Resolution 32/2020, which sets forth the technical and operational requirements to be observed by institutions which participate in the Brazilian Open Banking System.
The new rule lays out, among others, rules relating to (i) the scope of the data and services to be shared by participating institutions within Open Banking, detailed in a specific manual; (ii) the standards for the development of application programming interfaces (APIs) by participating institutions, detailed in a specific manual, which deals with their design, data transmission protocols, data exchange formats, control accesses, version control systems and specification parameters; among other things; (iii) criteria for registration and cancellation of registration in Open Banking; (iv) services to be rendered by the Open Banking Governance Structure, which also is detailed in a specific manual, including the maintenance of a repository of participating institutions and a website containing updated information about Open Banking and its implementation; and (v) minimal security standards and certifications.
Additionally, on September 9, 2021, the Brazilian Central Bank published Resolution No. 138, which disclosed the minimum scope of data to be available for sharing on Stage 4 of Open Banking, to be further detailed by the Open Banking Governance Body. The fourth stage of the ecosystem, which covers data on foreign exchange, investment, insurance, and open-end private pension transactions, as well as merchant acquiring services, began on December 15, 2021, when the participating institutions must make the information about the mentioned products and services available to other financial institutions.
Regarding investment transactions, the main financial and capital market products offered in Brazil were included in the scope of Stage 4, such as: (i) Banking Time Deposit Certificates (Certificados de Depósito Bancário or CDBs); (ii) Banking Time Deposit Receipts (Recibos de Depósito Bancário or RDBs); (iii) Real Estate Credit Bills (Letras de Crédito Imobiliário or LCIs); (iv) Agribusiness Credit Bills (Letras de Crédito do Agronegócio or LCAs); (v) investment fund quotas; (vi) direct treasury government bonds (títulos do tesouro direto); (vii) stock; (viii) quotas of exchange-traded investment funds (ETFs); (ix) debentures; (x) Certificates of Real Estate Receivables (Certificados de Recebíveis Imobiliários or CRIs); and (xi) Certificates of Agribusiness Receivables (Certificados de Recebíveis do Agronegócio or CRAs).
With regard to foreign exchange transactions, effective total value of transactions (VET) and commercial exchange rates will need to be made available. The data referring to merchant acquiring services will cover applied service fees and rates.
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Finally, the data referring to insurance products and pension plans will follow the scope defined by the CNSP and the SUSEP in CNSP Resolution No. 415/2021 and SUSEP Circular No. 635/2021, respectively, which establish a specific timeline for the implementation of Open Insurance, an exclusive governance body responsible for Open Insurance, as well as specific implementation manuals.
Stage 4 of Open Banking introduced information sharing beyond traditional banking products and services, marking the beginning of the migration from Open Banking to Open Finance in Brazil.
Regulatory Sandbox
On November 28, 2019, the Brazilian Central Bank published Public Consultation No. 72/2019, which ended on January 31, 2020, regarding the Controlled Testing Environment for Financial Innovations or “Sandbox” which is intended to enable institutions test innovative financial and payment projects for a specified period.
After receiving comments on such Public Consultation, the CMN and the Brazilian Central Bank issued, on November 26, 2020, CMN Resolution 4,865/20 and BCB Resolution 29/20, to regulate the Sandbox. These rules set forth the applicable conditions for the implementation of the Sandbox, among which are the specific rules for the first cycle of tests, such as duration and number of participants, required documentation, criteria for the classification of institutions and the schedule for registration, selection and authorization processes of such entities. In November 2021, the Brazilian Central Bank selected developers’ projects for the first cycle, which will last for one year and may be extended for another year.
Treatment of Overdue Debts
The Brazilian Central Bank requires financial institutions to classify credit transactions in accordance with their level of credit risk and to make provisions according to the level attributed to each transaction. Such credit classifications shall be determined in accordance with criteria set forth from time to time by the Brazilian Central Bank, relating to the conditions of the debtor and the guarantor and the transaction terms. Where there are several credit transactions involving the same customer, economic group or group of companies, the credit risk must be determined by analyzing the particular credit transaction of such customer or group that represents the greatest credit risk to the financial institution.
Credit transactions of up to R$50,000 may be classified either by the financial institution’s own evaluation method or according to the number of days such transaction is past due, whichever is the more stringent. Credit classifications are required to be reviewed (i) monthly, in the event of a delay in the payment of any installment of principal or interest, in accordance with the maximum risk classifications; (ii) every six months, in the case of transactions involving the same customer, economic group or group of companies, the amount of which exceeds 5% of the adjusted net worth of the financial institution in question; and (iii) once every 12 months, in all circumstances, except in the case of credit transactions with a customer whose total liability is lower than R$50,000, the classification of which may be reviewed as provided above. Such R$50,000 limit may be amended by the Brazilian Central Bank from time to time.
The provisions set forth above are not applicable to our IFRS consolidated financial statements, which are based on the criteria described under “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Impairment Losses on Financial Assets.”
Regulation of the Transfer of Customer Data by Financial Institutions to Database Managers
Brazilian law regulates the formation and consultation of databases with information regarding performance, individuals or legal entities, for the formation of credit history, Resolution No. 4,737 determines that the history of the following operations should be provided: (i) credit operations; (ii) leasing operations; (iii) self-financing operations executed upon consortium groups; and (iv) other operations with characteristics of credit granting; and defines the criteria for the registration of database managers, such as the identification of the natural and legal persons that are part of the control group of the database manager.
Collection of Bank Fees
Bank services to individuals are divided into the following four groups: (i) essential services; (ii) priority services; (iii) special services; and (iv) specific or differentiated services.
Banks are not able to collect fees in exchange for supplying essential services to individuals with regard to checking accounts, such as (i) supplying a debit card; (ii) supplying 10 checks per month to account holders who meet the requirements to use checks, as per the applicable rules; (iii) supplying a second debit card (except in cases of loss, theft, damage and other reasons not caused by the bank); (iv) up to four withdrawals per month, which can be made at a branch of the bank, using checks or in ATM terminals; (v) supplying up to two statements describing the transactions during the month, to be obtained through ATM terminals; (vi) inquiries over the internet; (vii) up to two transfers of funds between accounts held by the same bank, per month, at a branch, through ATM terminals or over the internet; (viii) clearing checks; and (ix) supplying a consolidated statement describing, on a month-by-month basis, the fees charged over the preceding year with regard to checking accounts and savings accounts.
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Certain services rendered to individuals with regard to savings accounts also fall under the category of essential services and therefore are exempt from the payment of fees. CMN prohibits banks from charging fees for supplying essential services in connection with deposit and savings accounts where customers agree to access and use their accounts by electronic means only (being authorized to charge fees for supplying essential services only when the customer voluntarily elects to obtain personal service at the banks’ branches or customer service locations),
Priority services are those rendered to individuals with regard to checking accounts, transfers of funds, credit transactions, leasing, standard credit cards, over-the-counter exchange transactions for the purchase or sale of foreign currency in respect of international travel, and records, and are subject to the collection of fees by the financial institutions only if the service and its nomenclature are listed in its regulations. Commercial banks must also offer to their individual customers a “standardized package” of priority services, whose content is defined, as well as the customers’ option to acquire individual services instead of adhering to the package.
The collection of fees in exchange for the supply of special services (including, among others, services relating to rural credit, currency exchange market and on lending of funds from the real estate financial system) is governed by the specific provisions found in the laws and regulations relating to such services. The regulation authorizes financial institutions to charge fees for the performance of specific services, provided either that the account holder or user is informed of the conditions for use and payment or that the fee and charging method are defined in the contract.
It is worth pointing out: (i) the prohibition against charging fees in cases of adhesion contract amendments, except in the cases of asset replacement in leasing transactions, early liquidation or amortization, cancellation or termination; (ii) the prohibition against including services related to credit cards and other services not subject to fees in service packages that include priority, special and/or differentiated services; (iii) the requirement that subscription to service packages must be through a separate contract; (iv) the requirement that information given to the customer with respect to a service package must include the value of each service included in the package, the number of times that each service may be utilized per month, and the total price of the package; (v) the requirement that a customer’s annual banking statement must separately identify default interest, penalties and other costs charged on loans and leasing transactions; (vi) the requirement that registration fees cannot be cumulatively charged; and (vii) the requirement that overdraft fees can be charged, at most, once over the course of 30 days.
In addition, CMN regulations establish that all debits related to the collection of fees must be charged to a bank account only if there are sufficient funds to cover such debits in such account and thus forbid overdrafts caused by the collection of banking fees. Furthermore, a minimum of 30 days’ notice must precede any increase or creation of fees (except if related to credit card services, when a minimum of 45 days’ notice is required), while fees related to priority services and the “standardized package” can be increased only after 180 days from the date of the last increase (except if related to credit card services, when a minimum of 365 days’ notice is required) whereas reductions can take place at any time.
Late Payment Fees
The default payment fees charged by financial institutions, consumer credit companies (financeiras), and leasing companies are expressly limited to compensatory interest per day on the amount that is overdue, interest on arrears and fines on arrears.
Credit Cards
The banking regulations also have specific rules relative to the charging of credit card fees, the publication of information in the card invoices and the obligation to provide a package of basic services upon offering credit cards to customers.
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Revolving credit for financings of credit card bills may only be extended to customers until the due date of the following credit card bill. After this term, financial institutions offer customers another product with conditions more favorable than the ones typically found in the credit card market. Banks are prohibited from offering this type of credit to customers who have already contracted one revolving credit for financing of credit card bills which were not repaid in a timely manner.
Payment Agents and Payment Arrangements
The regulation issued by the Brazilian Central Bank, determines, among other aspects: (i) consumer protection, anti-money laundering compliance and risk prevention systems that should be observed by payment agents and payment arrangers; (ii) the procedures for incorporation, organization, authorization and operation of payment agents, as well as transfer of shareholding control, subject to the Brazilian Central Bank’s prior approval; (iii) capital requirements; (iv) definition of arrangements excluded from the SPB; and (v) rules related to payment accounts, which are divided into prepaid and postpaid accounts and require the allocation of the totality of their balance to a special account at the Brazilian Central Bank or investment in government bonds.
Portability of Credit Transactions
Financial institutions’ customers can transfer their credit transactions from one institution to another. Such transfers must comply with the specific rules established by the Brazilian Central Bank, including, among others, the requirement that the amount and term of the transaction in the receiving financial institution must not be higher than the amount due and term of the original transaction.
Digitalization of Documents and Record Keeping
Financial institutions and other institutions authorized to operate by the Brazilian Central Bank may keep in their records digital documents instead of physical documents, provided that certain requirements to ensure the documents’ authenticity and validity are met.
Anti-Money Laundering Regulations
Under the Brazilian Anti-Money Laundering Law, it is a crime to conceal or dissimulate the nature, origin, location, availability, transaction or ownership of assets, rights or amounts resulting, directly or indirectly, from any criminal offense, as well as their use in economic or financial activity and to participate in a group, association or office while being aware that its principal or secondary activities are directed toward the practice of such acts.
The Brazilian Anti-Money Laundering Law also created the Financial Activities Control Council (Conselho de Controle de Atividades Financeiras or “COAF”), which operates under the jurisdiction of the Ministry of Finance. The purpose of the COAF is to investigate, examine, identify and impose administrative sanctions in respect of any suspicious occurrences of illicit activities related to money laundering in Brazil.
The COAF is composed of individuals with recognized competence in this area, appointed by the Minister of Finance, all of whom are nominated by each of the following entities: (i) the Brazilian Central Bank; (ii) the CVM; (iii) the SUSEP; (iv) the Brazilian Treasury Attorney-General’s Office; (v) the Brazilian Federal Revenue; (vi) the Federal Intelligence Agency; (vii) the Ministry of Foreign Affairs; (viii) the Ministry of Justice; (ix) the Federal Police Department; (x) the Ministry of Social Security; and (xi) the General Comptroller’s Office, one of whom will be the president, which shall be appointed by the President of Brazil on the basis of recommendations by the Minister of Finance.
Financial institutions must maintain specific records of (i) the transactions in cash (deposit, withdrawal, withdrawal by means of a prepaid card or request of provision for withdrawal) so as to enable the identification of a deposit in cash, withdrawal in cash, withdrawal in cash by means of a prepaid card, or request of provision for withdrawal, of (a) an amount equal to or greater than R$100,000.00 or (b) that presents evidence of concealment or dissimulation of the nature, of the origin, of the location, of the disposal, of the movement or of the ownership of assets, rights and valuables; and (ii) the issuances of cashier’s checks, funds electronic transfers (TED) or of any other instrument of transfer of funds upon payment in cash, for an amount equal to or greater than R$100,000.00.
Financial institutions must maintain records of all operations, products and services contracted, including withdrawals, deposits, contributions, payments, receipts and transfers of funds. Additionally, the institutions must also keep specific records of (i) transactions in cash with an individual value greater than R$2,000.00; (ii) deposit or cash transactions of an individual value equal to or greater than R$50,000.00; and (iii) withdrawal transactions, including those carried out by check or money order, with an individual value equal to or greater than R$50,000.00.
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The regulations also impose an obligation on financial institutions to request that both customers and non-customers are providing a withdrawal request at least three working days in advance for withdrawals (including those carried out by check or money order) in an amount equal to or greater than R$50,000.00.
On January 23, 2020, the Brazilian Central Bank published Circular No. 3,978, which improves the regulation applicable to financial institutions, by expanding the adoption of a risk-based approach and came into effect on July 1, 2020. Regulated institutions must carry out specific internal risk assessments in order to identify and measure the risk of using their products and services in the practice of money laundering and terrorist funding.
In connection with the aforementioned change, the Know-Your-Client procedures were also improved and include the identification, qualification and classification of the customer, compatible with the risk profile, the nature of the relationship with the AML policy and the institution’s internal risk assessment, which must be permanently reassessed, according to the evolution of the business relationship and the risk profile of the client. The procedures must also include the verification of the client’s (including their representatives’, family members’ or close collaborators) condition as a Politically Exposed Individual, as well as consider them in the monitoring, selection and analysis of operations and situations with indications of suspected money laundering or terrorist funding.
On July 27, 2021, the Brazilian Central Bank published Resolution No. 119, which came into effect on September 1, 2021 and introduced certain changes to Circular No. 3,978/2020, which establishes the regulations and procedures related to anti-money laundering and combating the financing of terrorism applicable to entities subject to the Brazilian Central Bank´s regulation and supervision.
Among other changes brought by the new rule, financial institutions (and other entities regulated by the Brazilian Central Bank) are now required to obtain information about their customers’ place of residence, in the case of a natural person, or the location of the head office or branch, in the case of a legal entity, as part of their mandatory Know-Your-Client (KYC) procedure. The CVM also issued CVM Resolution No. 50 in August 31, 2021, which establishes the framework for the prevention of money laundering and the financing of terrorism in the Brazilian securities market. CVM Resolution No. 50 is in line with the practices currently implemented in the principal global securities markets, including with regard to the recommendations of the Financial Action Group against Money Laundering and the Financing of Terrorism (GAFI/FATF), as well as with the duties arising from Brazilian anti-money laundering laws.
Brazilian Anti-Corruption Law
Law No. 12,846/13 of August 1, 2013, or the “Brazilian Anti-Corruption Law” establishes that legal entities will have strict liability regardless of fault or willful misconduct for acts against the public administration carried out in their interest or for their benefit. The Law encompasses not only performance of acts of corruption but also performance of other injurious acts contrary to the Brazilian or foreign public administration.
Corporations that violate the Brazilian Anti-Corruption Law’s provisions will be subject to heavy penalties, some of which may be imposed through administrative proceedings and others solely through judicial channels. The Brazilian Anti-Corruption Law also creates a leniency program under which self-disclosure of violations and cooperation by corporations might result in the reduction of fines and other sanctions.
Politically Exposed Individuals
Financial institutions and other institutions authorized by the Brazilian Central Bank to operate must take certain actions and have certain controls in order to establish business relationships with and to follow up on the financial transactions of customers who are deemed to be politically exposed individuals (public agents and their immediate family members, spouses, life partners and stepchildren who occupy or have occupied a relevant public office or position over the past five years in Brazil or other countries, territories and foreign jurisdictions). The internal procedures developed and implemented for this purpose by financial institutions must be structured in such a way as to enable the identification of politically exposed individuals, as well as the origin of the funds involved in the transactions of such customers. One option is to verify the compatibility between the customer’s transactions and the net worth stated in such customer’s file.
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Bank Secrecy
Brazilian financial and payment institutions shall also maintain the secrecy of their banking operations and services provided to their customers. The only circumstances in which information about customers, services or transactions of Brazilian financial and payment institutions may be disclosed to third parties are the following:
● the disclosure of information with the express consent of the interested parties;
● the exchange of information between financial institutions for record purposes;
● the supplying to credit reference agencies of information based on data from the records of issuers of bank checks drawn on accounts without sufficient funds and defaulting debtors; and
● the occurrence or suspicion that criminal or administrative illegal acts have been performed, in which case the financial institutions and the credit card companies may provide the pertinent authorities with information relating to such criminal acts when necessary for the investigation of such acts.
Complementary Law 105/01 also allows the Brazilian Central Bank or the CVM to exchange information with foreign governmental authorities, provided that a specific treaty has previously been executed.
The governments of Brazil and the United States executed an agreement on March 20, 2007, by means of which these governments established rules for the exchange of information relating to tax, or the “2007 Agreement.” Under the 2007 Agreement, the Brazilian tax authority would be able to send information it receives by virtue of Section 5 of the Bank Secrecy Law to the U.S. tax authority.
Data Protection Requirements
The LGPD (Lei Geral de Proteção de Dados) was published in the Federal Official Gazette on August 15, 2018 and was amended by Law 13,853/19. The LGPD came into effect in September 2020, except for administrative sanctions, which came into effect on August 1, 2021, pursuant to Law No. 14,010/20, which delayed the applicability of certain provisions of the LGPD.
Before the LGPD, Brazil lacked regulations specific to data privacy and a data protection authority. Despite this, privacy has been generally protected through the Brazilian Federal Constitution, the Civil Code (Law No. 10,406/2002), the Consumer Protection Code (Law No. 8,078/1990) and the Civil Rights Framework for the Internet (Law No. 12,965/2014 and the Decree 8,771/2016).
The LGPD brings about profound changes in the rules and regulations applicable to the processing of personal data, with a set of rules to be complied with in activities such as the collection, processing, storage, use, transfer, sharing and erasure of information concerning identified or identifiable natural persons.
The LGPD has a wide range of applications and extends to individuals as well as private and public entities, regardless of the country where they are headquartered or where data are hosted, as long as (i) the data processing takes place in Brazil; (ii) the data processing activity is intended to offer or supply goods or services to, or to process data of individuals located in Brazil; or (iii) the subjects of the data are located in Brazil at the time their personal data are collected. The LGPD will apply irrespective of the industry or business when dealing with personal data and is not restricted to data processing activities performed through digital media and/or on the internet.
The LGPD sets out several rules related to data processing such as principles, requirements and duties imposed to data controllers and data processors; rights of data subjects; requirements in connection with cross-border transfers of data; the obligation to appoint a data protection officer; data security and data breach notification; corporate governance practices; and the regime for civil liabilities and penalties in case of a breach of the provisions of the LGPD. Penalties include warnings, blocking and erasure of data, public disclosure of the offense and fines of up to 2% of the economic group’s turnover in Brazil in the preceding year, capped at R$50 million per offense.
Moreover, Law 13,853/2019 created the Brazilian National Data Protection Authority, or “ANPD,” which will have powers and responsibilities analogous to the European data protection authorities, exercising a triple role of (i) investigation, comprising the power to issue norms and procedures, deliberate on the interpretation of the LGPD and request information of controllers and processors; (ii) enforcement, in cases of noncompliance with the law, through an administrative process; and (iii) education, with the responsibility to disseminate information about and foster knowledge of the LGPD and security measures, fostering standards for services and products that facilitate control of data, and elaborating studies on national and international practices for the protection of personal data and privacy, among others.
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The ANPD has been assured technical independence, although it is subordinated to the Presidency of the Republic. It will be composed of five commissioners, to be appointed by the President of Brazil, and advised by a National Council for the Protection of Personal Data and Privacy, composed of 23 unpaid members.
Regulations on Cybersecurity
Financial institutions must follow certain cyber risk management and cloud outsourcing requirements which apply to the design and adaptation of internal controls, namely CMN Resolution No. 4,893/2021, which requires financial institutions to institute a Cybersecurity Policy, as well as regulates the outsourcing of relevant data processing and storage and cloud computing services and CVM Ruling No. 35/2021, which sets forth the standards and procedures to be observed in security transactions carried out in regulated securities markets requiring the implementation of cybersecurity controls and data protection. Policies and action plans to prevent and respond to cybersecurity incidents were fully compliant and in place by December 2021. Data location and processing may occur inside or outside Brazil, but access to data stored abroad must be granted at all times to the Brazilian Central Bank for inspection purposes. The contracting of relevant processing services must be communicated to the Brazilian Central Bank within 10 days from the execution of the agreement. See “Item 3. Key Information—D. Risk Factors— Risks Relating to the Brazilian Financial Services Industry and Our Business—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”
Auditing Requirements
The legislation and regulations issued by the CMN, CVM and B3 determine that the periodic financial statements of financial institutions must be audited by independent auditors (individuals or legal entities) that are registered with the CVM and who meet the minimum requirements set forth by the Brazilian Central Bank, and that the financial statements must be presented together with an independent auditor’s report. Our financial statements are audited in accordance with International Standards on Auditing with regard to Brazilian GAAP and also with the standards of the Public Company Accounting Oversight Board with regard to IFRS as issued by the IASB, as required by the SEC. For purposes of the financial statements prepared according to Brazilian GAAP, as from January 2017 all financial institutions and other institutions authorized to operate by the Brazilian Central Bank are required to create provisions for all losses related to financial guarantees issued by them. As a result of the auditing work, the independent auditor must prepare the following reports: (i) an audit report, issuing an opinion regarding the accounting statements and the respective explanatory notes, including regarding the compliance with financial regulations issued by the CMN and the Brazilian Central Bank; (ii) an internal control system quality and adequacy evaluation report, including regarding electronic data processing and risk management systems, evidencing any identified deficiencies; (iii) a legal and regulatory provisions noncompliance report, regarding those which have, or may have, material impacts on the financial statements or on the audited financial institution’s operations; (iv) a limited assurance report, analyzing our Annual and Sustainability Report pursuant to the guidelines and requirements of the Global Reporting Initiative, or “GRI”; and (v) any other reports required by the Brazilian Central Bank, CVM and B3. The reports issued by independent auditors must be available for consultation upon request by the overseeing authorities.
Independent auditors and the audit committee, individually or jointly, must formally notify the Brazilian Central Bank of the existence or evidence of error or fraud, within three business days of the identification of the respective occurrence, including:
● noncompliance with legal rules and regulations that place the continuity of the audited entity at risk;
● frauds of any amount perpetrated by the management of the institution;
● material frauds perpetrated by the institution’s employees or third parties; and
● errors that result in major incorrectness in the financial statements of the audited entity.
The executive office of the financial institution must inform the independent auditor and the audit committee, if any of the above situations occur.
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CMN regulation also requires financial institutions and certain other entities holding Regulatory Capital equal to or greater than R$1 billion to create a corporate body designated as the “audit committee.” To obtain more information concerning the audit committee, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee.”
Internal Auditing of Financial Institutions
Financial institutions are required to establish and maintain internal audit activities compatible with their operational specifications, so that such internal bodies are able to perform an independent, autonomous and impartial audit of the quality and effectiveness of the institution’s internal systems. Such unit shall be directly controlled by the institution’s board of directors. Internal and external independent auditors are also liable for failures of the financial institution’s internal control mechanisms.
Environmental, Social and Governance (ESG) requirements applicable to financial institutions
Financial institutions are currently required by CMN Resolution No. 4,327/14 to have a responsibility policy, which must guide the social and environmental actions in conducting their businesses, their relationship with their customers and other users of their products and services. The responsibility policy must also guide the financial institution’s relationship with its personnel and with any others affected by the financial institution’s activities. In addition, the responsibility policy must provide for the management of social and environmental risks (which, according to the Brazilian Central Bank, represent one of the several categories of risk to which financial institutions are exposed).
Following Public Consultations Nos. 82, 85 and 86, initiated by the Brazilian Central Bank in 2021 under the “Sustainability” pillar of the “Agenda BC#” (which consists of a list of goals to improve the Brazilian National Financial System), a new set of rules was published on September 15, 2021. These new rules aim to improve the disclosure of information, management and governance of social, environmental and climate risks by financial institutions, as well as to bring changes to the rural credit regulations in effect.
Resolution No. 140 establishes new conditions for the access to rural credit considering social, environmental and climatic aspects. Among them, it stands out the credit restriction for a producer who is not registered, or whose registration is canceled, in the Rural Environmental Registry (Cadastro Ambiental Rural – CAR). The new resolution also sets forth that rural credit shall not be granted to (i) an enterprise fully or partially inserted in a conservation unit, indigenous land already approved, an area of embargo in force resulting from the economic use of illegally deforested areas in the Amazon; nor (ii) an individual or legal entity registered in the official register of employers who have kept workers in conditions analogous to slavery.
CMN issued Resolution No. 4,943, which amended CMN Resolution No. 4,557/17 with the purpose of highlighting and distinguishing social, environmental and climate risks, as necessary for the identification, measurement, evaluation, monitoring, reporting, control and mitigation in connection with the risk management structure of financial institutions. The new rule provides for specific definitions to such risks, using new and modern concepts, such as the inclusion of the two main components of climate risks – physical and of transition – already recognized by international ESG standards. The amended rule also deals with the identification and monitoring of social, environmental and climate risks incurred by financial institutions, resulting not only from their products, services and activities, but also from the activities performed by their counterparties, controlled entities, suppliers and outsourced service providers.
Similar provisions were also included in the simplified structure of continuous risk management pertaining to the Simplified Reference Capital (Patrimônio de Referência Simplificado – PRS5) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.
The CMN issued Resolution No. 4,945, replacing CMN Resolution No. 4,327 of April 25, 2014 on the Social and Environmental Responsibility Policy (Política de Responsabilidade Socioambiental or PRSA). The new rule provides for the inclusion of a climate aspect to the PRSA, which will be henceforth named Social, Environmental and Climatic Responsibility Policy (Política de Responsabilidade Social, Ambiental e Climática – PRSAC). Such new policy to be implemented by financial institutions shall take into account the impacts, strategic goals and business opportunities for the financial institutions in connection with social, environmental and climate aspects. There was also a reduction in the period for reviewing the PRSA, from five to three years.
The Brazilian Central Bank issued Resolution No. 139, regulating the preparation of a Report on Social, Environmental and Climate Risks and Opportunities (Relatório de Riscos e Oportunidades Sociais, Ambientais e
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Climáticas, or the “GRSAC Report”) by financial institutions classified in segments S1 (such as Banco Santander), S2, S3 and S4. Following the propositions of the Public Consultation, this new rule seeks to contemplate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) at the national regulatory level. The GRSAC Report must be published annually with the base date of December 31, within a maximum period of 90 days from December 31, and must be made available on the financial institutions' websites for a period of five years.
Finally, on October 6, 2021, the Brazilian Central Bank published Resolution No. 151, which regulates the remittance information regarding social, environmental, and climate risks addressed in CMN Resolution No. 4,557 and CMN Resolution No. 4,945 to the Brazilian Central Bank by authorized institutions. The rule applies to institutions classified in segments S1 (such as Santander Brasil), S2, S3, or S4; and the information that must be sent to the Brazilian Central Bank is related to the assessment of social, environmental and climate risks related to their exposures in credit and securities transactions, as well as those of the respective debtors under these transactions. The information to be remitted includes identification, economic sector, risk aggravating and mitigating factors, appraisal of social, environmental and climactic risks, among others.
In order to allow financial institutions to adapt their practices and policies to this new set of rules, CMN Resolution No. 4,943/21 and article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) will enter into effect on July 1, 2022, while CMN Resolution No. 4,944/21, the other provisions of CMN Resolution No. 4,945/21 and Central Bank Resolution No. 139/21 will enter into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 will enter into effect on July 1, 2022 and Central Bank Resolution No. 140, which specifically provides for rural credit, came into effect on October 1, 2021.
Policy for Succession of Financial Institutions Managers
Brazilian financial institutions and other institutions authorized to operate by the Brazilian Central Bank shall implement and maintain internal policies for succession of managers, applicable to higher levels of the institution’s management. The internal policy shall encompass the procedures related to recruitment, promotion, appointment and retention of managers in accordance with the institution’s rules for identification, evaluation, training and selection of the candidates to management offices.
Corporate Governance of Financial Institutions
Financial institutions must (i) remit to the Brazilian Central Bank information on the financial institution’s management, controlling group and relevant shareholders, including the obligation to communicate to the regulator any information that may affect the reputation of any such persons; (ii) make available a communication channel allowing employees, contributors, customers, users, associates, or services providers to report anonymously situations indicating illegalities of any nature related to the institution; and (iii) have an internal body responsible for receiving the information and complying with the reporting obligations.
Compliance Policy
Financial institutions must implement and maintain a compliance policy compatible with the nature, size, complexity, structure, risk profile and business model of the institution, which is intended to ensure an effective compliance risk management by the institution and may be established at the consolidated enterprise level (conglomerado prudencial). The compliance policy must establish the scope and purpose of the compliance function in the institution, set forth the organizational structure of the compliance function, specify which personnel is allocated to the compliance function, and establish a segregation of roles among personnel in order to avoid conflicts of interest.
The compliance policy must be approved by the board of directors and the regulation also assigns to the board the responsibility to ensure the following: adequate management of the compliance policy throughout the institution, its effectiveness and continued application, its communication to all employees and services providers, as well as the dissemination of the integrity and ethical standards as part of the institution’s culture. The board of directors is also responsible for ensuring the application of measures in case of noncompliance, and for providing the necessary means for the activities related to the compliance functions to be adequately conducted.
Consumer Protection
Relationships between consumers and financial institutions are governed by Law 8,078, dated September 11, 1990, or the “Brazilian Consumer Protection Code,” which grants consumers certain rights and sets forth measures to be observed by suppliers, which must be complied with by financial institutions. The Brazilian Consumer Protection Code sets forth as consumer rights, among others, the assistance/facilitation in the defense of consumers’ rights, including through reverse burden of proof in their favor, and possibility of judicial review of contractual provisions deemed abusive.
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● to timely provide the necessary information including rights, duties, responsibilities, costs or advantages, penalties and possible risks when carrying out a transaction or rendering a service to allow customers and users free choice and decision-making;
● to timely provide, to the customer or user, agreements, receipts, statements, advice and other documents related to the transactions and services, as well as the possibility of timely cancellation of the agreements;
● formalization of an adequate instrument setting forth the rights and obligations for opening, using and maintaining a postpaid payment account;
● to forward a payment instrument to the customers’ or users’ residence or to enable the respective instrument only upon express request or authorization; and
● identification of end users’ beneficiaries for payments or transfer in statements and bills of the payer, including in situations in which the payment service involves institutions participating in different payment arrangements.
Financial institutions operating exclusively via digital means are excluded from the scope of certain aspects of the regulation.
Law No. 14,181, which amends the Brazilian Consumer Protection Code and Senior Citizens' Statute (Law No. 10,741 of October 1, 2003) to improve provisions related to the offering of consumer credit and provide for the prevention and treatment of over-indebtedness, came into effect on July 2, 2021.
Regarding the prevention of over-indebtedness, such rule created a chapter in the Brazilian Consumer Protection Code dedicated to responsible credit and financial education. The amendments determine the presentation of specific information to the consumer in the granting of credit or installment sales, such as the effective monthly interest rate, late payment interest and the total charges foreseen in the event of late payment.
The new law also regulates informational conduct to be observed by the credit supplier regarding the nature and modality of the credit offered, considering the age of the consumer.
The law also included a new chapter in the Brazilian Consumer Protection Code dedicated to the conciliation between debtor and creditor with respect to over-indebtedness. According to the new law, the over-indebted consumer may request the initiation of a debt renegotiation process, with the consumer being responsible for submitting a payment plan proposal, preserving the existential minimum. The unjustified non-attendance of the creditor or his attorney at the conciliation hearing may suspend the payment of the credit, with the interruption of the late payment charges. In the case of a successful conciliation, the court decision that ratifies the agreement will describe the debt payment plan and will be enforceable. A new debt renegotiation request may only be submitted after two years, counting from the settlement of the obligations provided for in the payment plan. In the case of unsuccessful conciliation, the judge, at the consumer's request, will institute proceedings for over-indebtedness to review and integrate the contracts and renegotiate the remaining debts, through a compulsory judicial plan.
Further, on September 30, 2021, the CMN published Resolution No. 4,949. The rule provides the principles and procedures to be adopted in the relationship with clients and users of products and services of financial institutions and other institutions authorized to operate by the Brazilian Central Bank. On October 13, 2021, the Brazilian Central Bank published Resolution No. 155, which establishes almost identical principles and procedures to be adopted by payment institutions and consortium administrators, which are regulated and supervised solely by the Brazilian Central Bank.
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CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 set forth new rules mainly with the goal of ensuring fair and equitable treatment at all stages of the relationship with institutions providing financial and payments services, as well as a convergence of the interests of such institutions with those of their consumers.
Under CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021, institutions authorized to operate by the Brazilian Central Bank shall prepare and implement an institutional policy for the relation with consumers and users. Such new policy should consolidate guidelines, strategic objectives and organizational values, so that the conduct of the institution’s activities is guided by the principles of ethics, responsibility, transparency and diligence.
CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 also provide that institutions authorized to operate by the Brazilian Central Bank and must indicate to such regulatory agency the officer responsible for complying with the obligations provided under the new rules.
The rules also impose other obligations to the regulated entities within their scope, such as the compliance with transparency and suitability rules. CMN Resolution No. 4,949 will enter into effect on March 1, 2022, and Central Bank Resolution No. 155 will enter into effect on October 10, 2022.
Policy for Relationship with Customers and Users of Financial Products and Services
Financial institutions and other institutions authorized to operate by the Brazilian Central Bank must have a policy governing the relationship with customers and users of financial products and services. In addition, such entities shall comply with the principles of ethics, liability, transparency and diligence promoting the convergence of interests and the consolidation of the institutional image of credibility, security and expertise.
Ombudsman
Financial institutions and other entities that are authorized to operate by the Brazilian Central Bank must have an ombudsman office. An ombudsman office has the following attributes according to the current regulation:
● to provide last resort assistance in connection with customer claims that have not been resolved through the conventional customer service channels (including the banking correspondents and the customer service assistance channel (Serviço de Atendimento ao Consumidor), or SAC); and
● to act as a communication channel between the financial institutions and their customers, including for dispute resolution.
Institutions that are part of a financial group are allowed to establish one ombudsman department to service the whole group. The officer in charge of the ombudsman office must prepare a report every six months, which must be provided to the management and auditing bodies. The reports and recordings of interactions of the ombudsman unit with consumers must be available to the Brazilian Central Bank for a period of at least five years.
Investment Funds Industry Regulation
Investment funds are subject to the regulation and supervision of the CMN and the CVM and, in certain specific matters, the Brazilian Central Bank. Investment funds may be managed by full-service banks, commercial banks, savings banks, investment banks, credit, financing and investment companies and brokerage and dealer companies within certain operational limits.
Investment funds may invest in any type of financial instrument available in the financial and capital markets, including, for example, fixed income instruments, stocks, debentures and derivative products, provided that, in addition to the denomination of the fund, a reference to the relevant type of fund is included.
Broker-Dealer Regulation
Broker and dealer firms are part of the national financial system and are subject to CMN, Brazilian Central Bank and CVM regulation and supervision. Brokerage firms must be chartered by the Brazilian Central Bank and are the only institutions in Brazil authorized to trade on stock exchanges. Both brokers and dealers may act as underwriters in the public placement of securities and engage in the brokerage of foreign currency in any exchange market.
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Since August 29, 2019, securities brokers and dealers may loan their own securities to their customers as long as they use the funds as collateral for operations in which the institution itself intermediates. The loan transaction consists of the transfer of assets from the institution: (i) to the customer, in conjunction with the transfer of that asset to the clearinghouse or clearing and settlement service provider; or (ii) to the clearinghouse or clearing and settlement service provider on behalf of the customer through powers established in a formal written power of attorney. In either case, the assets or set of assets in question shall return to the positions originally held at the end of the period stipulated in the contract. To offer this new service, securities brokers and dealers must appoint a director responsible for the loan operations under consideration.
Since November 27, 2020, securities brokers and dealers may issue electronic currency and maintain payment accounts.
Foreign Exchange Market
Transactions involving the sale and purchase of foreign currency in Brazil may be conducted only by institutions duly authorized by the Brazilian Central Bank to operate in the foreign exchange market. There is no current limit to long or short positions in foreign currency for banks authorized to carry out transactions on the foreign exchange market. Other institutions within the national financial system are not allowed to have short positions in foreign currency, although there are no limits with respect to foreign exchange long positions.
The Brazilian Central Bank imposes a limit on the total exposure in foreign currency transactions and transactions subject to foreign exchange fluctuation undertaken by Brazilian financial institutions, including branches abroad, and their direct and indirect affiliates. The limit is currently equivalent to 30.0% of the financial institution’s Regulatory Capital (Patrimônio de Referência), on a consolidated basis. The CMN, the Brazilian Central Bank and the Brazilian government may change the regulation applicable to foreign currency and foreign exchange transactions undertaken by Brazilian financial institutions in accordance with Brazil’s economic policy (including its foreign exchange policy).

On December 20, 2021, the President of Brazil sanctioned Law No. 14,286, approved by the Brazilian Senate on December 8, 2021, or the “New Foreign Exchange Law.” The New Foreign Exchange Law, an initiative of the Brazilian Central Bank, overhauls the rules applicable to the Brazilian foreign exchange market and contains provisions regarding Brazilian capital abroad and foreign capital within Brazil. The initiative aims to modernize, simplify and reduce legal doubts associated with current Brazilian foreign exchange legislation.
The main aspects of the New Foreign Exchange Law are: (i) ratification, at the legal level, that foreign exchange transactions may be carried out freely (provided such transactions are carried out by entities authorized to operate in this market and subject to applicable rules); (ii) granting of broad powers to the CMN and the Brazilian Central Bank to regulate the foreign exchange market and foreign exchange operations; (iii) expansion of international correspondence activities by Brazilian banks; (iv) possibility of Brazilian financial institutions investing and lending abroad funds that have been raised in Brazil or abroad; (v) the exclusion from its scope of foreign currency purchase and sale operations of up to U.S.$500 carried out between individuals on an occasional and non-professional basis; and (vi) the granting of powers to the monetary authorities to establish situations in which the prohibition of the private offset of credits between residents and nonresidents, as well as payments in foreign currency in Brazil, would not apply.
Law No. 14,286 will enter into effect in one year from the date of its publication (which occurred on December 30, 2021).
Foreign Investment in Brazilian Financial Institutions
According to the Brazilian federal constitution, the acquisition of equity interests by foreign individuals or legal entities in the capital stock of Brazilian financial institutions is forbidden, unless permitted by bilateral international treaties or by the Brazilian government by means of a presidential decree. A presidential decree issued on November 13, 1997, issued in respect of Banco Meridional do Brasil S.A. (our legal predecessor) allows 100% foreign participation in our capital stock. Foreign investors may acquire the shares issued by Santander Brasil as a result of this decree. In addition, foreign investors may acquire publicly traded nonvoting shares of Brazilian financial institutions traded on a stock exchange or securities depositary receipts offered abroad representing shares without specific authorization.
Following the enactment of Decree No. 10,029, the Brazilian Central Bank published, on January 22, 2020, Circular No. 3,977 recognizing as an interest of the Brazilian government the foreign holding of equity or increase in equity interest of financial institutions headquartered in Brazil (which is still subject to the same requirements and procedures applicable to the acquisition of equity in any Brazilian financial institution), as well as the opening of local branches of foreign financial institutions. However, since Santander Brasil had already been granted a specific presidential decree authorizing the foreign interest in its share capital, prior to Decree 10,029/19 being issued it does not affect its operations in Brazil.
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A foreign financial institution duly authorized to operate in Brazil through a branch or a subsidiary is subject to the same rules, regulations and requirements that are applicable to any Brazilian financial institution.
Bank Correspondents
Financial institutions are allowed to provide specific services to customers, including customer services, through other entities. These entities are called “bank correspondents” and the relationship between the financial institution and the bank correspondent is ruled by a specific regulation published by CMN and is subject to the supervision of the Brazilian Central Bank.
On July 29, 2021, the CMN published Resolution No. 4,935, which will revoke CMN Resolution No. 3,954, of February 24, ~~2019, we completed~~2011, changing the ~~sale~~regulation of banking correspondents in Brazil. Banking correspondents are companies contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank to provide services to their contracting institutions.
The new rule determines that these institutions set forth a policy for the operation and hiring of their correspondents, and it should formalized by a specific document and approved by the institution’s board of officers or board of directors. This operation and contracting policy should provide for the criteria required for contracting correspondents, internal controls related to the correspondent and remuneration rules for the provision of services.
The contracting institutions will continue to be required to maintain adequate internal control systems in order to monitor the public service activities carried out by the contracted correspondents and the contracting institution’s internal audit must annually assess the effectiveness of these quality control mechanisms.
In addition, with the inclusion of the express possibility of the correspondents acting in a digital setting, some provisions were improved, highlighting the need for the correspondent’s digital platform itself to have a minimum technical qualification that allows the offering of products and services suited to the needs, interests and goals of the contracting institution’s clients.
CMN Resolution 4,935 came into effect on February 1, 2022.
Regulation of Branches
Authorization by the Brazilian Central Bank is required for operations of branches or subsidiaries of Brazilian financial institutions, upon the compliance with certain term, capital and equity requirements, as well as the submission of an economic and financial feasibility analysis.
The Brazilian Central Bank’s prior authorization is also required in order to: (i) allocate new funds to branches or subsidiaries abroad; (ii) subscribe capital increases, directly or indirectly, in subsidiaries abroad; (iii) increase equity participation, directly or indirectly, in subsidiaries abroad; and/or (iv) merge or spin off, directly or indirectly, subsidiaries abroad.
The Brazilian Central Bank determines that financial institutions can install the following establishments in Brazil: (i) branches, (ii) teller booths, (iii) automatic teller machines, and (iv) segregated administrative units, provided that, for items (i) to (iii), conformity with requirements of minimum capital and operating limits are necessary.
Cayman Islands Banking Regulation
We have a branch in the Cayman Islands with its own staff and representative officers, Banco Santander (Brasil) S.A. – Grand Cayman Branch is licensed under The Banks and Trust Companies Law (2013 Revision) of the Cayman Islands, or the “Banks and Trust Companies Law,” as a Category “B” Bank and it is duly registered as a Foreign Company with the Registrar of Companies in the Cayman Islands. The branch, therefore, is duly authorized to carry on banking business in the Cayman Islands. The branch was authorized by the local authorities to act as its own registered office and it is located at the Waterfront Centre Building, 28, North Church Street – 2nd floor, George Town, Grand Cayman, Cayman Islands, P.O. Box 10444 – KYI-1004, Phone: 1-345-769-4401 and Fax: 1-345-769-4601.
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Our Grand Cayman Branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions with Brazil. The results of the operations of the Grand Cayman Branch are consolidated in our consolidated financial statements.
Banks and trust companies wishing to conduct business from within the Cayman Islands must be licensed by the Cayman Islands Monetary Authority under the Banks and Trust Companies Law, irrespective of whether the business is to be actually conducted in the Cayman Islands.
Under the Banks and Trust Companies Law, there are two main categories of banking license: a category “A” license, which permits unrestricted domestic and offshore banking business, and a category “B” license, which permits principally offshore banking business. The holder of a category “B” license may have an office in the Cayman Islands and conduct business with other licensees and offshore companies but, except in limited circumstances, may not do banking business locally with the public or residents of the Cayman Islands. We have an unrestricted category “B” license.
There are no specific ratio or liquidity requirements under the Banks and Trust Companies Law, but the Cayman Islands Monetary Authority will expect observance of prudent banking practices, and the Banks and Trust Companies Law imposes a minimum net worth requirement of an amount equal to CI$400,000 (or, in the case of licensees holding a restricted category “B” or a restricted trust license, CI$20,000). As of December 31, 2020, CI$1 was equivalent to R$6.68, according to the Brazilian Central Bank.
Luxembourg Banking Regulation
Branches of credit institutions from outside the European Union (“non-EU credit institutions”) must be licensed by the Luxembourg Minister of Finance under the law of 5 April 1993 on the financial sector, as amended, in order to operate in Luxembourg.
We have a branch in Luxembourg with its own staff and representative officers. Our Luxembourg branch is licensed as a Luxembourg branch of a non-EU credit institution and is duly registered with the Luxembourg Trade and Companies’ Registry. The branch, therefore, is duly authorized to carry on banking business in Luxembourg. Its registered offices are at 35F, avenue J. F. Kennedy, 2nd floor, L-1855 Luxembourg, Grand Duchy of Luxembourg.
Our Luxembourg branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions involving Brazil. The results of the operations of the Luxembourg branch are consolidated in our consolidated financial statements.
Luxembourg law requires the Luxembourg branch to have a minimum endowment capital of €8,700,000 and the solvency, and liquidity requirements deriving, among others, from EU Regulation No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms apply to it.
Foreign Subsidiary
We had established an independent subsidiary in Spain, Santander EFC, in order to complement our foreign trade strategy for corporate customers, which are composed of large Brazilian companies and their operations abroad. This has allowed us to provide financial products and services by means of an offshore entity, which is not established in a “tax haven,” such as our Cayman Islands branch, in accordance with Law No. 12,249, of June 11, 2010, and Brazilian Federal Revenue Normative Ruling No. 1,037, of June 4, 2010.
The establishment of our ~~entire~~foreign subsidiary was approved by the Brazilian Central Bank on September 26, 2011, by the Spanish Ministerio de Economia y Hacienda on February 6, 2012 and by the Bank of Spain on March 28, 2012. The remittance of resources to pay up the share capital of the subsidiary was carried out on March 5, 2012, totaling €748 million, Santander EFC was operational from 2012 to November 12, 2020, when we approved its liquidation. As a consequence of the liquidation, we, as sole shareholder of Santander EFC, have participated in the net assets of the corporation, in the net amount of €741 million.
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U.S. Banking Regulation
Financial Regulatory Reform
Banking statutes and regulations are continually under review by the United States Congress. In addition to laws and regulations, the U.S. bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance. Many changes have occurred as a result of the 2010 Dodd-Frank Act and its implementing regulations, most of which are now in place. The Board of Governors of the Federal Reserve System, or the “Federal Reserve Board,” retains the right to apply enhanced prudential standards to foreign banking organizations, or “FBOs,” with greater than $100 billion in global total consolidated assets, such as Santander Spain.
In October 2019, the federal banking agencies issued final rules, or the “Tailoring Rules,” that adjust the thresholds at which certain enhanced prudential standards and capital and liquidity requirements apply to certain banking organizations, including large FBOs such as Santander Spain. As a result, Santander Spain is now generally subject to less restrictive enhanced prudential standards and capital and liquidity requirements than under previously applicable regulations.
Under the current administration, however, banking organizations, including large FBOs, may become subject to increased scrutiny and more extensive legal and regulatory requirements than under the prior presidential and congressional regime. In addition, changes in key personnel at the agencies that regulate such banking organizations, including the federal banking regulators, may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more severe penalties than previously.
Volcker Rule
Section 13 of the U.S. Bank Holding Company Act of 1956, as amended, and its implementing rules (collectively, the “Volcker Rule”) prohibits “banking entities” from engaging in certain forms of proprietary trading or from sponsoring or investing in “covered funds,” in each case subject to certain exceptions. The Volcker Rule also limits the ability of banking entities and their affiliates to enter into certain transactions with covered funds with which they or their affiliates have certain relationships, Banking entities such as Santander Brasil and Santander Spain were required to bring their activities and investments into compliance with the requirements of the Volcker Rule by the end of the conformance period applicable to each requirement. Santander Spain has assessed how the Volcker Rule affects its businesses and subsidiaries, including Santander Brasil, and has brought its activities into compliance. Santander Brasil has adopted processes to establish, maintain, enforce, review and test the compliance program designed to achieve and maintain compliance with the Volcker Rule. The Volcker Rule contains exclusions and certain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations, as well as certain foreign government obligations, and trading solely outside the United States, and also permits certain ownership interests in certain types of funds to be retained. Santander Spain’s non-U.S. banking organization subsidiaries, including Santander Brasil, are largely able to continue their activities outside the United States in reliance on the “solely outside the U.S.” exemptions from the Volcker Rule. Those exemptions generally exempt proprietary trading, and sponsoring or investing in covered funds if, among other restrictions, the essential actions take place outside the United States and any transactions are not with U.S. persons.
On July 21, 2017, the five regulatory agencies charged with implementing the Volcker Rule announced the coordination of reviews of the treatment of certain foreign funds that are investment funds organized and offered outside the United States and that are excluded from the definition of covered fund under the agencies’ implementing regulations. Also in July 2017, the Federal Reserve issued guidelines for banking entities seeking an extension to conform certain “seeding” investments in covered funds to the requirements of the Volcker Rule.
In June 2019, the five regulatory agencies charged with implementing the Volcker Rule finalized amendments to the Volcker Rule. These amendments tailor the Volcker Rule’s compliance requirements to the amount of a firm’s trading activity, revise the definition of trading account, clarify certain key provisions in the Volcker Rule, and modify the information companies are required to provide the federal agencies. Santander Brasil will still largely rely on the “solely outside the U.S. exemption” to conduct its trading activities.
In June 2020, the five federal agencies finalized additional amendments to the Volcker Rule related to the restrictions on ownership interests, in sponsorship of and relationships with covered funds. These amendments became effective on October 1, 2020. Santander Spain will continue to monitor these Volcker Rule-related developments and assess their impact on its operations, including those of Santander Brasil, as necessary.
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U.S. Anti-Money Laundering, Anti-Terrorist Financing, and Foreign Corrupt Practices Act Regulations
Santander Brasil, as a foreign private issuer whose securities are registered under the Exchange Act, is subject to the U.S. Foreign Corrupt Practices Act, or the “FCPA.” The FCPA generally prohibits such issuers and their directors, officers, employees and agents from using any means or instrumentality of U.S. interstate commerce in furtherance of any offer or payment of money to any foreign official or political party for the purpose of influencing a decision of such person in order to obtain or retain business. It also requires that the issuer maintain books and records and a system of internal accounting controls sufficient to provide reasonable assurance that accountability of assets is maintained and accurate financial statements can be prepared. Penalties, fines and imprisonment of Santander Brasil’s officers and/or directors can be imposed for violations of the FCPA.
Furthermore, Santander Brasil is subject to a variety of U.S. anti-money laundering and anti-terrorist financing laws and regulations, such as the Bank Secrecy Act of 1970, as amended, and the USA Patriot Act of 2001, as amended, and a violation of such laws and regulations may result in substantial penalties, fines and imprisonment of Santander Brasil’s officers and/or directors.
The Anti-Money Laundering Act of 2020, or “AML Act,” enacted on January 1, 2021 as part of the National Defense Authorization Act, does not directly impose new requirements on banks, but requires the U.S. Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, and conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that the Bank Secrecy Act and Patriot Act impose on banks. The AML Act also contains provisions that promote increased information-sharing and use of technology and increases penalties for violations of the Bank Secrecy Act and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.
U.S. Sanctions
“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, OFAC), the United Nations Security Council, the European Union or Her Majesty’s Treasury. The Office of Foreign Assets Control, or “OFAC,” is responsible for administering economic sanctions imposed against designated foreign countries, governments, individuals and entities pursuant to various Executive Orders, statutes and regulations.
OFAC-administered sanctions take many different forms. For example, sanctions may include: (1) restrictions on U.S. persons’ trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (2) blocking of assets of targeted governments or “specially designated nationals,” by prohibiting transfers of property subject to U.S. jurisdiction, including property in the possession or control of U.S. persons. Blocked assets, such as property and bank deposits, cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. In addition, non-U.S. persons can be liable for “causing” a sanctions violation by a U.S. person or can violate U.S. sanctions by exporting services from the United States to a sanctions target, for example by engaging in transactions with targets of U.S. sanctions denominated in U.S. dollars that clear through U.S. financial institutions (including through U.S. branches or subsidiaries of non-U.S. banks).
Failure to comply with applicable U.S. sanctions could have serious legal and reputational consequences, including significant civil monetary penalties and, in the most severe cases, criminal penalties.
In addition, the U.S. government has implemented various sanctions that target non-U.S. persons, including non-U.S. financial institutions that engage in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”) that involve Iran, North Korea, Russia, or Hezbollah or other persons designated by the United States under the Specially Designated Global Terrorist, or “SDGT,” sanctions program. If a non-U.S. financial institution were determined to have engaged in activities targeted by certain secondary U.S. sanctions or used proceeds produced by such activities targeted, it could lose its ability to open or maintain correspondent or payable-through accounts with U.S. financial institutions, among other potential consequences.
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Antitrust Regulation
According to the Brazilian antitrust law, actions that concentrate market share must be previously submitted to CADE for approval if the following criteria are met: (i) at least one of the groups involved in the deal has posted annual gross revenues or volume of business equal to or over R$750 million, in Brazil, in the year prior to the transaction; and (ii) at least another group has posted annual gross revenues or volume of business equal to or over R$75 million, in Brazil, in the year prior to the transaction. Closing of a transaction without CADE’s approval will subject the parties to fines ranging from R$60,000 to R$60 million.
The Brazilian Central Bank will also examine certain corporate reorganizations and other acts involving two or more financial institutions not only considering their potential effects on the financial system and its stability but also any potential impacts regarding market concentration and competition. Upon approval of the transaction, the Brazilian Central Bank may establish certain restrictions and require that the financial institutions execute an agreement of market concentration control, pursuant to which the terms and conditions of the sharing of the efficiency gain resulting from the act shall be set forth.
In December 2018, the Brazilian Central Bank and CADE approved a joint normative act establishing procedures with the purpose of increasing efficiency for their respective actions regarding antitrust matters. Pursuant to the joint normative act, the authorities are authorized to share information for the purposes of their respective activities and carry out meetings with each other to discuss matters requiring the regulatory cooperation between both authorities.
Insolvency Laws Concerning Financial Institutions
Financial institutions are subject to the proceedings established by Law 6,024 of March 13, 1974, or “Law 6024,” which establishes the applicable provisions in the event of intervention or extrajudicial liquidation by the Brazilian Central Bank, as well as to bankruptcy proceedings.
Intervention and extrajudicial liquidation occur when the Brazilian Central Bank has determined that the financial institution is in bad financial condition or upon the occurrence of events that may impact the creditors’ situation. Such measures are imposed by the Brazilian Central Bank in order to avoid the bankruptcy of the entity.
Intervention
An intervention can be carried out at the discretion of the Brazilian Central Bank in the following cases:
● risk to the creditors due to mismanagement;
● consistent violation of Brazilian banking laws or regulations; or
● if the intervention is a feasible alternative to the liquidation of the financial institution.
As of the date on which it is ordered, the intervention will automatically suspend the enforceability of the payable obligations; prevent early termination or maturity of any previously contracted obligations; and freeze deposits existing on the date on which the intervention is decreed.
The intervention will cease if interested parties undertake to continue the economic activities of the financial institution, by presenting the necessary guarantees, as determined by the Brazilian Central Bank, when the situation of the entity is regularized as determined by the Brazilian Central Bank; or when extrajudicial liquidation or bankruptcy of the entity is ordered.
Intervention may also be ordered upon the request of a financial institution’s management.
Extrajudicial Liquidation
Extrajudicial liquidation is an administrative proceeding decreed by the Brazilian Central Bank (except that it is not applicable to financial institutions controlled by the Brazilian federal government) and conducted by a liquidator appointed by the Brazilian Central Bank. This extraordinary measure aims at terminating the activities of the affected financial institution, liquidating its assets and paying its liabilities, as in a judicially decreed bankruptcy. The Brazilian Central Bank will place a financial institution in extrajudicial liquidation if:
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● the institution’s economic or financial situation is at risk, particularly when the institution ceases to meet its obligations as they become due, or upon the occurrence of an event that could indicate a state of insolvency under the rules of the Bankruptcy Law;
● management seriously violates Brazilian banking laws, regulations or rulings;
● the institution suffers a loss which subjects its unprivileged and unsecured creditors to severe risk; and/or
● upon revocation of the authorization to operate, the institution does not initiate ordinary liquidation proceedings within 90 days or, if initiated, the Brazilian Central Bank determines that the pace of the liquidation may harm the institution’s creditors.
A request for liquidation procedures can also be filed on reasonable grounds by the officers of the respective financial institution or by the receiver appointed by the Brazilian Central Bank in the receivership procedure.
The decree of extrajudicial liquidation will: (i) suspend the actions or foreclose on rights and interests relating to the estate of the entity being liquidated, while no other actions or executions may be brought during the liquidation; (ii) accelerate the obligations of the entity; and (iii) interrupt the statute of limitations with regard to the obligations assumed by the institution.
Extrajudicial liquidation procedures may be terminated:
● by discretionary decision of the Brazilian Central Bank if the parties involved undertake the administration of the financial institution after having provided the necessary guarantees; or
● when the final accounts of the receiver are delivered and approved and subsequently registered in the relevant public records;
● when converted into ordinary liquidation; or
● when a financial institution is declared bankrupt.
Temporary Special Administration Regime (Regime de Administração Especial Temporária or “RAET”)
In addition to the intervention procedures described above, the Brazilian Central Bank may also establish a RAET, under Law 9447, dated March 14, 1997 combined with Law 6,024/74, which is a less severe form of the Brazilian Central Bank intervention in private and nonfederal public financial institutions that allows institutions to continue to operate normally. The RAET may be ordered in the case of an institution that:
● continually enters into recurrent operations that are against economic or financial policies set forth in federal law;
● faces a shortage of assets;
● fails to comply with the compulsory reserves rules;
● reveals the existence of hidden liabilities;
● experiences the occurrence of situations that cause receivership pursuant to current legislation;
● has reckless or fraudulent management; or
● carries out activities which call for an intervention.
The main objective of a RAET is to assist the recovery of the financial condition of the institution under special administration and thereby avoid intervention and/or liquidation. Therefore, a RAET does not affect the day-to-day business, operations, liabilities or rights of the financial institution, which continues to operate in the ordinary course of business. Measures which may be adopted by the institution include the transfer of assets, rights and obligations to other entities, and corporate restructuring of these entities, with a view to the continuity of the institution’s business or activities.
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There is no minimum term for a RAET, which ceases upon the occurrence of any of the following events: (i) acquisition by the Brazilian federal government of control of the financial institution, (ii) corporate restructuring, merger, spinoff, amalgamation or transfer of the controlling interest of the financial institution, (iii) decision by the Brazilian Central Bank, or (iv) declaration of extrajudicial liquidation of the financial institution.
Bankruptcy Law
Law No. 11,101, of February 9, 2005, as amended, or the “Bankruptcy Law,” regulates judicial reorganizations, out-of-court reorganizations and the bankruptcy of individuals and corporations that have occurred since 2005 and applies to financial institutions only with respect to the matters not specifically regulated by the intervention and extrajudicial liquidation regimes described above.
On December 24, 2020, Law 14,112, or “Law 14,112/20,” was passed. Law 14,112/20 overhauls the current Bankruptcy Law in several material aspects. Law 14,112/20 came into effect on January 23, 2021. Certain changes arising from this new legislation may affect enforcement and priority matters, such as: (i) the possibility of creditors putting forward an alternative judicial reorganization plan; (ii) new rules on the approval of post-petition loans in judicial reorganization and on priority claims in case of conversion to bankruptcy liquidation; (iii) more flexible quorum and mechanics in the extrajudicial reorganization process; (iv) new rules to expedite the bankruptcy liquidation process; (v) new methods for restructuring of the debtor’s tax liabilities and installment payments, as well as new taxation schemes; and (vi) incorporation of rules on cross-border insolvency proceedings into the Brazilian framework.
Law 14,112/20 replicates, with some adjustments, the provisions of the UNCITRAL Model Law on Cross-Border Insolvency. As a result, Law 14,112/20 sets out some rules on access of foreign representatives to courts in Brazil, the method and requirements for recognition of foreign main and ancillary proceedings, authorization for the debtor and his representatives to act in other countries, methods of communication and cooperation between foreign authorities and representatives and the Brazilian jurisdiction, and the processing of concurrent proceedings.
Law 14,112/20 also sets forth, among other measures, (i) a protection for creditors that agree on the conversion of debt into equity against potential transfer of liability with regard to the debtor’s obligations; (ii) the stay period and constraints on the assets of the debtor under judicial reorganization; (iii) conciliation and mediation measures before and during judicial reorganization proceedings; and (iv) the rules on procedural and substantive consolidation. Law 14,112/20 also sets out that a bankruptcy decree does not reach beyond the bankrupt itself, save when the disregard doctrine is to apply.
Repayment of Creditors in a Liquidation or Bankruptcy
In the event of extrajudicial liquidation or bankruptcy of a financial institution, creditors are paid pursuant to their priorities and privileges. Prepetition claims are paid on a ratable basis in the following order: labor credits; secured credits; tax credits; credits with special privileges; credits with general privileges; unsecured credits; contractual fines and pecuniary penalties for breach of administrative or criminal laws, including those of a tax nature; and subordinated credits.
The current law confers immunity from attachment of compulsory deposits maintained by financial institutions with the Brazilian Central Bank. Such deposits may not be attached in actions by a bank’s general creditors for the repayment of debts and require that the assets of any insolvent bank funded by loans made by foreign banks under trade finance lines be used to repay amounts owing under such lines in preference to those amounts owing to the general creditors of such insolvent bank.
Recovery Plans for Systematically Important Financial Institutions
Systemically important Brazilian financial institutions must implement a recovery plan (plano de recuperação), with the aim of reestablishing adequate levels of capital and liquidity and to preserve the viability of such institutions. The recovery plans must identify their critical functions for the National Financial System, adopt stress-testing scenarios, define clear and transparent governance procedures, assess possible barriers to the entity’s recovery, as well as implement effective communication plans with key stakeholders.
Deposit Insurance – FGC
The purpose of the FGC is to guarantee the payment of funds deposited with financial institutions in case of intervention, liquidation, bankruptcy or insolvency. The FGC is funded by ordinary contributions made by the financial institutions in the amount of up to 0.0125% of the total amount of outstanding balances of the accounts corresponding to guaranteed obligations, and certain special contributions as determined. Delay in performing such contributions is subject to a penalty of 2% over the amount of the contribution.
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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 ~~CIBRASEC – Companhia Brasileira~~or financial instrument held by such entities, are not protected by the ordinary guarantee of FGC. In December 2017, the CMN enacted a new rule amending certain provisions of the FGC regulation among which includes the establishment of a limit of R$1 million per four-year period for the coverage of the credits of a certain creditor against the group of associated financial institutions.
Administrative Proceedings in the Brazilian National Financial System, the Brazilian Payment System and Capital Markets
Law 13,506 of November 13, 2017 or “Law 13,506/17” applies to entities authorized or supervised by the Brazilian Central Bank or by the CVM, as well as to market participants. Some of the key aspects of Law 13,506 are that: (i) it increases the maximum fine applicable by the Brazilian Central Bank from R$250,000 to R$2 billion or 0.5% of the revenues of the company arising from services and financial products in the year prior to the violation; (ii) it increases the maximum fine applicable by the CVM from R$500,000 to R$50 million; (iii) it makes additional types of violations subject to penalties; (iv) it provides that the penalty of “public admonition” may be cumulative to other penalties applicable by the Brazilian Central Bank; (v) it provides that Brazilian Central Bank may enter into cease-and-desist commitments; and (vi) it provides that the Brazilian Central Bank and the CVM may enter into administrative agreements similar to leniency agreements.
Opening, Maintenance and Closing of Deposit Accounts
CMN Resolution No. 4,753/19 provides criteria for the opening, maintenance and closing of deposit accounts. The regulation determines that financial institutions must adopt procedures and controls that allow the verification and validation of the identity and qualification of the account holders and, if applicable, their representatives, as well as the authenticity of the information provided by the client. This information must be kept updated by the financial institution.
The rule also requires financial institutions to ensure, through the procedures and technology used for the opening, maintaining and closing of deposit accounts, the integrity authenticity and confidentiality, as well as the protection against unauthorized access, use, alteration, reproduction and destruction, of the information and the electronic documents used by them during the process.
Issuance of Credit Instruments Electronically
Provisional Measure No. 897, or “MP 897/2019,” among other provisions, (i) created a new credit instrument, the Rural Real Estate Note (Cédula Imobiliária Rural or “CIR”), with the purpose of advancing rural real estate financing by the creation of an instrument specifically designed to that end; (ii) changed the rules governing Bank Deposit Certificates (Certificado de ~~Securitização (“Cibrasec”~~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 ~~ISEC Securitizadora S.A. (“ISEC”). Our~~perform electronic bookkeeping activity.
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On July 15, 2020, the Brazilian Central Bank regulated, through Circular No. 4,036/20, the electronic issuance of book-entry CCBs and CCRs by financial institutions. A financial institution must render the following services in respect of the bookkeeping of CCBs and CCRs: (i) issue the instrument in book-entry form at the request of the borrower; (ii) include of all obligatory information related to CCBs and CCRs, as well as ancillary documents and/or information for the purposes of verifying the outstanding balance of the underlying credit transaction; (iii) verify the effective title or fiduciary title of the instruments; (iv) make the payment CCBs and CCRs for the settlement of obligations available to the debtor; (v) control the financial flow related to the CCBs and CCRs, including prepayments; (vi) record security interests in an entity authorized to perform centralized registration or deposit of financial assets; (vii) make information about the CCBs and CCRs available to debtors, holders, collateral beneficiaries or any other legally qualified interested party; and (viii) carry out the issuance of certificates regarding the instruments whenever required.
Limitation to the fees and interest ~~amounted~~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 ~~4,000 common shares~~R$500.00; and ~~50 Class A preferred shares, representing~~(ii) 0.25% for the opening of credit facilities larger than R$500.00, calculated with the amount of the facility that exceeds R$500.00. It also limits interest rates over the overdraft-secured check to up to 8% per month, to which must be added a discount of the overdraft fees already charged monthly by the financial institution. If the interest is less than or equal to the overdraft fees, such interest rates must be equal to zero. In addition, Resolution No. 4,765/2019 establishes that the overdraft-secured check must be compatible with the customer’s risk profile.
Resolution No. 4,765/2019 came into force on January 6, 2020, for agreements executed after the referred date, came into force on June 1, 2020, for agreements executed prior to such date. Regarding the 8% limitation above, the rule applies to all contracts from January 6, 2020, regardless of the date the applicable contract was entered into.
On February 6, 2020, the Brazilian Central Bank issued Circular No. 3,981, which deals with the new information regarding overdraft facilities that must be highlighted in ~~aggregate, approximately 9.72%~~the statement of ~~Cibrasec’s total capital stock. We received consideration~~the checking accounts held by natural persons or MEIs. Circular No. 3,981 came into effect on June 1, 2020.
Automatic debit of banking accounts
On March 26, 2020, CMN issued Resolution No. 4,790, which sets forth new rules for the automatic debit payments from checking account and accounts designated for the payment of an individual’s wages. The new rule sets forth that financial institutions should only process automatic debit payments upon prior and express authorization of the client, and provides for the procedures for the authorization and cancellation of automatic debit payments. The new rule came into force on March 1, 2021, CMN Resolution No. 4,790 repealed CMN Resolution 4,771.
Taxation
Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL)
The IRPJ is calculated at a rate of 15.0%, plus a surtax of 10.0% which is levied on profits exceeding the amount of R$~~9.8~~240,000 per year and the CSLL is calculated at a rate of 20.0% (25.0% exceptionally in 2021, as per Law No. 14,183/2021) for financial institutions and 9.0% for companies, after adjustments determined by the tax legislation.
Deferred tax assets and liabilities are measured based on temporary differences between the book basis and tax basis of assets and liabilities, tax losses, and adjustments to fair value of securities and derivatives.
According to the requirements in the current regulations, the expected realization of deferred tax assets is based on projections of future results and a technical study approved by the Directors of Santander Brasil.
Income tax (IRPJ) and Social Contribution Tax (CSLL) on Foreign Exchange Variation of Hedges for Investments Held Abroad (Law No. 14,031/2020)
Pursuant to Law No. 14,031/2020, which came in force in July 2020, exchange rate variations arising from hedges on investments held abroad are taxable starting in 2021. Accordingly, in 2021, 50% of the exchange rate variation shall be taxable under the IRPJ and CSLL, while, in 2022, 100% of the exchange rate variation will be considered as taxable.
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Tax on Services (ISS)
Each of the Municipalities of Brazil and the Federal District are responsible for establishing the applicable ISS rate, which is charged on the value of services provided by the company, to the municipality where the service renderer is located. The rates vary from 2% to 5% and depend on the nature of the service.
On December 30, 2016, Complementary Law No. 157/2016 was enacted. This legislation establishes a minimum rate of 2% for these types of taxes, no reductions or deductions being permitted. This legislation provides that the following services are subject to ISS in the municipality in which the service taker is located: (i) card management, including POS services, that may be paid to the municipality where the corresponding POS device has been registered; (ii) leasing; (iii) fund management; and (iv) consortium.
Before the aforementioned Law was enacted, the ISS was due in the municipality in which the service provider was located (irrespective of where the service taker was located). With this new legislation, ISS rates may vary depending on where the service taker is located.
There are several complications that may arise from this new legislation, including (i) as service takers are generally located in several municipalities, it is logistically difficult to comply and collect the taxes; and (ii) there are situations where the municipality of the service taker is not easily identifiable by the credit card company (as is the case for online transactions, for example).
Since the ISS is a municipal tax, the rule must be regulated by each municipality in order to be enforceable. This new rule is only applicable to triggering events occurring from 2018 onwards, when the municipal regulations applicable to Supplementary Law No. 157 come into force.
On March 23, 2018, the Brazilian Supreme Court suspended the application of the Complementary Law No. 157. It is still suspended as of the date of this annual report. This suspension may be circumvented by the enactment of Complementary Law No. 175/20.
Complementary Law No. 175, published on September 24, 2020, was enacted to create a unified ISS collection system, in which taxpayers would be able to collect ISS in every municipality in Brazil. It’s an effort to facilitate tax collection considering the complexity regarding the multiple rulings on ISS, since each municipality can pass its own laws on ISS.
The system is currently under development, and it is expected that it would enable Complementary Law No. 157 to be brought back into effect.
PIS and COFINS Tax Rates
PIS and COFINS (respectively, the profit participation contribution and the social security financing contribution, both of which are social contributions due on certain revenues net of certain expenses) payable by financial institutions and similar entities, as defined by law, are due at the rate of 0.65% and 4%, respectively. They are levied cumulatively on gross revenue billed, which is defined as the total revenues earned by the legal entity, net of certain expenses, such as funding costs.
Non-financial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to non-cumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.
Tax on Financial Transactions (IOF)
IOF is a tax levied on credit, currency exchange, insurance and securities transactions and it is imposed on the following transactions and at the following rates.
Decree No. 10,797/2021 temporarily increased IOF on credit transactions as follows:
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Transaction (1)
Maximum Legal Rate
Current Rate
Credit extended by financial institutions and non-financial entities 1.5% or 3% (between 2.04% and 4.08% in 2021) 0.0041% per day for loans contracted by legal entities and 0.0082% per day for individuals capped at 365 days. An additional 0.38% rate is applicable in both cases. (Exceptionally, in 2021, 0.00559% per day for legal entities and 0.01118% per day for individuals).
Transactions relating to securities (2) 1.5% per day 0.5% per day for certain investment funds.
0% on transactions with equity securities and certain debt securities, such as debentures and real estate receivables and agribusiness receivables (CRI/CRA).
1% per day on transactions with fixed income derived from federal, state, or municipal public and private bonds, and fixed income investment funds limited to certain percentages of the income raised from investment. This rate is reduced to zero from the 30th day following the acquisition date of the investment and on repurchase agreements carried out by financial institutions and other institutions authorized by the Brazilian Central Bank with debentures issued by institutions belonging to the same group (Decree 8,731/2016).
0% on the assignment of securities to permit the issuance of Depositary Receipts abroad.
Transactions relating to derivatives 25% Although the maximum rate is 25%, it has been reduced to zero at this moment.
Insurance transactions entered into by insurance companies 25% 2.38% for health insurance.
0.38% for life insurance.
7.38% for other types of insurance.
Foreign exchange transactions(2) 25% 0.38% (general rule).
6.38% on credit card transactions as from April 27, 2011.
6.38% on withdrawals abroad using credit or debit cards as from December 28, 2013.
6.38% on purchase of travelers checks or loading of international prepaid card as from December 28, 2013.
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
6% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is equal or less than 180 days.
0% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is higher than 180 days.
0% for interbank transactions.
0% for exchange transactions in connection with the outflow of proceeds from Brazil for the remittance of interest on net equity and dividends to be received by foreign investors.
0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors in the Brazilian financial and capital markets.
0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors for purposes of initial or additional margin requirements in connection with transactions in stock exchanges.
0% for exchange transactions for the outflow of funds invested by foreign investors in the Brazilian financial and capital markets.
0% for exchange transactions for the inflow and outflow of funds invested by foreign investors, including by means of simultaneous foreign exchange transactions, in certificates of deposit of securities, known as Brazilian Depositary Receipts (“BDRs”).
0% for simultaneous exchange transactions, for the inflow of funds by foreign investors derived from the conversion of direct investments in Brazil made pursuant to Law 4,131/62 into investments in stock tradable in stock exchanges, as from May 2, 2016.
0% for revenues related to the export of goods and services transactions.
The applicable rate is 1.10% for acquisitions of foreign currency (Decree 8,731/2016).
The applicable rate for credit on a foreign bank account belonging to a resident in Brazil is 1.10%, as from March 3, 2018.
(1) The transactions mentioned in the table are for illustration purposes and do not reflect an exhaustive list of transactions subject to the IOF.
(2) There are some exemptions or specific cases in which the applicable rate is zero.
FATCA
The Foreign Account Tax Compliance Act, or “FATCA,” became law in the United States on March 18, 2010. The legislation requires foreign financial institutions, or “FFIs,” (such as Santander Brasil) to enter into an FFI agreement under which they agree to identify and provide the U.S. Internal Revenue Service, or “IRS,” with information on accounts held by U.S. persons and certain U.S.-owned foreign entities, or otherwise face a 30% withholding tax on certain U.S. source withholdable payments. In addition, FFIs that have entered into an FFI agreement will be required to withhold on such payments made to FFIs that have not entered into an FFI agreement, account holders who fail to provide sufficient information to classify an account as a U.S. or non-U.S. account, and U.S. account holders who do not agree to the FFI reporting their accounts to the IRS.
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On September 23, 2014, Brazil and the United States announced that they entered into an intergovernmental agreement, or “IGA,” which became effective in Brazil by virtue of Decree No. 8506 as of August 24, 2015. The aim of the IGA is to improve international tax compliance and implement FATCA. The IGA establishes an automatic annual bilateral exchange of information with the U.S. tax authorities. Under this agreement, Brazilian financial institutions will generally be required to provide certain information about their U.S. account holders to the Brazilian tax authorities (Receita Federal do Brasil), which will share that information with the IRS.
Complying with the required identification, withholding, and reporting obligations requires significant investment in an FFI’s compliance and reporting framework. We are continuing to follow developments regarding FATCA closely and are coordinating with all relevant authorities.
Common Reporting Standard
On December 28, 2016, Normative Ruling No. 1680 was enacted, introducing the Common Reporting Standard in Brazil. The Common Reporting Standard provides for certain account reporting obligations similar to those existing under FATCA. It was created in the context of the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting project, which is aimed at reducing tax avoidance. Normative Ruling No. 1,680 applies to legal entities required to present the e-Financeira pursuant to Normative Ruling No. 1571, dated July 2, 2016.
On the same date, the Normative Ruling No. 1681 was enacted providing for the obligation to annually deliver the “Country to Country Statement,” an ancillary obligation also arising from the discussions under the BEPS Project, before the Brazilian Federal Revenue Service, or “RFB,” as a measure to expand information exchange and improve the level of international tax transparency. This new regulation should not have any impact on Santander Brasil, since, as it is controlled by a legal entity resident in Spain, it is not required by the Brazilian regulation to present such statement.
Income Tax Levied on Capital Gains
Law No. 13,259, of March 16, 2016 or “Law 13,259/16” introduced the application of progressive tax rates for income taxation over capital gains recognized by Brazilian individuals and by holders that are not domiciled in Brazil for purposes of Brazilian taxation (“Non-Resident Holders”) on the disposition of assets in general, Under Law 13,259/16, the income tax rates applicable to capital gains realized by these investors would be: (i) 15% for the portion of the gains up to R$5 million, (ii) 17.5% for ~~our~~the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million.
The provisions of Law 13,259/16 may apply to Non-Resident Holders pursuant to CMN Resolution 4,373, provided such Non Resident Holders are not located in a Tax Haven. However, Non Resident Holders (whether they are considered to be Non-Resident Holders as a result of CMN Resolution 4,373 or otherwise) located in a Tax Haven are subject to a specific tax regulation and will continue to be taxed at a rate of 25%.
Most transactions carried out by Non-Resident Holders pursuant to CMN Resolution 4,373 and that result in capital gains are subject to taxation at a fixed 15% rate, provided they are not located in a Tax Haven.
The tax must be withheld and paid by the buyer or, in cases where the buyer and seller are domiciled abroad, a legal representative of buyer shall be designated for the payment of the tax.
Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law.
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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 report:
(a) Santander UK holds seven blocked accounts for five customers that are currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander UK on these accounts in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(b) Santander Consumer Finance, S.A. holds through its Belgian branch seven blocked correspondent accounts for an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by Santander Consumer Bank, S.A. on these accounts in the year ended December 31, 2021.
(c) Santander Brasil holds a blocked account for a customer with domicile in Brazil designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship with the customer preceded its designation under the sanctions program. Revenues and profits generated by Santander Brasil on this account in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(d) The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program (stand-by letters of credit to guarantee the obligations – either under tender documents or under contracting agreements – of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007.
In the aggregate, all of the transactions described above resulted in gross revenues and net profits in the year ended December 31, 2021 which were negligible relative to the overall revenues and profits of Banco Santander, S.A. The Santander Group has undertaken significant steps to withdraw from the Iranian market such as closing its representative office in Iran and ceasing all banking activities therein, including correspondent relationships, deposit taking from Iranian entities and issuing export letters of credit, except for the legacy transactions described above. The Santander Group is not contractually permitted to cancel these arrangements without either (i) paying the guaranteed amount (in the case of the performance guarantees), or (ii) forfeiting the outstanding amounts due to it (in the case of the export credits). As such, the Santander Group intends to continue to provide the guarantees and hold these assets in accordance with company policy and applicable laws.
Regulatory Developments Related to COVID-19
The following section summarizes the measures implemented by the CMN and the Brazilian Central Bank to mitigate the consequences of the COVID-19 pandemic on the Brazilian financial system.
Temporary Suspension of Dividend Distributions and Other Payments
On May 29, 2020 the CMN enacted Resolution No. 4,820 in response to the COVID-19 pandemic. Resolution No. 4,820 prohibits financial institutions, such as us, to: (i) offset their capital, including by means of early payment, in excess of amounts equivalent to the minimum mandatory dividend required by the Brazilian Corporate Law, including as interest on capital (ii) repurchase their own shares, subject to certain exceptions as authorized by the Brazilian Central Bank; (iii) reduce their capital stock, except if such reduction is required by law or approved by the Brazilian Central Bank; and (iv) increase the compensation of their officers, directors and members of the board of directors and audit committee, including fixed and variable compensation, CMN Resolution No. 4,280 repealed CMN Resolution No. 4,797.
On December 23, 2020, the CMN enacted Resolution No. 4,885, which made the payment of dividends or interest on capital more flexible. As a result, financial institutions were not allowed to pay in ~~Cibrasec.~~ excess of the greater of (x) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (y) the amount equivalent to the mandatory dividends as set forth in article 202 of the Brazilian Corporate Law. This is the only restriction still in force as a result of Resolution No. 4,820.
As a result, we ~~are no longer~~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.
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Reduction of Capital Conservation Buffer
On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduces the Capital Conservation Buffer (where all rates relate to the total amount of risk weighted assets) required from financial institutions, from 2.5% to 1.25%. The rate of 1.25% will remain in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the Capital Conservation Buffer requirement will gradually be restored to 2.5%. The measure aims to increase the ability of banks to renegotiate credit transactions and maintain engagement in new transactions, considering the current scenario of increased demand for financial services. CMN Resolution No. 4,783 was replaced by CMN Resolution No. 4,958/2021, which maintains the same rates for the periods set forth in the previous rule.
Repos on Sovereign Bonds Denominated in U.S. Dollars
On March 18, 2020, the Brazilian Central Bank issued Circular No. 3,990, which allowed the repurchase transactions of U.S. Dollar denominated federal bonds between the Brazilian Central Bank and Brazilian financial institutions. The Brazilian Central Bank can purchase such bonds with a ~~shareholder~~discount of ~~Cibrasec.~~
~~Incorporation~~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 ~~spun-off portion~~transaction whenever the exposure is equal or greater than U.S.$500,000. The purpose of ~~Integry Tecnologia e Serviços A.H.U Ltda.~~this measure is to provide liquidity to the Brazilian sovereign bonds market, by offering liquidity in U.S. Dollars to Brazilian banks and reducing trading volatility of such bonds. Circular No. 3,990 was revoked by Brazilian Central Bank Resolution No. 76, of February 23, 2021, which essentially maintains the same wording established in the previous rule.
Changes to Provision Requirements
On ~~October~~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, ~~2019, we~~2020. These measures were not applied in 2021.
New Time Deposits with Special Collateral
CMN Resolution No. 4,799/20 has regulated funding through new Time Deposits with Special Collateral (Novo Depósito a Prazo com Garantias Especiais or “DPGEs”), which are deposits taken by financial institutions and guaranteed by the Credit Guarantee Fund (Fundo Garantidor de Crédito or “FGC”). The resolution increased the cap from R$20 million to R$40 million and is intended to strengthen the liquidity strength of smaller financial institutions. The current limit, set forth 4,964/2021, is set at R$90 million.
Central Bank Loans Backed by Debentures and Financial Bills Held by Financial Institutions
On March 23, 2020, the CMN enacted Resolution No. 4,786, which authorized the Brazilian Central Bank to grant loans to multiservice banks, commercial banks, investment banks and saving banks, backed by debentures (corporate debt instruments) held by such institutions and acquired in the secondary market, provided that certain provisions set forth in the ruling are complied with. It is worth mentioning the ruling sets forth that said loans will also be secured by mandatory deposits in Bank Reserve Accounts, in amount equivalent to, at least, the total amount of the transactions, as well as by the debenture collateral.
This is considered a Temporary Special Liquidity Credit Facility, and was another measure to offer financial institutions more liquidity in their transactions. The loans established in Resolution No. 4,786/20 will be available to financial institutions until April 30, 2020 and could be engaged for a 125 business day term, which could be extended, at the Brazilian Central Bank’s discretion, for more 125 business days, provided the maximum term of 359 calendar days.
On April 2, 2020, the CMN enacted Resolution No. 4,795, which authorized the Brazilian Central Bank to grant loans to financial institutions under specific conditions, by means of a Temporary Special Liquidity Credit Facility, upon direct acquisition, in the primary market, of Financial Bills secured by financial assets or securities. The loan was available in tranches, and could reach 100% of the Reference Assets of such financial institutions. The facility became available to financial institutions through December 31, 2020 and the Financial Bills issued thereunder had a term between 30 and 359 calendar days. The first tranche was approved on May 12, 2020, in a ~~spin-off~~total amount of ~~Integry Tecnologia e Serviços AHU Ltda,~~R$17.5 billion. Both rules were revoked on November 1, 2021.
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Flexibilization of Funding Requirements Through Agribusiness Credit Notes (Letras de Crédito do Agronegócio or ~~“Integry,”~~“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 ~~then wholly-owned subsidiary~~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 Getnet Adquirência e Serviços para Meios de Pagamento S.A., or “Getnet.” Subsequently on December 20, 2019, Getnet and Santander Merchant Platform Solutions, S.L., or “SMPS Global,” a company based in Spain and controlled by Santander Spain, entered into a share purchase agreementR$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 ~~SMPS Global now holds 100%~~regulates the granting of ~~Integry’s~~loans under the Emergency Employment Support Program (Programa Emergencial de Suporte a Empregos or “PESE”), established through Provisional Measure No. 944/2020. PESE sets forth the offering of an emergency credit line of R$40 billion to finance, for two months, the payroll of small and medium-sized companies that adhere to the program, with the purpose of preserving jobs. Regarding the funding of said credit line, 85% will derive from the National Treasury and the remaining 15% from participating financial institutions, including Santander Brasil. The adhering small and medium-sized businesses will not be able to dismiss workers during the period that the loan is taken out and up to the 60th day after the business receives its last installment. The maximum amount financed per worker will be up to two minimum wages. The funding will go directly to the worker’s account, as is done today through payrolls operated by financial institutions. PESE came into effect on April 6, 2020. CMN Resolution No. 4,846 repealed CMN Resolution No. 4,800.
FX overhedge of equity interests abroad
On March 18, 2020, the CMN enacted Resolution No. 4,784, which amended CMN Resolution No. 4,192, of March 1, 2013. The rule sets forth that the tax credits arising from losses on excess FX position aimed at hedging of investments held abroad by financial institutions will not be deducted from their regulatory capital (patrimônio de referência). The measure aims at providing further capital relief and hence additional comfort for financial institutions to maintain and extend credit.
The changes were incorporated into CMN Resolution No. 4,955, of 2021, which repealed and replaced Resolution No. 4,192.
Higher ceiling for repurchase of financial bills (letras financeiras) by financial institutions
Pursuant to CMN Resolution No. 4,788, issued on March 23, 2020, financial institutions classified as Segment 1 for the proportional application of the prudential regulation, as is our case, may, from March 23 to April 30, 2020, repurchase up to 20% of financial bills of their own issuance, a substantial increase from the previous ceiling of 5%.
Brazilian Central Bank authorized to buy and sell government bonds and private financial assets and securities in the secondary market
Constitutional Amendment No. 106, enacted on May 7, 2020, sets forth emergency economic and budget measures for the Brazilian government during the COVID-19 pandemic. Among them, the Amendment authorizes the Brazilian Central Bank, for the duration of the pandemic, to buy and sell (i) government bonds in local and foreign secondary markets; and (ii) other assets, in domestic secondary financial, capital and payments markets, provided that, at the time of purchase, they have a credit risk rating in the local market equivalent to BB- or higher, conferred by at least one of the three largest international rating agencies, as well as a reference price published by a financial market entity accredited by the Brazilian Central Bank.
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SELECTED STATISTICAL INFORMATION
The following information for Santander Brasil is included for analytical purposes and is derived from, and should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 5. Operating and Financial Review and Prospects.”
Average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: as of December 31, of the prior year and each of the month-end balances of the 12 subsequent months. Average income statement and balance sheet data and other related statistical information have been prepared on a consolidated annual basis.
The selected statistical information set forth below includes information as of and for the years ended December 31, 2021, 2020, and 2019 extracted from the audited financial statements prepared in conformity with IFRS as issued by the IASB. See “Presentation of Financial and Other Information” and “Item 3. Key Information— A. Selected Financial Data.”
Average Balance Sheet and Interest Rates
The following tables show our average balances and interest rates for each of the periods presented. With respect to the tables below and the tables under “—Changes in Net Interest Income – Volume and Rate Analysis” and “—Assets—Earning Assets – Yield Spread,” (i) we have stated average balances on a gross basis, before netting impairment losses, except for the total average asset figures, which include such netting, and (ii) all average data have been calculated using month-end balances, which is not significantly different from having used daily averages. We stop accruing interest on loans once they are more than 60 days past due. All our non-accrual loans are included in the table below under “Other assets.”
For the Year Ended December 31,
2021 2020 2019
Average Balance(1) Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate
(in millions of R$, except percentages)
Assets and Interest
Income
Cash and balances with the Brazilian Central Bank 58,494 2,581 4.4 % 54,531 1,552 2.8 % 48,670 3,828 7.9 %
Loans and amounts due from credit institutions 95,513 5,191 5.4 % 104,759 1,519 1.4 % 101,981 3,844 3.8 %
Of which:
  Reverse repurchase
agreements 45,458 2,154 4.7 % -   -   -   -   -   -
Loans and advances to customers 461,141 49,538 10.7 % 384,389 44,104 11.5 % 323,180 50,406 15.6 %
Debt instruments 224,890 19,042 8.5 % 203,578 13,556 6.7 % 178,811 13,528 7.6 %
Other interest – earning assets -   1,636 -   -   2,044 -   -   1,235 -
Total interest – earning assets 840,038 77,988 9.3 % 747,257 62,775 8.4 % 652,642 72,841 11.2 %
Equity instruments 2,279 90 3.9 % 1,730 34 2.0 % 1,464 19 1.3 %
Investments in associates 952 -   -   1,098 -   -   1,060 -   -
Total earning assets 843,269 78,077 9.3 % 750,085 62,809 8.4 % 655,166 72,860 11.1 %
Cash and balances with the Brazilian Central Bank 4,633 -   -   4,800 -   -   4,538 -   -
Loans and amounts due from credit institutions 441 -   -   6,668 -   -   2,258 -   -
Impairment losses (26,908 ) -   -   (23,936 ) -   -   (22,528 ) -   -
Other assets 81,669 -   -   76,642 -   -   56,912 -   -

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Property, plant and equipment 8,823 -   -   9,587 -   -   9,091 -   -
Intangible assets 30,250 -   -   30,769 -   -   30,070 -   -
Total average assets 942,177 78,077 8.3 % 854,615 62,809 7.3 % 735,507 72,860 9.9 %
Liabilities and Interest Expense
Deposits from the Brazilian Central Bank and Deposits from credit institutions 149,111 4,712 3.2 % 111,684 4,327 3.9 % 100,473 4,866 4.8 %
Of which:
   Repurchase agreements 103,809 4,567 4.4 % -   -   -   -   -   -
Customer deposits 420,185 13,188 3.1 % 380,058 7,504 2.0 % 303,741 14,966 4.9 %
Of which:
   Repurchase agreements 58,264 -   -   -   -   -   -   -   -
Marketable debt securities 63,906 4,537 7.1 % 68,585 2,786 3.7 % 76,194 5,138 6.7 %
Subordinated debts 14,550 955 6.6 % 13,102 909 6.6 % 10,779 660 6.1 %
Other interest-bearing liabilities -   3,277 -   -   2,806 -   -   2,890 -
Total interest-bearing liabilities 647,752 26,669 4.2 % 573,429 18,332 3.2 % 491,187 28,520 5.8 %
Noninterest bearing demand deposits 33,893 -   -   28,581 -   -   14,612 -   -
Other liabilities 155,133 -   -   150,759 -   -   133,255 -   -
Non-controlling interests 329 -   -   315 -   -   617 -   -
Stockholders’ Equity 105,070 -   -   101,531 -   -   95,836 -   -
Total average liabilities and equity 942,177 26,669 2.8 % 854,615 18,332 2.1 % 735,507 28,520 3.9 %
(1)     In the year ended December 31, 2021, we revisited the accounting treatment of electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.
Changes in Net Interest Income – Volume and Rate Analysis
The following tables present the changes in our net interest income allocated between changes in average volume and changes in average rate for the year ended December 31, 2021, compared to the year ended December 31, 2020, and for the year ended December 31, 2020 compared to the year ended December 31, 2019. We have calculated volume variances based on movements in average balances over the period and rate variance based on changes in interest rates on average interest-earning assets and average interest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume. You should read the following tables and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Years Ended 2021/2020 For the Years Ended 2020/2019
Increase (decrease) due to changes in
Volume Rate Net change Volume Rate Net change
(in millions of R$)
Interest and Similar Income
Interest-earning assets
Cash and balances with the Brazilian Central Bank 113 854 1,029 414 (2,690 ) (2,276 )
Loans and amounts due from credit institutions (134 ) 4,175 3,672 102 (2,427 ) (2,325 )
Loans and advances to customers 8,806 (2,809 ) 5,436 8,493 (14,797 ) (6,304 )
Debt instruments 1,419 3,681 5,486 1,753 (1,725 ) 28
Other interest-earning assets (408 ) —   (408 ) 809 —   809
Total interest-earning assets 9,796 5,901 15,215 11,571 (21,639 ) (10,068 )
Equity Instruments 11 34 56 4 11 15
Total earning assets 9,807 5,935 15,271 11,575 (21,628 ) (10,053 )
Interest Expense and Similar Charges
Interest-bearing liabilities
Deposits from the Brazilian Central Bank and Deposits from credit institutions 1,450 (798 ) 385 504 (1,043 ) (539 )
Customer deposits 792 4,431 5,690 3,095 (10,563 ) (7,468 )
Marketable debt securities (172 ) 2,355 2,023 (471 ) (2,153 ) (2,624 )
Subordinated liabilities 95 (51 ) 39 150 53 203
Other interest-bearing liabilities 2,421 —   2,421 235 —   235
Total interest-bearing liabilities 4,587 5,937 10,558 3,513 (13,706 ) (10,193 )
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Assets
Earning Assets – Yield Spread
The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Year Ended December 31,
2021 2020 2019
(in millions of R$, except percentages)
Average earning assets 840,038 747,257 652,642
Interest and dividends on equity securities(1) 78,078 62,807 72,860
Net interest income 49,193 44,480 44,340
Gross yield(2)(*) 9.3 % 8.4 % 11.2 %
Net yield(3)(*) 5.9 % 6.0 % 6.8 %
Yield spread(4)(*) 4.8 % 5.2 % 5.3 %
(*) Yield information does not give effect to changes in fair value that are reflected as a component of stockholder’s equity.
(1) Total earning assets plus dividends from companies accounted for by the equity method (equity instruments).
(2) Gross yield is the amount of “Interest and dividends on equity securities” divided by “Average earning assets.”
(3) Net yield is the amount of “Net interest income” divided by “Average earning assets.”
(4) Yield spread is the difference between the average rate of “Total earning asset” and the average rate of “Total interest-bearing liabilities.”
Return on Equity and Assets
The following table presents our selected financial ratios for the periods indicated.
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For the Year Ended December 31,
2021 2020 2019
ROA: Return on average total assets 1.7 % 1.6 % 2.3 %
ROE: Return on average stockholders’ equity 14.8 % 13.3 % 17.4 %
ROE (adjusted) (1) 20.2 % 18.5 % 24.6 %
Average stockholders’ equity as a percentage of average total assets 11.2 % 11.9 % 13.0 %
Payout(2) 62.0 % 24.7 % 64.9 %

(1) “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” is a non-GAAP financial measure which adjusts “Return on average stockholders’ equity” to exclude the goodwill arising from the acquisition of Banco Real in 2008, Getnet and Super, both in 2014, and Banco Olé Bonsucesso Consignado S.A. in 2015, 60%, and the remaining 40% in 2020. See “Item 3. Key Information—A. Selected Financial Data—Selected Consolidated Ratios” for a reconciliation of “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” to “Return on average stockholders’ equity.”
(2) Dividend payout ratio (dividends declared per preferred share divided by net income per preferred share).
Interest-Earning Assets (other than Loans)
The following table shows the percentage mix of our average interest-earning assets for the years indicated. You should read this table in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Year Ended December 31,
2021 2020 2019
Cash and balances with the Brazilian Central Bank 7.0 % 7.3 % 7.5 %
Loans and amounts due from credit institutions 11.4 % 14.1 % 15.6 %
Loans and advances to customers 54.9 % 51.4 % 49.5 %
Debt instruments 26.8 % 27.2 % 27.4 %
Total interest-earning assets 100 % 100 % 100 %

Loans and Amounts Due from Credit Institutions
For further information about Loans and Amounts Due from Credit Institutions, see note 5 to our audited consolidated financial statements included elsewhere in this annual report.
Investment Securities
As of December 31, 2021 and 2020, the book value of investment securities was R$228 billion and R$232 billion, respectively (representing 24.5% and 24.9%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$171 billion, or 75.3% and R$192 billion, or 82.8% of our investment securities as of December 31, 2021 and 2020, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:
As of December 31,
2021 2020 2019
(in millions of R$)
Debt securities
Government securities—Brazil 171,437 191,896 135,848
Debentures and promissory notes 19,882 17,072 13,875
Other debt securities 33,894 21,134 23,609
Total domestic/debt securities 225,212 230,102 173,332

Equity securities
Shares of Brazilian companies 1,870 1,953 665
Shares of foreign companies 49 14 —
Investment fund units and shares 609 363 1,693
Total equity securities 2,528 2,329 2,358
Total investment securities 227,740 232,432 175,690
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As of December 31, 2021 and 2020, we held no securities of single issuers or related groups of companies whose aggregate book or market value exceeded 1% of our stockholders’ equity, other than the Brazilian government securities, which represented 151.5% and 180.5%, respectively of our stockholders’ equity. As of December 31, 2021 and 2020, the total value of our debt securities was approximately 212.5% and 217.4%, respectively, of stockholders’ equity.
The following table analyzes the maturities and weighted average yields of our debt investment securities not carried at fair value (before impairment allowance) as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.
Maturing within 1 year Maturing between 1 and 5 years Maturing between 5 and 10 years Maturing after 10 years Total
(in R$ millions)
Debt securities
Government securities—Brazil (1) 107,450 41,694 22,293 -   171,437
Other debt securities (2) 34,295 3,045 16,435 -   53,776
Total debt investment securities 141,745 44,739 38,728 -   225,212
(1) Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C and NTN-F).
(2) Includes balances of debentures and promissory notes.
The average rate for debt investment securities is 7.1%.
Investment Portfolio – Yields
The following table shows the balances and weighted-average yields for our debt securities not carried at fair value through earnings, for each range of maturities, as of December 31, 2021. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.
Maturing within 1 year Yield within 1 year Maturing between 1 and 5 years Yield between 1 and 5 years Maturing between 5 and 10 years Yield between 5 and 10 years Maturing after 10 years Yield after 10 years
(in R$ millions, except percentages)
Weighted-average yields % % % %
Domestic:
Brazilian Government 16,969 9.8 61,237 8.4 19,282 6.8 5,297 6.8
Other fixed-income securities 25,793 8.4 27,239 9.0 207 7.8 369 9.2
Impaired financial assets 829 8.4 257 9.0 842 7.8 -   -
Impairment losses (13 ) 8.4 (267 ) 9.0 (784 ) 7.8 -   -
Total domestic 43,578 6.4 88,466 7.2 19,547 6.8 5,666 6.7
International:
Foreign government 1,588 5.0 7,756 5.0 1,917 4.7 -   -
Other fixed-income securities 720 4.3 5,122 2.7 -   2.7 -   -
Impaired financial assets 105 4.3 -   2.7 -   2.7 -   -
Impairment losses (32 ) 4.3 (31 ) 2.7 (64 ) 2.7 -   -
Total international 2,381 4.1 12,847 3.6 1,853 2.7 -   -
Total weighted-average yields 8.7 8.0 6.6 6.7

Domestic and Foreign Currency
The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.
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As of December 31,
2021 2020 2019
Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank 21,543 10,851 4,531 15,617 4,878 15,250
Debt instruments 208,133 17,080 226,787 3,315 164,447 8,885
Loans and amounts due from credit institutions, gross 91,868 3,797 109,339 3,520 107,694 1,553
Loans and advances to customers, gross 398,335 66,509 396,950 20,822 326,421 20,835
Equity Instruments 2,078 45 1,675 -   2,358 -
Total assets 721,957 98,282 739,283 43,275 605,798 46,523
Liabilities
Financial Liabilities at Amortized cost:
Deposits from the Brazilian Central Bank and Deposits from credit institutions 62,332 58,674 86,564 45,093 58,283 40,988
Customer deposits 470,973 -   445,900 -   336,515 -
Marketable debt securities 66,027 13,009 47,476 9,399 64,987 8,715
Debt instruments eligible to compose capital -   12,781 -   13,120 -   10,176
Other financial liabilities 68,496 413 66,727 153 60,885 -
Total liabilities 667,828 84,877 646,667 67,766 520,670 59,879
Loan Portfolio
As of December 31, 2021, our loans and advances to customers totaled R$493 billion (53.0% of our total assets). Net impairment losses, loans and advances to customers totaled R$465 billion as of December 31, 2021 (49.9% of our total assets). In addition to loans, we had outstanding loan commitments drawable by third parties totaling R$146.0 billion, R$131.7 billion, R$125.9 billion as of December 31, 2021, 2020, 2019, respectively.
Types of Loans by Type of Customer
The majority of the loans we have outstanding are to borrowers domiciled in Brazil and are denominated in reais. For each loan category, we maintain specific risk management policies that are in line with the standards of the Santander Group, which in turn, are managed and monitored by our board of officers through the credit committee, The credit approval process for each loan category is structured primarily around our business segments. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk” for details on our credit approval policies for retail and wholesale lending.
We have a diversified loan portfolio, with no specific concentration exceeding 10% of our total loans, Currently, 1.2% of our loan portfolio is allocated to our largest debtor and 7.4% to the next 10 largest debtors.
For further information about the breakdown of our Loans and Maturity see sections “a - Breakdown” and “b – Detail” of note “9 – Loans and advances to customers” to our audited consolidated financial statements included in this annual report.
Maturity
The following table sets forth an analysis by maturity of our loans, by type and status, as of December 31, 2021.
As of December 31, 2021
Debt Sector by Maturity Less than 1 year % of
total Between 1 and 5 years % of
total Between 5 and 15 years % of
total More than 15 years % of
total Total % of
total
Commercial and industrial 165,729 61.37 % 73,723 45.81 % 8,222 20.16 % -   -   247,674 50.20 %
Real estate 3,986 1.48 % 10,138 6.30 % 19,337 47.41 % 21,278 98.58 % 54,739 11.10 %
Installment loans to
individuals 99,051 36.68 % 75,833 47.12 % 13,219 32.41 % 306 1.42 % 188,409 38.19 %
Lease financing 1,285 0.48 % 1,238 0.77 % 10 0.02 % -   -   2,533 0.51 %
Loans and advances to customers, gross 270,051 100.00 % 160,932 100.00 % 40,787 100.00 % 21,585 100.00 % 493,355 100.00 %
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Fixed and Variable Rate Loans
The following table sets forth a breakdown of our fixed and variable rate loans by type and status as of December 31, 2021.
Fixed and variable rate loans maturing in
Less than one year Between one and five years Between five and 15 years Over 15 years Sub-total more than one year Total
(in millions of R$, except percentages)
Fixed rate
Commercial and industrial 111,499 29,745 1,941 -   31,865 143,185
Real estate 24 73 62 18 153 177
Installment loans to individuals 105,045 74,689 12,965 306 87,961 193,005
Lease financing 522 694 -   -   695 1,217
Total Fixed rate 217,090 105,201 14,968 324 120,493 337,583
Variable rate
Commercial and industrial 37,149 33,524 2,109 -   35,633 72,782
Real estate 3,962 10,065 19,274 21,260 50,600 54,562
Installment loans to individuals 11,087 11,598 4,426 -   16,024 27,111
Lease financing 763 544 9 -   553 1,316
Total Variable rate 52,961 55,731 25,819 21,261 102,810 155,771
Total 270,051 160,932 40,787 21,585 223,304 493,355
Cross-Border Outstandings
The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.
As of December 31,
2021 2020 2019
Balance % of Total Assets Balance % of Total Assets Balance % of Total Assets
(in millions of R$, except percentages)
OECD countries(1)
Spain 108 - 437 - 1,984 0.3
United States 835 0.1 12,674 1.4 3,721 0.5
Netherlands - - 80 - 1,531 0.2
United Kingdom 20 - 29 - 1,003 0.1
Luxembourg 13,058 1.4 - - - -
Other OECD countries(2) 1,958 0.2 3,534 0.4 16,264 2.4
Total OECD 15,979 1.7 16,754 1.8 24,503 3.6
Non-OECD countries
Latin American countries(2) 560 0.1 1,204 0.1 1,382 0.2
Cayman Islands 1,679 0.2 2,917 0.3 3,528 0.5
Other(2) 282 - 1,189 0.1 2,397 0.3
Total non-OECD 2,521 0.3 5,310 0.6 7,307 1.1
Total 18,500 2.0 22,064 2.4 31,810 4.6
(1) The Organization for Economic Cooperation and Development.
(2) Aggregate outstandings in any single country in this category do not exceed 1.5% of our total assets.
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The following table presents the amounts of our cross-border outstandings as of December 31, 2021, 2020 and 2019 by type of borrower where outstandings in the borrower’s country exceeded 1.2% of our total assets.
Government Banks and Other Financial Institutions Commercial and Industrial Other Loans Total
(in millions of R$)
2019
United States -   8,710 55 316 9,081
Netherlands -   -   2,355 -   2,355
Austria -   -   127 (2 ) 125
United Kingdom -   -   7 151 158
Cayman Islands 469 263 488 (752 ) 468
Total 469 8,973 3,032 (287 ) 12,187
2020
United States -   12,653 9 12 12,674
Netherlands -   -   80 -   80
Austria -   -   -   444 444
United Kingdom -   28 -   1 29
Cayman Islands -   1,341 (1 ) 1,577 2,917
Total -   14,022 86 2,034 16,144
2021
United States -   3,943 1 12 3,956
Netherlands -   -   3 -   3
Austria -   -   -   595 595
United Kingdom -   28 -   -   28
Cayman Islands -   2,815 -   1,290 4,105
Total -   6,786 4 1,897 8,687
Non-current assets held for sale
For further information, see note 10 to our audited consolidated financial statements included elsewhere in this annual report.
Liabilities
Deposits
The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.
For further information, see notes 16 and 17 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the maturity of time deposits (excluding inter-bank deposits) in denominations of U.S.$100,000 or more at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.
As of December 31, 2021
Domestic International
(in millions of R$)
Under 3 months 255,120 -
3 to 6 months 25,742 -
6 to 12 months 51,483 -
Over 12 months 257,622 -
Total 589,967 -
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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, 2021.

As of
December 31, 2021
Maturing
Three Months or Less
Over Three Months Through Six Months
Over Six Months Through
12 Months
Over 12 months
(in millions of R$)
Total uninsured deposits 285,967 96,146 20,896 68,960 99,965
Short-Term Borrowings
The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.
As of December 31,
2021 2020 2019
Amount Average Rate Amount Average Rate Amount Average Rate
(in millions of R$, except percentages)
Securities sold under agreements to repurchase
As of December 31 115,964 1.76 % 112,477 1.90 % 123,941 5.00 %
Average during the period (1) 114,484 2.58 % 112,096 2.71 % 100,473 4.84 %
Maximum month-end balance 155,484 155,174 123,941
Total short-term borrowings at year end 115,964 112,477 123,941
(1) The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: at December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.
Allowance for Loan Losses
Changes in Allowances for Impairment Losses on the Balances of “Loans and receivables”
The following tables analyze changes in our allowances for impairment losses for the periods indicated. For further information regarding these changes, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Impairment Losses on Financial Assets (Net).”
As of December 31,
2021 2020 2019 2018 2017
(in millions of R$)
Balance at beginning of year 25,640 22,626 22,969 18,262 18,191
Initial adoption of IFRS 9 -   -   -   2,461 -
Balance adjusted 25,640 22,626 22,969 20,723 18,191
Impairment losses charged to income for the year 16,987 18,311 14,361 13,540 13,493
Write-off of impaired balances against recorded impairment allowance (12,904 ) (15,297 ) (14,705 ) (11,294 ) (13,422 )
Balance at end of year 29,723 25,640 22,626 22,969 18,262
Of which:
Loans and advances to customers 28,511 24,053 20,557 20,242 15,409
Loans and amounts due from credit institutions 22 9 14 14 69
Debt Instruments 1,191 1,577 2,055 2,714 2,784
Recoveries of loans previously written off(1) 1,536 861 991 827 1,154
(1) Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off.
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Allowance by Type of Borrower
The table below shows a breakdown of recoveries, net provisions and write-offs against credit loss allowance by type of borrower for the periods indicated.
For the Year Ended December 31,
2021 2020 2019 2018 2017
(in millions of R$)
Recoveries of loans previously charged off(1) 1,536 861 991 827 1,154
Commercial and industrial 463 422 520 345 413
Real estate – construction 64 56 47 103 210
Installment loans to individuals 1,002 370 417 370 521
Lease finance 7 13 8 9 10
Impairment losses charged to income for the year(1) 16,987 18,312 14,361 13,540 13,491
Commercial and industrial 3,340 6,919 2,377 3,620 5,499
Real estate – construction 116 81 95 193 471
Installment loans to individuals 13,532 11,309 11,866 9,708 7,461
Lease finance (1 ) 3 23 19 61
Write-off of impaired balances against recorded impairment allowance (12,904 ) (15,297 ) (14,705 ) (11,294 ) (13,422 )
Commercial and industrial (5,153 ) (4,617 ) (5,713 ) (3,981 ) (5,716 )
Real estate – construction (167 ) (232 ) (108 ) (191 ) (342 )
Installment loans to individuals (7,576 ) (10,433 ) (8,834 ) (7,100 ) (7,312 )
Lease finance (8 ) (15 ) (49 ) (22 ) (52 )
(1) Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off.
The table below shows a breakdown of allowances for credit losses by type of borrowers and the percentage of loans in each category as a share ~~capital.~~of total loans at the date indicated.
As of December 31,
2021 % of Total Loans 2020 % of Total Loans 2019 % of Total Loans
(in millions of R$, except percentages)
Borrowers
Commercial and industrial 8,325 28.0 9,757 38.1 7,455 33.0
Real estate 154 0.5 194 0.8 345 1.5
Installment loans to individuals 21,240 71.5 15,676 61.1 14,800 65.4
Lease financing 4 - 14 0.1 26 0.1
Total 29,723 100 25,640 100.0 22,626 100.0

Internal Risk Rating
The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:
As of December 31,
2021 2020 2019
(in millions of R$)
Internal Risk Rating
Low 374,505 347,315 257,133
Medium-low 79,217 24,277 56,549
Medium 14,590 26,232 11,755
Medium-high 9,413 3,896 8,512
High 15,630 16,101 13,307
Loans and advances to customers, gross 493,355 417,822 347,257
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For further information on our internal risk rating levels and their corresponding probability of default, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk—Credit Monitoring.”
Renegotiation Portfolio
The renegotiation portfolio for the year ended on December 31, 2021 amounted to R$21.7 billion, compared to R$20.5 billion for the same period in 2020, an increase of R$1,193 million or 5.8%, This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.
The renegotiation portfolio was covered by allowances for impairment losses of 44.7% as of December 31, 2021 and 44.0% as of December 31, 2020. These levels are considered appropriate for the characteristics of these loans and advances to customers.
The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:
2021 2020 2019
(in millions of R$, except percentages)
Renegotiation Portfolio by type of customer
Commercial and industrial 5,322 5,862 5,141
Installment loans to individuals 16,356 14,623 10,102
Financial leasing 5 5 239
Total 21,683 20,490 15,482
Allowances for impairment losses 9,698 9,019 7,501
Coverage ratio 44.7 % 44.0 % 48.4 %
Balances are deemed to be impaired when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts on the dates indicated in the loan agreement, after taking into account the collateral guarantees received to secure (fully or partially) collection of the related balances.
As established in our internal renegotiation policy, in order for renegotiated products to be classified as performing, we must, receive an amount equivalent to at least 10% of the total amount outstanding in the six months which follow the renegotiation date (note that these transactions will remain classified as renegotiated operations even after receiving such payments). Renegotiated loans that are more than 60 days overdue are also accounted for as impaired.
We increased our efforts regarding the collection of loans that are less than 60 days past due and also in relation to written off loans. We are also continuing with our strategy of granting loans to persons with low risk profile and higher levels of collaterals and guarantees.
Impaired Assets
The following table shows our impaired assets, excluding country risk.
As of December 31,
2021 2020 2019 2018 2017
(in millions of R$, except percentages)
Impaired assets
Past due and other impaired assets(1) 26,923 23,176 23,426 22,426 19,145
Impaired assets as a percentage of total loans 5.5 % 5.5 % 6.7 % 7.0 % 6.7 %
Net loan charge-offs as a percentage of total loans 2.6 % 3.7 % 4.2 % 3.5 % 4.7 %
Net loan charge-offs as a percentage of average total loans 2.8 % 3.8 % 4.6 % 3.8 % 4.8 %
(1) Includes as of December 31, 2021, R$2,528 million of doubtful loans (R$2,028 million in 2020, R$2,788 million in 2019, R$3,754 million in 2018 and R$5,439 million in 2017) that were not past-due.
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Evolution of Impaired Assets
Our impaired assets increased by 16.2%, or R$3,747 million, to R$26,923 million as of December 31, 2021, compared to R$23,176 million as of December 31, 2020. Provisions for impairment losses, including total recoveries of loans previously charged off, increased 15.9%, or R$4,083 million, to R$ 29,723 million as of December 31, 2021, compared to R$ 25,640 million as of December 31, 2020. Offsetting these effects were recoveries of R$1,536 million on loans previously written off as of December 31, 2021 and R$ 861 million as of December 31, 2020.
We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2021.
The following table shows the changes in our impaired assets at the dates indicated:
As of December 31,
2021 2020 2019 2018 2017 2016
(in millions of R$)
Balance at beginning of year 23,176 23,426 22,426 19,145 18,887 18,599
Initial Adoption of IFRS9 ⁽¹⁾ -   -   -   703 -   -
Adjusted Balance 23,176 23,426 22,426 19,848 18,887 18,599
Net additions 18,429 14,758 16,001 13,872 13,679 11,893
Write-offs (14,681 ) (15,008 ) (15,000 ) (11,294 ) (13,422 ) (11,605 )
Balance at end of year 26,923 23,176 23,426 22,426 19,145 18,887
(1) Further information, see notes 1 and 9 to our audited consolidated financial statements included elsewhere in this annual report.
The amount of “net additions” for any period is assets that became impaired in that period less assets that were impaired but became performing in that period. In 2021, the debt restructuring options were improved to maintain consistent levels of “net additions” and “write-offs.”
Impaired Assets by Type of Customer
The following table shows the amount of our impaired assets by type of customers at the dates indicated:
As of December 31,
2021 2020
(in millions of R$)
Commercial and industrial 11,440 10,558
Real estate 470 456
Installment loans to individuals 14,996 12,144
Lease financing 17 17
Total 26,923 23,176

Commercial and Industrial
Impaired assets in the commercial and industrial loans portfolio amounted to R$11,440 million as of December 31, 2021, an increase of R$881 million, or 8.3%, compared to R$10,558 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.
Real Estate
Impaired assets in the real estate lending portfolio totaled R$470 million on December 31, 2021, an increase of R$14 million, or 3.1%, compared to R$456 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of the recurrent growth of the credit portfolio.
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Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$14,996 million as of December 31, 2021, with an increase of R$2,852 million, or 23.5%, compared to 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.
Financial Leasing
Impaired assets in the lease financing lending portfolio totaled R$17 million on December 31, 2021, remaining similar to December 31, 2020.
Methodology for Impairment Losses
We evaluate all loans regarding the provision for impairment losses from credit risk. Loans are either individually evaluated for impairment, or collectively evaluated by grouping similar risk characteristics. Loans that are individually evaluated for impairment losses are not evaluated collectively.
To measure the impairment loss on loans individually evaluated for impairment, we consider the conditions of the borrowers, such as their economic and financial situation, level of indebtedness, ability to generate income, cash flow, management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as the characteristics of assets, such as their nature and purpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the time of evaluation.
To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity of credit risk. In other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.
The expected loss measurement is made through the following factors:
● Exposure at Default (EAD): is the amount of a transaction exposed to credit risk including the ratio of current outstanding balance exposure that could be provided at default. Developed models incorporate hypotheses considering possible modifications to the payment schedule.
● Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay the principal and / or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - life time (Stage 2 and 3), which considers the probability that the transaction between in default between the balance sheet date and the residual maturity date of the transaction. The standard requires that future information relevant to the estimation of these parameters should be considered.
● Loss Given Default (LGD): is the loss produced in the event of default. In other words, this reflects the percentage of exposure that could not be recovered in the event of a default. It depends mainly on the collateral, which is considered as credit risk mitigants associated with each financial asset, and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation.
● Discount rate: the rate applied to the future cash flows estimated during the expected life of the asset, and which is equal to the net present value of the financial instrument at its carrying value.
In order to estimate the above parameters, the Bank has applied its experience in developing internal models for parameters calculation both for regulatory and management purposes.
Loans Past Due for Less Than 90 Days but Not Classified as Impaired
The following table shows the loans past due for less than 90 days but not classified as impaired at the dates indicated:
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As of December 31,
2021 % of total 2020 % of total
(in millions of R$, except percentages)
Commercial and industrial 4,892 20.7 5,132 25.8
Mortgage loans 3,606 15.2 3,085 15.5
Installment loans to individuals 15,150 64.0 11,661 58.6
Lease financing 11 0.1 13 0.1
Total (*) 23,659 100.0 19,891 100.0
(*) Refers only to loans past due between 1 and 90 days.
Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$74.8 billion to R$540.9 billion as of December 31, 2021, compared to R$466.1 billion as of December 31, 2020. Our impaired assets increased by approximately R$3,747 billion in the same period, from R$23.2 billion to R$26.9 billion. The default rate decreased by 30 basis points in 2021 in comparison to 2020, primarily due to the recurrent growth of the credit portfolio.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.
As of December 31,
2021 2020 2019 2018 2017
(in millions of R$ except percentages)
Loans and advances to customers, gross 493,355 417,822 347,257 321,933 287,829
Impaired assets 26,923 23,176 23,426 22,426 19,145
Provisions for impairment losses 29,723 25,640 22,626 22,969 18,262
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 540,873 466,104 391,569 364,194 330,474
Ratios
Impaired assets to credit risk exposure 5.0 % 5.0 % 6.0 % 6.2 % 5.8 %
Coverage ratio ⁽²⁾ 110.4 % 110.6 % 96.6 % 102.4 % 95.4 %
Impairment losses (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )
Losses on other financial instruments not
  measured at fair value ⁽³⁾ -   -   -   -   -
Impairment losses on financial assets (net) ⁽⁴⁾ (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )

(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$540,873 million as of December 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
(2) Provisions for impairment losses as a percentage of impaired assets.
(3) Corresponds to the registration of losses of a permanent character in the realization value of bonds and securities classified as “securities available for sale” currently accounted for in “earnings on financial assets (net).”
(4) As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial instruments included R$1,191 million, R$1,577 million and R$2,055 million, respectively, relating to debt instruments.
The following chart shows our impaired assets to credit risk ratio from 2017 through 2021:
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Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2021, 2020 and 2019.
The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”

As of December 31,
2019 2020 2021
(in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding
Allowance for credit losses 22,626 25,640 29,723
Total loans outstanding 347,257 417,822 493,355
Credit ratio 6.52 % 6.14 % 6.02 %
Nonaccrual loans to total loans outstanding
Total nonaccrual loans outstanding 23,426 23,176 26,923
Total loans outstanding 347,257 417,822 493,355
Credit ratio 6.75 % 5.55 % 5.46 %
Allowance for credit losses to nonaccrual loans
Allowance for credit losses 22,626 25,640 29,723
Total nonaccrual loans outstanding 23,426 23,176 26,923
Credit ratio 96.6 % 110.6 % 110.4 %
Net charge-offs during the period to average loans outstanding
Net charge-offs during the period (14,705 ) (15,297 ) (12,904 )
Average amount outstanding 324,190 394,542 471,068
Credit ratio 4.5 % 3.9 % 2.7 %
Commercial and industrial:
Net charge-offs during the period (5,713 ) (4,617 ) (5,153 )
Average amount outstanding 132,372 176,750 214,286
Credit ratio 4.3 % 2.6 % 2.4 %
Real estate:
Net charge-offs during the period (108 ) (232 ) (167 )
Average amount outstanding 38,107 42,368 51,883
Credit ratio 0.3 % 0.5 % 0.3 %
Installment loans to individuals:

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Net charge-offs during the period (8,834 ) (10,433 ) (7,576 )
Average amount outstanding 151,735 173,336 202,578
Credit ratio 5.8 % 6.0 % 3.7 %
Lease financing:
Net charge-offs during the period (49 ) (15 ) (8 )
Average amount outstanding 1,975 2,089 2,321
Credit ratio 2.5 % 0.7 % 0.3 %
Allowance for credit losses to total loans outstanding
In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.
In 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.
Nonaccrual loans to total loans outstanding
In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of December 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the growth in total loans outstanding over nonaccrual loans.
In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a decrease of 1.1% in the nonaccrual loans outstanding.
Allowance for credit losses to nonaccrual loans
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.
In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$3,200 million for potential loan losses in connection with the COVID-19 pandemic.
Net charge-offs during the period to average loans outstanding
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by 66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.
Commercial and Industrial Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.
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Real Estate Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in average loans outstanding and a decrease of 28.0% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of December 31, 2019 to 0.5% as of December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.
Installment Loans to Individuals
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of December 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.
Lease Financing Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.
4C. Organizational Structure
Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V., or “Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, 2021, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
The following table presents the name, country of incorporation or residence and proportion of ownership interest of our main subsidiaries in accordance with the criteria for consolidation pursuant to IFRS:
Activity Country of Incorporation Ownership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. (1)
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. Credit Recovery Services Brazil 100.00%
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 100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A. Holding Brazil 100.00%
Sancap Investimentos e Participações S.A. Holding Brazil 100.00%
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Santander Holding Imobiliária S.A. (current name of Webcasas S.A.) Holding Brazil 100.00%
F1RST Tecnologia e Inovação Ltda. Technology 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 S.A. Other Activities 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%
Paytec Tecnologia em Pagamentos Ltda. Other Activities Brazil 100.00%
SX Negócios Ltda. Other Activities Brazil 100.00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.)
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) Credit Recovery Services Brazil 100.00%
Liderança Serviços Especializados em Cobranças Ltda. Credit Recovery Services Brazil 100.00%
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)
Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.) Asset Management Brazil 100.00%
Controlled by Sancap Investimentos e Participações S.A.
Santander Capitalização S.A. Savings and annuities Brazil 100.00%
Evidence Previdência S.A. Social Securities Brazil 100.00%
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A. 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. Other Activities Brazil 80.00%
Controlled by Santander Leasing S.A. Arrendamento Mercantil
Banco Bandepe S.A. Bank Brazil 100.00%
PI Distribuidora de Títulos e Valores Mobiliários S.A. Leasing Brazil 100.00%
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A.
Toro Corretora de Títulos de Valores Mobiliários Ltda. Broker Brazil 60.00%
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda.
Toro Investimentos S.A. Broker Brazil 100.00%
Controlled by Sancap
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Santander Auto S.A. Other Activities 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 (2) Investment Fund Brazil (a)
Santander FI Hedge Strategies Fund (2) 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) This table reflects the Spin-Off of Getnet. For additional information on the Spin-Off, see “—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
(2) Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund.
4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 385 properties for the activities of our banking network and rent 1,719 properties for the same purpose. Furthermore, in 2014, we transferred our operation to a new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at Avenida Presidente Juscelino Kubitschek, 2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5A. Operating Results
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 and the related notes thereto, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected Financial Data” included elsewhere in this annual report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated because of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors,” and other factors discussed elsewhere in this annual report. Our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019, prepared in accordance with IFRS as issued by the IASB and the report of our independent registered public accounting firm are included in “Item 18. Financial Statements.”
Financial Presentation
We have prepared our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.
The Getnet Spin-Off
We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.
Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.
For additional information on the Spin-Off, see “Item 4. Information on the Company–A. History and Development of the Company–The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.”
Brazilian Macroeconomic Environment
Overview
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil, which has been severely affected by the COVID-19 pandemic. While Brazilian GDP grew in 2021, due in part to Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:
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As of and For the Year Ended December 31,
2021 2020 2019
GDP growth(1) 4.6 % (4.1 %) 1.2 %
CDI Rate 4.4 % 2.1 % 6.0 %
TJLP 5.3 % 4.6 % 5.6 %
SELIC rate 9.25 % 2.0 % 4.5 %
Selling exchange rate (at period end) R$ per U.S.$1.00 5.58 5.20 4.03
Decrease (increase) in real rate against the U.S. dollar 7.4 % 28.9 % 4.0 %
Average exchange rate R$ per U.S.$1.00(2) 5.40 5.16 3.94
Inflation (IGP-M) 17.8 % 23.1 % 7.3 %
Inflation (IPCA) 10.06 % 4.5 % 4.3 %
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) GDP growth for 2021 is based on Santander Brasil’s internal estimates. For 2020 the source is the IBGE’s revised series.
(2) Average of the selling exchange rate for the business days during the period.
General economic stability in Brazil following the onset of the global financial crisis in 2009 allowed the Brazilian Central Bank to continue its policy of reducing interest rates. Due to inflation and other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a benchmark interest rate, reaching 10.00% at the end of December 31, 2013, 11.75% at the end of December 31, 2014 and 14.25% at the end of December 31, 2015. The Brazilian Central Bank reduced interest rates between 2015 and early 2021, with the SELIC reaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, 4.50% as of December 31, 2019 and 2.0% as of December 31, 2020. In 2021, in response to the widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the monetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and it has increased the SELIC rate to 10.75% p.a. as of the date of this annual report.^.
The lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s already high public. This has resulted in a significant risk premium, a depreciation of the real and volatility in financial asset prices. Brazil’s economy has been severely affected by the COVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a result of Brazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as set out under “—Impact of COVID-19” below, but considerable uncertainty remains as to the duration and severity of the COVID-19 pandemic and its economic effects. Combined with the emergence of new variants and the continuing limitations to the normal working of activities has led to a slow recovery cycle.
Any deterioration in Brazil’s rate of economic growth, changes in interest rates, the unemployment rate or price levels generally may adversely affect our business, financial conditions and results of operations. Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment.
Impact of COVID-19 on the Brazilian Economy
The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to mitigate the effects of the pandemic in the economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of 2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal support has led to a sharp increase in the fiscal deficit and public debt. Progress on structural reforms of the Brazilian economy has also been slow. As a result, financial markets have become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December
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31, 2021 from 145 basis points as of December 31, 2020 and the depreciation of the real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.
Interest Rates
An increase in the SELIC rate may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have a positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.
The following table presents the low, high, average and period-end SELIC rate since 2016, as reported by the Brazilian Central Bank:

Low
High(1)
Average(2)
Period-End
Year
2016 13.75 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 2.00 4.50 2.81 2.00
2021 2.00 9.25 4.81 9.25
2022 (through February 22, 2022) 9.25 10.75 9.86 10.75
(1) Highest month-end rate.
(2) Average of month-end rates during the period.
Our assets are predominantly fixed rate and our liabilities are predominantly floating. The resulting exposure to increases in market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. As of December 31, 2021, a 100-basis point increase in the yield curve would have resulted in R$ 553 million decline in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
In 2019, the ratio of nonperforming loans to individuals reached 3.5% and the household debt burden reached 23.9% of household income. In 2020, outstanding credit increased 15.6% as a result of credit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which resulted in a ratio of nonperforming loans of 2.8% in 2021, while further increasing the household debt burden to 24.4% of household income. In 2021, given the extension of some government support programs and the relaxation in certain mobility restrictions which enabled certain businesses to resume their activities, the volume of outstanding credit continued to expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of nonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 27.9% of household income).

2021
2020
2019
(in billions of R$)
Total Credit Outstanding (*) 4,684 3,261 3,471
Earmarked credit 1,881 1,500 1,465
Non-earmarked based credit 2,803 1,761 2,006
of which:
Corporate 1,291 814 905
Individuals (retail) 1,513 948 1,101
(*) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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Foreign Exchange Rates
Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. In 2021, we recorded foreign exchange exposure of R$117,400 million, foreign exchange exposure of R$ (124,437) million in 2020 and foreign exchange exposure of R$11,208 million in 2019. These results are due to the variation of the U.S. dollar against the real on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”
The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. During 2016, the real appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December ~~23,~~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, ~~Integry changed its name~~the real continued to ~~Santander Merchant Platform Solutions Brasil Ltda.~~depreciate against the U.S. dollar and as of December 31, 2019, it was at R$4.03 per U.S.$1.00. In 2020, the real continued to depreciate, and as of December 31, 2020 it was at R$5.20 per U.S.$1.00. In 2021, the real has continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As of December 31, 2021, the exchange rate was R$5.58 per U.S.$1.00. In 2022 through the date of this annual report, the real appreciated against the U.S. dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of February 22, 2022, the exchange rate was R$5.06 per U.S.$1.00.
Depreciation of the real relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government, Depreciation of the real may also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of the real could make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.
Inflation
In recent years, inflation had been oscillating around the target, which is set by the CMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target the last couple of years. From 2005 to 2018, the targeted level was 4.5%, with a tolerance interval of 2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for 2019 by the CMN was lowered to 4.25% and additional 0.25 percentage point decreases were defined for the targets until 2024, when the goal will be 3.00%.
Between 2012 and 2014, inflation ranged from 5.8% to 6.4%, i.e., it was close to the top of the fluctuation range in the Brazilian Central Bank’s inflation targeting range. In 2015, as a result of the indexation of a significant portion of contracts for services to the inflation levels of the previous years, the impact of adjustment of tariffs and the impact of the depreciation of the real on prices, inflation rate reached a level of 10.7%, the highest on record since May 2005 and well above the Brazilian Central Bank’s inflation target of 4.5%. In 2017, inflation fell substantially as a result of the consistent efforts of the Brazilian Central Bank to reduce the inflation rate, ending the year at 2.95%. As a result, the Brazilian Central Bank was required to send a letter to the CMN explaining the reasons for not meeting the target in which the Brazilian Central Bank explained that it expected that the monetary easing undertaken in 2018 would make the actual inflation rate converge toward the target. In 2018 the inflation increased to 3.75%, thus reinforcing the efficiency of the monetary policy in Brazil. In 2019, as a result of temporary price shocks affecting edible items, inflation ended the year slightly above the targeted level, at 4.31%. In 2020, inflation increased to 4.5%. In 2021, inflation continued to accelerate and reached 10.06% at the end of the year, as a result of several shocks that ranged from problems in global supply chains – which
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increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the beginning of 2018, the Brazilian monetary authority sent a letter to the CMN explaining why it failed to meet the inflation target and what are the actions to be implemented in order to ensure that inflation will converge to the targeted levels in the coming years.
The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.
Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the IPCA and IGPM. For example, considering the amounts in 2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$90 million and R$83 million, respectively.
Reserve and Lending Requirements
The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our results of operations by limiting or expanding the amounts available for commercial credit transactions.
The table below shows the requirements for reserves and credit to which we are subject for each financing category:
Product As of December 31, 2021 As of December 31, 2020 Form of Required Reserve Yield
Demand deposits
Rural credit loans(1) 25.00 % 27.50 % Loans Cap rate: 7.5% p.a.
Microcredit loans(2) 2.00 % 2.00 % Loans Cap rate: 4.0% p.m.
Reserve requirements(3) 21.00 % 21.00 % Cash Zero
Additional reserve requirements 0.00 % 0.00 % Cash n/a
Free funding(4) 52.00 % 49.50 %

Savings Accounts
Mortgage loans 65.00 % 65.00 % Loans Cap rate (SFH): TR + 12.0% p.a.
Reserve requirements(2) 20.00 % 20.00 % Cash TR + 6.17% or TR + 70.00% of the target SELIC
Additional reserve requirements 0.00 % 0.00 Cash n/a
Free funding(4) 15.00 % 15.00 %

Time deposits
Reserve requirements(3) 20.00 % 17.00 % Cash SELIC
In cash or other instruments 0.00 % 0.00 % Cash or other instruments n/a
In cash 0.00 % 0.00 % Cash n/a
Additional reserve requirements 0.00 % 0.00 % Cash n/a
Free funding(4) 80.00 % 83.00 %

(1) Rural credits are credits granted to farmers in the amount R$13.6 billion on December 31, 2021 and December 31, 2020, respectively.
(2) Microcredit is a credit granted to very small businesses, with an open position of R$1.3 billion on December 31, 2021 and December 31, 2020, respectively.
(3) Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular Nos, 3,917, 3,975 and 145.
(4) Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category.
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Taxes
See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulation—Taxation.”
Acquisition of residual equity stake in Getnet
On December 19, 2018, the minority shareholders of Getnet exercised their ~~Put~~right to sell all of their shares to Santander Brasil, or the “Put Option,” pursuant to the ~~SPA.~~Share Purchase and Sale Agreement and Other Covenants executed between the parties on April 4, 2014, or “SPA.” On the exercise date of the Put Option, we entered into a binding amendment to the SPA, to acquire all of the Getnet shares owned by minority shareholders, corresponding to 11.5% of the entity’s equity interest, in the amount of R$~~1,431~~1.4 billion. The transaction was approved by the Brazilian Central Bank on February 18, 2019 and closed on February 25, 2019. We subsequently spun-off Getnet to our shareholders as a result of which Getnet is no longer a subsidiary of Santander Brasil, see “—A. History and Development of the Company—The Getnet Spin-Off.”
Put option of the remaining equity interest in Banco Olé Consignado S.A. against Aymoré Crédito, Financiamento e Investimento S.A.
On March 14, 2019, the minority shareholder of Banco Olé Consignado S.A., or “Banco Olé” formalized its interest in exercising the put option right provided in the Investment Agreement executed with Aymoré CFI on July 30, 2014, to sell its 40% equity interest in Banco Olé to Aymoré CFI, a controlled entity of Santander Brasil. On January 31, 2020, Santander Brasil and the shareholders of Bosan Participações S.A. (a holding company whose single asset is the shares representing 40% of the corporate capital of Banco Olé) entered into the definitive agreements and performed the closing acts related to the purchase and sale of all shares issued by Bosan, upon the transfer of Bosan’s shares to Santander Brasil and payment of the total price of R$1,608.8 million to the sellers. As a result, Santander Brasil ~~currently owns 100%~~became, both directly and indirectly, the holder of ~~Getnet’s~~all shares issued ~~and outstanding share capital.~~by Banco Olé.
~~Formation~~Acquisition of ~~Esfera Fidelidade S.A.~~
Esfera Fidelidade was incorporated on August 14, 2018 as our wholly-owned subsidiary. Esfera Fidelidade was formed to develop and manage customer loyalty programs. The company started its operations in November 2018.
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~~Investment in Loop Gestão de Pátios S.A.~~
~~In 2018, Webmotors, a company in which we own an indirect 70% equity interest, entered into an agreement with Allpark~~Summer Empreendimentos Participações e Serviços S.A. and Celta L.A. Participações S.A. to acquire a 51% stake in Loop through a capital increase and issuance of new shares by Loop which were fully subscribed and paid-in by Webmotors. Loop conducts physical and virtual car auctions. This acquisition has enabled Webmotors to expand its service portfolio and strengthen its competitive position. The transaction was completed on September 25, 2018 for the amount of R$23.9 million.
~~Formation of BEN Benefícios e Serviços S.A.~~
On June 11, 2018, Santander Brasil incorporated Ben. Ben 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) in the form of printed electronic and magnetic cards. The company begun its operations in the second quarter of 2019.
~~Creation of PI DTVM~~
Ltda.
On May ~~3, 2018,~~14, 2019, we and our wholly-owned subsidiary Santander ~~Finance Arrendamento Mercantil~~Holding Imobiliária S.A., ~~one of our indirect subsidiaries, was converted~~or “SHI,” entered into a ~~securities brokerage and changed its corporate name to SI Distribuidora de Títulos e Valores Mobiliários S.A.~~binding document with the shareholders of Summer Empreendimentos Ltda., or “Summer,” for the acquisition of Summer’s issued share capital. The ~~conversion process~~acquisition was approved by the Brazilian Central Bank on ~~November 21, 2018. On December 17, 2018, SI Distribuidora~~September 16, 2019 and concluded on September 20, 2019. We now hold, directly and indirectly through SHI, 100% of Summer’s share capital. Initially, Summer was not consolidated in our financial statements because it was treated as a temporary investment (non-current assets for sale). However, the investment is no longer considered temporary, and therefore Summer is included in our consolidated financial statements.
Sale of equity stake in CIBRASEC – Companhia Brasileira 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 company began its operations in March 2019.
~~Acquisition of Isban Brasil S.A. and Produban Serviços de Informática S.A. Companies~~
Securitização
On ~~February 19~~July 24, 2019, we completed the sale of our entire equity interest in CIBRASEC – Companhia Brasileira de Securitização, or “Cibrasec,” to ISEC Securitizadora S.A., or “ISEC.” Our interest amounted to 4,000 common shares and ~~28, 2018, respectively, we purchased all~~50 Class A preferred shares, ~~issued by Isban Brasil from Ingenería de Software Bancário, S.L.,~~representing, in the aggregate, approximately 9.72% of Cibrasec’s total capital stock. The transaction was effected pursuant to the Shares Purchase and all shares issued by Produban Serviços de Informática S.A. from Produban Servicios Informáticos Generales, S.L., for R$61,078 thousand and R$42,731 thousand, respectively. While all parties to these transactions are ultimately controlled by Santander Spain, the transactions were conducted on an arm’s length basis. On February 28, 2018, Isban Brasil was merged into Produban Serviços de Informática S.A. andOther Covenants Agreement executed on the same date ~~Produban Serviços de Informática S.A. changed its corporate name to~~among Santander Brasil, ~~Tecnologia S.A.~~
~~Sale~~the other shareholders of ~~equity~~Cibrasec, ISEC and Cibrasec, who acted as an intervening party. We received consideration of R$9.8 million for our interest in ~~BW Guirapá I S.A.~~Cibrasec. As a result, we are no longer a shareholder of Cibrasec.
On December 22, 2017, Santander Investimentos, Corretora de Seguros, Cia. de Ferro Ligas da Bahia – Ferbasa S.A.and Brazil Wind S.A. entered into an agreement for the sale of 100% of the shares issued by BW Guirapá I S.A. held by Santander Corretora de Seguros and Brazil Wind to Cia. de Ferro Ligas da Bahia – Ferbasa S.A. The transaction also encompassed the seven wind farms organized as special purpose companies held by BW I. The base consideration paid was R$450 million, and an additional amount of up to R$35 million may still be paid if certain contractual targets are met. The transaction closed on April 2, 2018.
~~Formation of Santander Auto S.A.~~
On December 20, 2017, we entered into binding agreements with HDI Seguros for the formation of a partnership involving 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 focuses on offering motor insurance policies through a 100% digital platform. The transaction closed on October 9, 2018 when the documentation to form Santander Auto S.A. was executed and we and HDI Seguros undertook a joint capital contribution of R$15 million into Santander Auto. On January 9, 2019, SUSEP granted Santander Auto the regulatory authorization to operate. Santander Auto began its operations in August 2019.
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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~~
“Return 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 the Return Entities of its decision to exercise ~~the~~its call option for ~~the~~ shares representing the remaining 30% of the Return Entities’ 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. The Return Entities are active in the credit recovery intelligence sector, providing services such as credit portfolio evaluation and pricing, collection, management and recovery of non-performing loans.
Incorporation of the spun-off portion of Integry Tecnologia e Serviços A.H.U Ltda.
~~Accession to Certain Tax Payment Plans~~
~~In August 2017,~~On October 31, 2019, we ~~joined~~approved a spin-off of Integry Tecnologia e Serviços AHU Ltda, or “Integry,” a then wholly-owned subsidiary of Getnet (which was itself a subsidiary of Santander Brasil until the ~~PERT. The program allows for certain tax debts to be repaid~~completion of the Getnet Spin-Off). Subsequently on December 20, 2019, Getnet and Santander Merchant Platform Solutions, S.L., or “SMPS Global,” a company based in ~~installments. In connection with our participation in this program, we are repaying in installments certain amounts due~~Spain and controlled by Santander Spain, entered into a share purchase agreement as a result of ~~lawsuits~~which SMPS Global now holds 100% of Integry’s share capital. On December 23, 2019, Integry changed its name to Santander Merchant Platform Solutions Brasil Ltda.
Sale of equity stake in Super Pagamentos e Administração de Meios Eletrônicos S.A.
On February 28, 2020, we sold our entire equity interest in Super Pagamentos e Administração de Meios Eletrônicos S.A., or “Superdigital,” to Superdigital Holding Company, S.L., a company indirectly controlled by Santander Spain, for the amount of R$270 million as consideration. As a result of such transaction, we are no longer a shareholder of Superdigital.
Disclosure of Projections
On July 29, 2020, we informed the market that we 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 ~~administrative proceedings relating~~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.
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Merger of Banco Olé Consignado S.A. into Banco Santander (Brasil) S.A.
Following the acquisition of the remaining equity interest over Banco Olé Consignado S.A., through the holding company Bosan Participações S.A., together referred to as “Olé Companies,” the shareholders of Santander Brasil and the Olé Companies approved the merger of Olé Companies into Santander Brasil, as provided by the general meetings held on August 31, 2020. As a result, the Olé Companies ceased to exist and were succeeded by Santander Brasil. The incorporation of the Olé Companies has been approved by the Brazilian Central Bank and is in the process of being registered with the applicable commercial registries (juntas comerciais).
Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários Ltda.
On September 29, 2020, Santander Brasil’s subsidiary, PI DTVM, entered into an investment and other covenant agreement with the shareholders of Toro Controle e Participações S.A., or “Toro Controle,” to invest in Toro Controle. Toro Controle is the holding company of Toro Corretora de Títulos e Valores Mobiliários Ltda, or “Toro Corretora,” and Toro Investimentos S.A., or “Toro Investimentos,” which jointly run an investment platform focused on the retail market, founded in Belo Horizonte in 2010. We refer to Toro Controle, Toro Corretora and Toro Investimentos as “Toro.” As a result of the transaction, and the subsequent merger of Toro Controle into Toro Corretora, PI DTVM holds 60% of Toro Corretora’s share capital.
In addition, PI DTVM and Toro Corretora combined their market experiences to develop a complete platform of fixed and variable income products. This platform is based on shared expertise, technology and operate in the growing Brazilian investment market. The completion of the transaction occurred in April, 2021, following the execution of certain customary agreements between the parties, the fulfillment of customary conditions precedent and the receipt of certain regulatory approvals, including the approval of the Brazilian Central Bank.
Capital reduction of Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A.
On October 8, 2020, the shareholders of Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A., which we refer to jointly as the “Norchem Companies,” approved a capital reduction in the two Norchem Companies, in the amounts of R$14.7 million and R$19.9 million, respectively. As a result, we ceased to be shareholders of the Norchem Companies.
Dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A.
On November 12, 2020, we approved the dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A., a Spanish entity wholly-owned by us, which we used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our 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 of Paytec Tecnologia em Payments Ltda, and Paytec Logística e Armazém EIRELI
On December 8, 2020, we entered into a quota purchase agreement with the owners of Paytec Tecnologia em Payments Ltda, and Paytec Logística e Armazém Eireli (jointly “Paytec”) for the acquisition of the entirety of Paytec’s issued share capital. Paytec is a logistics operator with Brazil-wide coverage which focuses on the payments market. The transaction closed on March 12, 2021.
Buyback Program
On February 2, 2021, our board of directors approved, in continuity with the buyback program that expired on November 4, 2020, 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 36,956,402 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 is up to 18 months beginning on February 3, 2021 and expiring on August 2, 2022.
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Corporate reorganization Santander Leasing S.A. Arrendamento Mercantil and Banco Bandepe S.A.
On May 11, 2021, Santander Brasil and Banco Bandepe SA, or “Bandepe,” entered into an Agreement for the Purchase and Sale of Shares through which Santander Brasil acquired the entire equity interest held by Bandepe in Santander Leasing S.A. Arrendamento Mercantil, or “Santander Leasing,” which amounted to 21.42% of Santander Leasing’s share capital. As a result, Santander Brasil became the sole shareholder of Santander Leasing. On May 27, 2021, an incorporation of all the shares of Bandepe by Santander Leasing was approved, in order to convert Bandepe into a wholly-owned subsidiary of Santander Leasing. As a result, the capital stock of Santander Leasing increased by approximately R$5.4 billion.
Acquisition of Equity Interest in Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda.
On June 15, 2021, Pi DTVM, Toro Corretora and Toro Investimentos SA, or “Toro Investimentos” entered into an investment agreement and other covenants with the partners of Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda., or, collectively, “Monetus,” by means of which Toro Investimentos will hold, upon the closing of the transaction, 100% of the capital stock of Monetus. Monetus, originally from Belo Horizonte in the state of Minas Gerais, carries out its activities through an automated investment application. Taking into account a customer’s needs and risk profile, this application automatically creates, executes and tracks a diversified and personalized investment strategy to provide optimal service to customers. The transaction is subject to the execution of the definitive agreements and the occurrence of certain conditions usual to this type of transaction, including the applicable regulatory approvals.
Acquisition of Equity Interest in Mobills Labs Soluções em Tecnologia Ltda. and Mob Soluções em Tecnologia Ltda.
On June 15, 2021, Pi DTVM, Toro Corretora and Toro Investimentos S.A. executed an investment agreement and other covenants with the partners of Mobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda (jointly “Mobills”), by which, once the transaction is concluded, Toro Investimentos will hold 100% of the capital stock of Mobills. Domiciled in Ceará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning. After the conditions precedent established in the investment agreement were fulfilled, the transaction closed on January 4, 2022.
Acquisition of Equity Interest in Solutions 4 Fleet Consultoria Empresarial Ltda.
On July 13, 2021, Aymoré Crédito, Financiamento e Investimento S.A., or “Aymoré,” and the partners of Solution 4 Fleet Consultoria Empresarial Ltda., or “Solution4Fleet,” executed a certain Investment Agreement and Share Purchase and Sale Agreement, by means of which Aymoré will hold, upon the closing of the transaction, 80% of the capital stock of Solution4Fleet, or “Solution4Fleet Transaction.” Solution4Fleet specializes in structuring vehicle rental and subscription businesses – long-term rental for individuals. The transaction closed on October 8, 2021 after the applicable conditions precedent were fulfilled.
Acquisition of equity interest in Car10 Tecnologia e Informação S.A. and Pag10 Fomento Mercantil Eireli.
On July 13, 2021, Webmotors S.A., or “Webmotors,” the shareholders of Car10 Tecnologia e Informação S.A., or “Car10 Tecnologia,” and Pag10 Fomento Mercantil Eireli, or “Pag10,” and, together with Car10 Tecnologia, “Car10,” entered into certain agreements for the acquisition by Webmotors of 66.7% of the capital stock of Car10 Tecnologia, which is the sole holder of Pag10. Car10 acts as a marketplace that brings together more than 7,000 service providers such as workshops and autocenters, auto body and paint, and cleaning and sanitizing, as well as emergency assistance and towing. The transaction closed on September 20, 2021.
Acquisition of equity interest in Liderança Serviços Especializados em Cobranças Ltda. and Fozcobra Agência de Cobranças Ltda.
On August 4, 2021, Atual Serviços de Avaliação de Créditos e Meios Digitais S.A., or “Atual,” a wholly-owned subsidiary of Santander Brasil and the shareholders of Liderança Serviços Especializados em Cobranças Ltda., or “Liderança,” entered into a certain Agreement for the Assignment of Quotas and Other Covenants, for the acquisition by Atual of 100% of the capital stock of Liderança. Liderança operates in the industry of overdue credit recovery, providing extrajudicial collection services to financial institutions and other industries, and has a subsidiary: Fozcobra Agência de Cobranças Ltda. The transaction closed on October 1, 2021. Subsequently, Fozcobra Agência de Cobranças Ltda. was merged into Liderança on October 4, 2021.
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Acquisition of Equity Interest in Apê11 Tecnologia e Negócios Imobiliários Ltda.
On September 2, 2021, Santander Holding Imobiliária S.A., or “SHI,” a wholly-owned subsidiary of Santander Brasil, entered into a Share Purchase and Sale Agreement and Investment Agreement with the shareholders of Apê11 Tecnologia e Negócios Imobiliários Ltda., or “Apê11,” for the acquisition of 90% of the capital stock of Apê11. Apê11 acts as a collaborative marketplace, pioneering the digitization of the purchase journey of houses and apartments. After the conditions precedent established in the agreement were fulfilled, the closing of the transaction occurred on December 16, 2021.
Issuance of Notes
In November and December 2021, Santander Brasil issued Financial Bills with a subordination clause, to be used to compose our Tier 2 regulatory capital, in the total amount of R$5.5 billion. The Financial Bills have a term of ten years, and redemption and repurchase options in accordance with the applicable regulations. The Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.
Acquisition of Equity Interest in CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A.
On January 21, 2022, Santander Corretora de Seguros, Investimentos e Serviços S.A., or “Santander Corretora,” together with other investors (including Banco BTG Pactual S.A. and CBOE III, LLC) entered into an investment agreement with CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A., or “CSD BR,” and its shareholders for the acquisition of a minority equity interest in CSD BR. CSD BR operates as a register of financial assets, derivatives, securities and insurance policies, authorized by the Brazilian Central Bank, the CVM and the SUSEP. Subject to closing, Santander Corretora’s interest in CSD BR will be 20%. The closing of the transaction is subject to the conclusion of definitive agreements and the implementation of certain customary conditions precedent, including the receipt of applicable regulatory approvals.
The Getnet Spin-Off
On February 25, 2021, further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, we announced that our Board of Directors approved the spin-off of our merchant acquiring business, which was undertaken by our then-subsidiary Getnet, in order to concentrate the technology and payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. On March 31, 2021, the shareholders of Santander Brasil approved the Spin-Off. As a result of the Spin-Off, each holder of our common shares, preferred shares and Santander Brasil units, including the custodian for the Santander Brasil ADS facility, received Getnet common shares, preferred shares and Getnet units, at the rate of 0.25 common share, preferred share or Getnet Unit, as the case may be, for each one common share, preferred share or Santander Brasil Unit issued by us held at close of trading on the B3 on the relevant record date. Additionally, each holder of Santander Brasil ADSs representing Santander Brasil units received Getnet ADSs, each representing two Getnet units, at a rate of 0.125 Getnet ADS for each Santander Brasil ADS held at the close of trading on the NYSE on the relevant ADS record date. The Getnet common shares, preferred shares and Getnet units are traded on B3, and Getnet ADSs are traded on Nasdaq under the symbol “GET.” The Spin-Off was completed on October 26, 2021.
As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021. On April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “ Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.”
The charts below set forth a summary of our simplified corporate structure before and after the Spin-Off and after the reorganization of the PagoNxt group, of which Getnet forms part:
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Corporate Structure Prior to the Spin-Off
Corporate Structure After the Spin-Off
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Corporate Structure After the Reorganization of the PagoNxt Group
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. Based on the information available as of the date of this annual report, we present below a summary of the main effects of the COVID-19 pandemic on our business and results of operations:
● As the COVID-19 pandemic escalated in Brazil starting March 2020, we adjusted our operations to be able to continue providing our products and services to our customers while ensuring the health and safety of our employees. We have prioritized the safety and health of our employees and customers by adhering to prevention and care measures recommended by the Brazilian health and labor ministries, while striving to minimize the impact on our business. From the beginning, we implemented remote working arrangements to safeguard employees most at risk from COVID-19. We have also provided telemedicine services in addition to standard medical support to support the care of our employees and their families. Furthermore, we have instituted a protocol for mapping, protecting, and monitoring all contaminated individuals and those in contact with them, as well as a remote working strategy that evolved in lockstep with the pandemic. We supported our employees throughout the COVID-19 pandemic by offering them and their dependent remote medical care through an agreement with a leading Brazilian hospital. We also provided advance payment of thirteenth salary installments in April 2020 (these are normally paid in April and November of each year).
● From March 2020 to October 2021, our branches operated with reduced service hours; from 9:00 a.m. to 2:00 p.m. from March 2020 to July 2020 and then from 9:00 a.m. to 3:00 p.m. until October 2021. From November 2021 through to the date of this annual report, we have been expanding our service hours in our branches from 9:00 a.m. to 4:00 p.m. We adopted a staggered entry system in branches with heavy customer traffic in order to reduce the total number of customers in the branch at any given time. We also reserved the period from 9:00 a.m. to 10:00 a.m. for customers who would are more vulnerable to COVID-19. To provide continuous service and meet the increased demand of our call centers, we temporarily relocated retail employees to our call centers to help deal with the increased demand for remote banking services. In line with our commitment to clear customer communication, we launched the “Overcome Together” and “Santander Supports You” websites, which gathered resources and initiatives related to our business.
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● We have offered individual, microentrepreneur and SME customers the possibility of deferring their loan payments for up to 60 days. In May 2020, we allowed an extension for an additional 30 days, as a result of which our deferred loan portfolio reached a total of R$49.8 billion as of June 30, 2020, R$40.6 million as of December 31, 2020 and R$25.9 million as of December 31, 2021. At the same time, we continuously monitored our loan quality indicators, which remained at acceptable levels throughout the COVID-19 pandemic and through the date of this annual report. We also participated in government programs created in 2020 that granted special credit lines for businesses, particularly in retail, to minimize the negative effects of the pandemic including CMN Resolution No. 4,846, which was published on August 24, 2020 and regulated lending under the Emergency Employment Support Program, initially established by Provisional Measure No. 944/2020. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” As a result, our total portfolio balance of government-sponsored loans reached R$10.3 billion as of December 31, 2021.
● The onset of COVID-19 had a negative impact on our net fee and commission income, especially in the first half of 2020, due to a lower volume of customer transactions, which adversely affected the total amounts we were able to charge in credit and debit card fees. As a result, we experienced reductions in the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2019 to the six months ended June 30, 2020, as compared to the growth rates of our net fee and commission income and of our net interest income from the six months ended June 30, 2018 to the six months ended June 30, 2019. These reductions were due to the abovementioned lower transaction volumes, a higher share of global wholesale banking in the loan portfolio, alongside a shift in the product mix, with a decreased share of higher risk products, such as credit cards and overdrafts. In 2021, in particular in the second half of the year, there was a recovery in economic activity. As a result, in the year ended December 31, 2021, our net interest income increased by 15.5% compared to the year ended December 31, 2020 (although our net fee and commission income decreased by 5.9% in the same period), our sales through physical distribution channels increased (by 46% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and so did our sales through digital channels (which increased by 45% in the year ended December 31, 2021 compared to the year ended December 31, 2020) and we added 784,000 new customers in December 2021 (which is 78% more than in December 2020). For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Interest Income” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Net Fee and Commission Income.”
● In 2020, we constituted an additional provision in the amount of R$3,200 million. This provision was calculated based on the analysis of the potential macroeconomic effects and took into account not only quantitative and qualitative indicators, but also the adequate and accurate identification of risks and a collective assessment of exposures. In 2021 as a response to the macroeconomic shock of the COVID-19 pandemic, we used a part of the provision overlay on expected credit losses created in 2020, as further explained under “Item 5. Operating and Financial Review and Prospects—A. Operating Results— Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Impairment Losses on Financial Assets (Net).” However, we also experienced an improvement in our loan portfolio, in particular with respect to individuals as loans to individuals increased by 17% in the year ended December 31, 2021 compared to the year ended December 31, 2020. For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019— Results of Operations—Impairment Losses on Financial Assets (Net).”
● In 2020, the National Monetary Council, or “CMN,” and the Brazilian Central Bank introduced measures to minimize the impact of COVID-19 on the financial system. With respect to liquidity, these changes included: (i) a reduction in the time deposit reserve requirement from 31% to 17%; and (ii) an increase in the additional limit on the reserve requirement treated as High Quality Liquidity Assets from 15% to 30%, ensuring greater liquidity in a stress scenario. In addition, a temporary suspension on dividends and other distributions was enacted through Resolution No. 4,820, limiting the distributions to shareholders 30% of adjusted net profit (following amendments enacted on December 23, 2020). As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This suspension on the payment of dividends was not renewed in 2021. The CMN also published Resolution No. 4,783, which temporarily reduced the capital conservation buffer (where all rates relate
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to the total amount of risk-weighted assets) required from financial institutions from 2.5% to 1.25% as of the second quarter of 2020, leading our Basel ratio to reach 15.3% as of December 31, 2020. In 2021, the time deposit reserve requirement increased from 17% to 20% as of November 2021, and the capital conservation buffer required from financial institutions rose from 1.25% to 1.625% as of April, 2021, with this percentage increasing gradually until April 2022, when it will reach 2.5%. For more information, see “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Regulatory Developments Related to COVID-19” and “—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”
● We experienced an increase in digital business. Specifically, we recorded an increase of 45% in the number of new contracts originated through digital channels in the year ended December 31, 2021 compared to the year ended December 31, 2020.
See also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business— The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”
Capital Expenditures and Divestitures
Our main capital expenditures include investments in our information technology platform. Our information technology platform focuses on our customers and supports our business model. In 2021, 2020 and 2019, total investments in information technology were R$1,905 million, R$1,432 million, and R$1,858 million, respectively.
In 2021, 2020 and 2019, we continually improved in our technology platforms by means of investment in our digital applications, especially through the implementation of new solutions in the areas of artificial intelligence (machine learning, AIOPs), micro services, blockchain technology, cyber insurance, facial recognition and cloud-based technologies, among others. The application of these new technologies improved our interaction with our customers enabled us to provide solutions across credit, consortium, payroll loan, insurance, private banking, cards, payments, agribusiness, investments to better address client needs. We also continued to invest in our physical distribution network (branches, PABs and PAEs), including: biometric identification for corporate customers, digital purchase and payment of exchange, among other initiatives. For more details about our technology and infrastructure, see the item “—B. Business Overview—Technology and Infrastructure.”
Our ongoing capital expenditures consist primarily of investments in information technology. We expect to fund our ongoing capital expenditures principally from our cash flow from operations.
Our major divestitures in the past three fiscal years and until the date of this annual report were the Spin-Off of Getnet and the sale of Super Pagamentos.
For more information, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations.”
4B. Business Overview
Our Strategy
Our strategy is centered on endeavoring to generate profitable, recurring, and sustainable growth. We believe the expansion of our customer base over the years is due to our ability to capture new customers and increase their loyalty. We have achieved this by offering a comprehensive portfolio of products and services, with a particular emphasis on quality and a constant drive to improve customer satisfaction. We serve our customers through multi-channel solutions which we believe enable us to provide a tailored and human service which is responsive to the needs of our customers. We rely on our four integrated service channels to do offer our services to our customers: digital, remote, physical and external channels.
We recorded net income ~~tax~~of R$15,559 million, R$13,451 millionand R$16,631 million in the years ended December 31, 2021, 2020 and 2019, an increase of 15.7% in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the years ended December 31, 2021, 2020 and 2019 we achieved capital adequacy ratios of 14.9%, 15.3% and 15.0% respectively. In the years ended December 31, 2021, 2020 and 2019, we have achieved efficiency ratios of 27.1%, 35.5% and 28.8%, and adjusted efficiency ratios of 28.2%, 27.7% and 28.2%, respectively. In addition, we achieved an adjusted return on average stockholders’ equity of 20.2%, 18.4% and 24.6% in 2021, 2020 and 2019, respectively. Adjusted return on average stockholders’ equity is a non-GAAP financial measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.” We believe these metrics demonstrate our track record of consistent performance and the results of our constant efforts to improve our productivity.
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In recent years, we have undergone significant transformations, thereby enabling us to identify and capitalize on business opportunities. We have expanded our platform to diversify our offering of products and services:
● In 2016, we initiated our commercial transformation by implementing new work models, streamlining processes and digitalizing our operations. We have sought to introduce a culture of innovation, while remaining cognizant of our surroundings and customer demands. This led us to expand our vehicle financing offering at a time when the market was moving in the opposite direction.
● In 2017, we took steps to improve service quality and we placed customer satisfaction to the core of our strategy. We believe we were industry pioneers in implementing and publicly disclosing our net promoter score, or NPS, as a measure of customer satisfaction.
● In 2018, alongside our culture of service, we advanced our pursuit of efficiency by bringing an industrial cost approach into our banking business, covering three critical fronts: organization, technology, and culture. We believe this strategy has already yielded positive results and that it will enable us to further optimize our productivity while also improving customer experience on our platforms.
● In 2019, we expanded our ecosystem by introducing new, innovative products into the market. We launched Sim, emDia, Santander Auto, Auto Compara and Ben Visa Vale while repositioning ourselves in the card market, as well as refocusing our efforts on customer and account holder loyalty.
● In 2020, we focused our efforts on assisting customers in facing the challenges posed by the COVID-19 pandemic by providing products and services adapted to the new reality brought in by the pandemic. We did so by improving and expanding our digital channels in order to deliver to our customers robust self-service banking at a time when in-person service delivery was not possible. We also reaffirmed our commitment to efficiency and rapid response to emerging market trends by launching SX Santander to offer customers exclusive benefits, differentiating ourselves from the Brazilian Central Bank’s PIX instant payment solution.
● Finally, in 2021 we redoubled our efforts to improve customer experience and satisfaction across all channels. Our strategy is to convert new customers into loyal customers (we define loyal customers as those who purchase six or more products), thus, generating profitability for the bank and satisfaction in using the bank for our customers. We seized on the opportunities we saw in the market and managed to reach 53.4 million customers as of December 31, 2021, including adding more than 784,000 new customers in December 2021. We achieved this while also maintaining high levels of customer loyalty, reaching eight million loyal customers as of December 31, 2021 (an increase of 32% compared to December 31, 2020). The combined effect of the growth in our customer base and our levels of customer loyalty enabled us to increase our customer base by 11% as of December 31, 2021 compared to December 31, 2020. We also further improved our digital operations by expanding our offerings through this channel, which has grown significantly, as evidenced by an increase of 45% in financial products and services purchased through this channel in the year ended December 31, 2021 compared to the year ended December 31, 2020. In addition, we continued to focus on streamlining processes, digitalizing our operations, and reducing paper consumption to enable us to operate faster and more efficiently. As a result, we have achieved: (i) faster service, as the lead time to open a business current account decreased by 78% in the year ended December 31, 2021 compared to the year ended December 31, 2020 and (ii) improved efficiency, with 87.0% of credit card bills issued in digital or email format in the year ended December 31, 2021, an increase of 13 p.p. compared to the year ended December 31, 2020.
● We strive to continuously improve our customer experience through the addition of new services, the expansion of our offering, and the enhancement and deeper integration of our channels.
We have consolidated and improved our four service channels through which customers can select the product or solution that best meets their needs. Our digital channel averaged 442 million total visits per month in 2021, adding 554,000 new accounts in December 2021. Similarly, the physical channel, which consists of our branch network that is expanding into Brazil’s rural areas, recorded a monthly average of more than 15 million visits by customers and potential customers, serving as a crucial pillar for business origination. In the remote channel, with the implementation of SX Negócios, a new service model, we have redefined our model to move away from a call center and toward a business channel. We have built a platform to capture new business, processing over 25 million support requests per month in the year ended December 31, 2021, 4.6 million of which are handled by humans. The external channel is comprised of bank correspondents, which are entities allowed to provide specific services to customers, including customer services, on behalf of another financial institutions, and our business verticals, such as payroll-deductible loans, Prospera and Olé Consignado.
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We believe that our digital platform enables us not only to offer our customers a comprehensive set of services but also to benefit from the business generation potential which arises from the ease with which customers are able to purchase our products and services through our digital sales channels. Sales of our products and services through our digital channels increased by 45% in the year ended December 31, 2021, compared to the year ended December 31, 2020, including an increase in the number of premium bonds (capitalização) contracts of 360% and 23% in premiums written in open insurance contracts (considering life insurance, personal accident insurance, home insurance, and other types of insurance) in each case in the year ended December 31, 2021 compared to the year ended December 31, 2020. GENT&, our artificial intelligence channel, recorded over 18.5 million interactions in December 2021 and is currently capable of answering more than 26,000 questions.
We believe that our business has the potential to grow by means of innovation and technology, in conjunction with user experience enhancements and steady evolution in the quality of our services. Our products, services, and businesses form part of the daily lives of all our customers, whether businesses or individuals, and include, among others, payment solutions (i.e., payment platforms), investment and advisory services, vehicle and consumer goods financing, mortgage loans, payroll-deductible and agribusiness loans, as well as the products and services offered through our wholesale unit. We also endeavor to maintain sound risk management, which entails continuously improving our credit granting models to maintain our credit risk indicators at acceptable levels.
In order to strengthen our platform, we have launched new businesses that continue to evolve and support our customer loyalty strategy, such as (i) Ben, which grew its customer base to 565,000 cards as of December 31, 2021 along with 2,675 human resources customers and 365,432 partner establishments as of the same date; (ii) Sim, which surpassed the five million customer mark and reached a loan portfolio of R$1.6 billion as of December 31, 2021; (iii) emDia, which increased recovered credit volume by 12% in the year ended December 31, 2021 compared to the year ended December 31, 2020, and (iv) Santander Auto, where the percentage of new consumer finance contract purchasers who also acquired insurance reached 20% in 2021, resulting in over R$210 million in written premiums in 2021. In 2020, we also announced the acquisition of securities brokerage firm Toro Corretora to complement our investment platform and broaden our product offering. Finally, in 2021, we launched Auto Compara, a fully online auto insurance comparison and offering platform that is now also available to non-customers. Auto Compara had an average of 350,000 website visits in the year ended December 31, 2021 and we increased by 26% in premiums written during the year. Additionally, we reinforced our position in the automotive and real estate industries by completing acquisitions of businesses and solutions to expand our business and build a more comprehensive platform.
As a result of our efforts to constantly improve our business, we were recognized the Best Bank in Brazil in 2021 by The Banker Magazine.
Our People
Our people are a key pillar of our strategy, supported by a culture that values employees, promotes diversity, encourages efficiency, and fosters innovation, while also preparing us for a new cycle and enabling us to continue anticipating market trends. Our performance is the embodiment of our culture, with our people serving as the catalyst for the transformation. Thus, we have built a diverse and engaged team. We value meritocracy, diversity, and inclusion, as evidenced by the fact that, as of December 31, 2021, 31% of our leadership positions were held by women, 27% of our employees were black employees, and 5% were held by people with disabilities. We also place a premium on proactive knowledge acquisition: in 2021, over 3,200 courses were held on the Santander Academy platform, with 78% of them being taught by employees. Close leadership and open communication are ingrained in our DNA. Our actions are backed by a culture that is increasingly centered on our people – 94% of whom are proud to work for Santander, according to the Great Place to Work, or “GPTW,” survey from 2021. As a result of our efforts, we have been named one of the top 10 best companies to work for in Brazil by GPTW 2021, appearing in the following categories: Ethnic-Racial, Women, LGBTQI+, Early Childhood, 50+, and Healthy Management. Additionally, we were honored with the following awards: (i) Ethnic-Racial by Exame magazine’s Diversity Guide, (ii) Diversity and Inclusion by Euromoney’s Awards for Excellence, and (iii) Bloomberg’s Gender Equality Index. Finally, we were also included on the GPTW B3 index.
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Social and Environmental Initiatives
Similarly, and consistent with our strategy of responsible growth, we recognize our role as a financial institution in Brazil’s development. Hence, for twenty years, we have sought to foster sustainable businesses. We highlight our Amigo de Valor program, one of the main social programs in Brazil today, started in 2002. In 2021, we continued to advance initiatives that reflect how sustainability and social ~~security contributions~~issues are embedded in every layer of our organization:
● In the social realm, we lead initiatives that have impacted more than one million people over the last three years. For the past 19 years, we have worked to protect, promote, and defend the rights of children and adolescents in vulnerable situations through the Amigo de Valor program, benefiting thousands of people and raising R$20 million in 2021 through employee and customer contributions. Since 2002, we have been promoting financial inclusion by means of Prospera Santander Microfinance (Prospera Santander Microfinanças), which had 708,000 active customers and a R$1.9 billion portfolio as of December 31, 2021, with the goal of helping microentrepreneurs thrive and thereby develop the communities in which they operate, while also providing business management guidance. Likewise, for more than two decades, we have consistently invested in education, as we believe that it is the foundation for societal transformation. Finally, we have awarded higher education scholarships since 2005, including 33,000 scholarships in 2021 alone.
● With respect to our environmental initiatives, we offer a comprehensive suite of financing solutions for the development of sustainable businesses, both for individuals and businesses, which we accelerated in 2021, generating R$ 51.6 billion in sustainable businesses in the year ended December 31, 2021. We pioneered green financing, with over R$ 1.3 billion loans linked to environmental, social and governance, or “ESG,” goals and green loans in our portfolio as of December 31,2021, in addition to being among the leaders in CBIOs (decarbonization credit). We are also active solar energy loans, financing photovoltaic panels for individuals, companies, and agribusinesses, disbursing R$ 2.3 billion in the year ended December 31, 2021. In 2021, we also launched a financing facility exclusively for bicycles.
We implement routine socioenvironmental risk assessment, for which we rely on a Socioenvironmental Questionnaire, or “QSA,” by means of which we collect information on customers that have environmental practices, including data on carbon emissions, management of offsets and extreme weather events. The QSA is applied to the Wholesale and Business 3 segments, as well as to Retail customers. This analysis is part of the annual credit review for 14 sectors in which we operate, all of which are potentially affected by climate change according to the Task Force on Climate-related Financial Disclosures, or “TCFD.”
Since 2016, we have taken climate change issues into consideration in the credit rating of Wholesale customers, and, since 2020, we have used a water stress calculator in our socioenvironmental assessments. This tool considers our customers’ economic activity, watershed location and measures taken to save water. It has been developed considering customer vulnerability to climate change in general, even as a result of changes in legislation or consumer preferences.
Regarding decarbonization targets, in 2021 we announced our intention to achieve net zero carbon emissions by 2050 to support the goals of the Paris Agreement on climate change using 100% renewable energy sources by 2025 and eradicating single-use plastic from all our operations. We have been carbon neutral since 2010, fully offsetting our emission sources.
In July 2021, we established a forum with the goal of preventing greenwashing by seeking to ensure that operations which we describe as green, social, or sustainable comply with Santander Group’s taxonomy and market standards. The forum, which is composed of senior executives from the Sustainability, Risk, Social and Environmental Risk, Business, Compliance, and Legal departments, also assesses reputational risks associated with our operations. Out of a total of 40 proposals to label a particular service of product as being “green” which were reviewed by the forum in 2021, 31 have been approved.
In addition, we have developed products that contribute to lowering the impact on climate change, such as:
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● Low Carbon CDB, we launched the Low Carbon CDB, a sustainable, low risk investment aimed at companies that want to have more sustainable investments in their portfolio capable of reducing their greenhouse gas emissions. The resources of the investments in CDB will be used to finance sustainable projects of companies that promote actions to reduce greenhouse gas emissions.
● Carbonômetro (Carbon meter), a tool that calculates the daily greenhouse gas emissions of our operations.
● Carbon Calculator, which encourages employees of Santander Brasil and affiliates to calculate their carbon footprint.
● "The Future of the Carbon Market in Brazil” live video. We produced a live video to discuss the future of the carbon market in Brazil and the challenges and opportunities for the business sector.
In July 2020, we announced a plan to promote sustainable development in the Amazon, in collaboration with two other largest private-sector banks in Brazil. Part of this plan, named “Plano Amazônia,” aims to eliminate deforestation in the supply chain for cattle farms for beef processors in the Amazon, aiming to finance the cultivation of local crops, such as açaí, Brazilian nuts and cocoa, and to identify opportunities for the development of bioeconomy chains. In 2021, we also launched the new commercial network Rede Norte Amazônica, in order to expand our operations in the region, and we have established the North Amazon Network, a business unit comprised of four Brazilian states (Amazonas, Acre, Rondônia, and Roraima), with the objective of fostering business in the region and a particular focus on sustainability. Since its creation, we have made over R$ 270 million in credit lines available to cooperatives and agribusinesses, as well as to producers of Amazonian products who adopt sustainable practices.
In 2021, we inaugurated Brazil’s first sustainable train station in partnership with the State Government of São Paulo, maximizing on-site natural resource efficiency by means of solar energy panels and a water reuse system. Furthermore, in collaboration with the International Finance Corporation, a World Bank Group institution, and the State Government of São Paulo, we supported the Pinheiros River clean-up program.
We also use ESG as one of the criteria for evaluating our executives, evidencing how deeply embedded the subject is in our culture.
In recognition of our efforts, we have received several ESG accolades in 2021, including Exame magazine’s Best ESG Bank, the Eco Brazil Award, Época Negócios 360°’s Most Sustainable Company, in addition to being named to Fortune magazine’s Change the World list.
Our Business
We provide our complete portfolio of products and services to our 30 million active customers as of December 31, 2021 through the following business segments:
● Commercial Banking: provides services and products to individuals and companies (except for global corporate customers who are managed by our Global Wholesale Banking). The revenue from this segment is derived from the banking and financial products and services available to our account and non-account holders.
● Global Wholesale Banking: offers a wide range of national and international tailored financial services and structured solutions for our global corporate customers, comprised mostly of local and multinational corporations.
We outline below the business divisions for each of our operating segments, as well as the breakdown of our net interest income and operating income before tax by segment:
Commercial Banking
Global Wholesale Banking
●Retail Banking ●Santander Corporate & Investment Banking (“SCIB”)
●Individuals
●SMEs
●Consumer Finance
●Corporate
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For the Year Ended December 31,
Net interest income Operating income before tax
2021 2020 2019 2021 2020 2019
(R$ millions)
Commercial Banking(1) 46,236 41,457 42,044 19,491 4,666 18,375
Global Wholesale Banking 5,082 2,985 2,277 5,260 4,998 3,898
Total 51,318 44,443 44,321 24,750 9,664 22,273
(1) Operating income before tax reported under commercial banking includes the effects of the hedge for investments held abroad (offset in the same amount in the “Income Tax” line). The effect of the hedge for investments held abroad in 2021, 2020 and 2019 amounted to loss of R$2,512 million, R$13,583 million and loss of R$1,264 million, respectively.
The following table shows a managerial breakdown of our loans and advances by customer type at the dates indicated:
As of December 31,
Change between
2020 and 2021

Change between
2019 and 2020
2021 2020 2019
(R$ millions)
Individuals 203,678 174,042 156,177 17.0 % 11.4 %
Consumer Finance 55,441 51,637 48,421 7.4 % 6.6 %
SMEs 59,602 54,525 53,119 9.3 % 2.6 %
Corporate(1) 174,634 137,618 89,539 26.9 % 53.7 %
Total Credit Portfolio 493,355 417,822 347,257 18.1 % 20.3 %
(1) For purposes of loan portfolio presentation, “corporate” includes companies with annual gross revenues exceeding R$200 million, including our Global Corporate Banking customers.
Commercial Banking
Retail
Individuals
We have structured the individual customer service segment as follows:
● Private Banking – is responsible for customers with at least R$5.0 million in assets available for investment. In this segment, we offer a complete and tailored portfolio of financial products and services, investment advice, loans and asset management through a dedicated manager for investments and banking services.
● Santander Select – is responsible for customers with a monthly income above R$10,000, and R$30,000 in investments, or more than R$100,000 in investments. The offer here consists of a value proposition with differentiated products and services, exclusive service spaces, relationship managers who serve a small number of customers and provide asset management advisory services,
● Santander Van Gogh – is responsible for customers with a monthly income ranging from R$4,000 to R$10,000, or with investments above R$40,000. Our goal is to understand the needs of our customers at each stage of their lives and provide them with financial advice through a multi-channel solution, including financial products and services, as well as financial advice,
● Santander Especial – is responsible for customers who earn up to R$4,000 per month. Our business model offers simple and efficient solutions with an attractive cost benefit to the customer, primarily through electronic channels.
Furthermore, we also support our Select and Van Gogh customers through our Santander Direct channel, Santander Direct is suited to customers who want more flexible service hours, from 8:00 a.m., to 10:00 p.m. and who prefer using a remote method, such as telephone, e-mail or chat, as well as access to digital channels. This service complements our offering and broadens our capillarity by catering to regions where we do not have a physical presence.
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We launched the following products or functionalities for retail customers in 2021:
● Santander Especial – New customers who opened their accounts on our digital channels have access to Santander Direct.
● New account digital process - We endeavor to simplify the account opening process using internal and external information and making the experience quick and simple for new customers.
Small and Medium Enterprises (SMEs)
We serve SMEs under the “Santander Negócios e Empresas” brand, with the following customer service segmentation model:
● Empresas 3 Núcleos (Core Companies) – responsible for companies with annual revenues between R$30 million and R$200 million. Our service model is based on dedicated relationship managers, a team of experts for more complex demands and loan managers specializing in risk management. We also provide specialized services to multinational, technology companies and other major corporations in order to meet their specific needs.
● Empresas 2 Polo (Hub Companies) – responsible for companies with annual revenues between R$3 million and R$30 million. We offer these customers a comprehensive range of products and services through a user-friendly interface, as well as dedicated relationship managers that work in specialized hubs.
● Empresas 1 Agência (Branch Businesses) – responsible for companies with annual revenues of up to R$3 million. We offer these customers a simple banking solution through an integrated account that combines a corporate account with a point of sale, or “POS,” terminal hosted by our former subsidiary Getnet. Through this arrangement, our customers receive benefits for using the Getnet solution to process their credit card sales, with receipts being posted to a Santander Brasil checking account.
● Negócios Direct - for companies with annual revenues of up to R$300 thousand. We offer these customers direct access to a relationship manager who is available during extended service hours and via remote channels, such as telephone, e-mail or chat, as well as access to digital channels that facilitate the client’s day to day needs.
● Empresas MEI (Individual Microentrepreneur) – responsible for companies with annual revenues of up to R$81 thousand. We offer these customers a simplified and cost-effective option through our Santander Conta MEI, a remote service, and digital solutions such as Gent& Santander – the artificial intelligence solution for service and sales.
Consumer Finance
We provide consumer credit to finance motor vehicles, goods and services directly or through intermediate agencies, Santander Financiamentos is our main service channel, but we also operate under multiple brands.
The following table sets forth certain key financial and operating data regarding our consumer finance business for the periods indicated:

As of December 31,
Change between 2020 and 2021
Change between 2019 and 2020

2021
2020
2019
Individual consumer finance loan portfolio market share (1) (%) 24.4% 25.1% 25.0% (1.1) p.p. 0.1 p.p.
(1) Source: Brazilian Central Bank.
Corporate
Our corporate banking segment aims to be the main distribution channel of the Santander Group to Brazilian and foreign and/or multinational corporate clients. The product offering ranges from ~~1999~~simple cash accounts to
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mergers and acquisitions advisory services. We leverage our strength in consumer finance, asset and wealth management, payments and markets to serve our clients and their shareholders, employees, clients and suppliers. We serve companies with annual gross revenues in excess of than R$200 million located across Brazil by physical and digital channels. Our corporate banking segment has been constantly evolving as a segment relying on a disciplined analytical toolkit, consistent communication and workforce upskilling.
Global Wholesale Banking
Santander Corporate & Investment Banking (SCIB)
SCIB is the global business unit that serves customers, who, due to their size and complexity, require tailored services or high-value-added wholesale products. In this segment, we provide a wide range of domestic and international financial services to large Brazilian and multinational companies. Our customer portfolio comprises a range of industries, including telecommunications, retail, aviation, real estate and logistics, power, construction and infrastructure, natural resources, food, agribusiness and financial institutions.
Our customers in the SCIB segment benefit from Santander Group’s global structure of services, which is supported by its worldwide-integrated wholesale banking network and global services solutions, as well as local market expertise and provision of integrated services.
Our Portfolio of Products and Services
Payments
Credit and Debit Cards
We operate in the credit and debit card market by issuing these products to our customers (including both account and non-account holders), with the majority of customers being individuals. Our strategy is to offer credit and debit cards that are compatible with the income level and lifestyle of each of our customers.
In order to reach a greater number of customers and remain competitive, we launched the SX card in November 2020, as part of the SX strategy detailed below. This product benefits highly engaged and transactional customers, facilitating the exemption from annual card fees. In addition, we also took the opportunity with the SX card to launch a more modern and ambitious card design for our customers.
To improve customer experience for the high-income segment, where we are aiming to increase market share and brand awareness, we launched the Gold, Platinum and Centurion products with American Express which include NFC technology, the accumulation of Esfera points that do not expire and still allow access to Membership Rewards, an exclusive American Express program.
In line with Santander Brasil’s global purpose of becoming NetZero by 2050, we launched cards made from recycled material in July 2021. The new cards made of recycled material were issued to customers who already had an SX or Elite card, close to expiry. We expect to make the official launch for the first quarter of 2022, with the issuance of 100% of SX and Elite cards with recycled material. Currently, we are the only bank in Brazil that issues cards made from recycled material.
In the SMEs segment, believing in the great potential of microentrepreneurs, or “MEI,” who represent more than half of the companies in Brazil, we developed an exclusive card for this segment. The MEI card grants customers discounts on purchases made with partners, chosen according to the microentrepreneurs field of activity, as a result of which cardholders have access to exclusive offers for the purchase of input for their companies. In addition, there is the possibility of an annual fee waiver by binding the card by using the card on a monthly basis or by registering with the PIX system.
In line with the objective of becoming an open financial services platform, in November 2021 we launched a partnership with Samsung, a solution that offers digital account opening, card sales and SIM loans on the first screen of Samsung pay. The objective is to provide a simple and fluid journey within the app that is already used on a daily basis to pay for on-the-go purchases.
We also improved our digital journey to provide better customer self-service, which we believe is a key component for higher customer engagement. A recent novelty is “Clique e Retire,” a new physical card delivery system that provides a quick, autonomous solution for customers by allowing them to opt to collect their cards from self-service machines.
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The following table sets forth certain key financial and operating data regarding our credit card business for the periods indicated.
As of and For the Year Ended
December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 2020 2019
Credit card portfolio market share (1) 12.4 % 13.4 % 12.9 % (1.0 p.p.) 0.5 p.p.
Credit card portfolio (R$ billion) (2) 48 37.8 36.1 27.0 (100.0 %)
Total card turnover (R$ billion) (2) 306.0 242.0 236.4 26.4 2.4 %
Credit card turnover (R$ billion) (2) 203 158.7 161.0 27.9 (1.4 %)
Total card transactions (in millions) (2) 3,555.3 2,570.8 2,725.4 38.3 (5.7 %)
Credit card transactions (in millions) (2) 1,859.1 1,300.0 1,450.9 43.0 (10.4 %)
Participation of credit card in the household consumption (only debit)– Market overview (2)(%) 24.1 % 17.4 % 13.8 % 6.7 p.p. 3.6 p.p.
Participation of credit card in the household consumption (only credit) – Market overview (2)(%) 42.1 % 25.2 % 24.0 % 16.9 p.p. 1.2 p.p.
Participation of credit card in the household consumption (total, debit and credit) – Market overview (2)(%) 69.3 % 43.5 % 38.2 % 25.8 p.p. 5.3 p.p.
(1) Source: Brazilian Central Bank, as of September 31, 2021. Data for the year ended December 31, 2021 was not available as of the date of this annual report.
(2) Source ABECS – “Monitor bandeiras,” The data relating for the year ended December 2021 has been revised as a consequence of the restatement of the methodology of monitoring issued by ABECS.
Santander Way
Santander Way is an app available to our cardholders that allows them to manage their Santander Brasil cards at any time and place. This complete payment platform also works as a digital wallet, enabling customers to conduct instant contactless payments. The app is frequently updated with new features. Some of the most notable features launched in 2021 included: (i) extra loan and installment offers, (ii) virtual cards that allow purchases before the physical card arrives, (iii) functions for safer online purchases without a physical card, (iv) possibility for the customer to update his or her income to obtain a higher credit limit, and (v) chargeback from unrecognized purchases. In 2021, we have nine million active customers using Santander Way.
Merchant Acquiring Market | Getnet
Getnet is a technology company that offers payment solutions to a range of merchants, from large businesses to the small entrepreneurs, both physically and digitally. Getnet was our subsidiary until the completion of the Spin-Off on October 26, 2021. For more information on the Spin-Off of Getnet, see “—A. History and Development of the Company—The Getnet Spin-Off.”
The following table sets forth certain historical key financial and operating data regarding Getnet’s business for the periods indicated.
As of and For the Year Ended December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 (1) 2020 2019
(R$ millions, except as otherwise indicated)
Market share of total turnover (2) 15.3 % 14.9 % 11.3 % 0.4 p.p. 3.6 p.p.
Debit turnover (3) 105.8 105.8 80.9 0 % 30.8 %
Credit turnover (3) 182.7 167.9 126.6 8.8 % 32.6 %

(1) We completed the Spin-Off of Getnet on October 26, 2021 and, as a result, Getnet is no longer a subsidiary of Santander Brasil. We stopped consolidating Getnet within our results of operations on March 31, 2021. For additional information on the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
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(2)   Source: Data for 2021 relates to the nine-month period ended September 30, 2021 and is based on ABECS Monitor Bandeiras - Acquirers. Data for the year ended December 31, 2021 was not available as of the date of this annual report. For comparison purposes, the difference between September 30, 2021 and September 30, 2020 would be an increase of 1.7 percentage points.
(3) Considers data until September, 2021.
We completed the Spin-Off of Getnet in October 2021, and Getnet is no longer our subsidiary. However, on April 15, 2021, we entered into the Getnet Partnership Agreement, which provides a framework for our relationship with Getnet following the Spin-Off. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Spin-Off of Getnet and Related Arrangements—Partnership Agreement.
Following the Spin-Off, Getnet is operating as the Brazilian leg and regional acquirer of the Santander Group’s PagoNxt merchant solutions. PagoNxt is a strategic initiative that seeks to promote sustainable and profitable growth by integrating various payment solutions for businesses and consumers using the latest technology. PagoNxt is an autonomous company within the Santander Group. Through its three lines of business, namely merchant solutions for businesses, trade solutions for international trade and consumer solutions for consumers, it provides solutions not only to banking clients of the Santander Group but also to third-party customers, financial institutions and fintechs.
Esfera
Esfera is our loyalty program, which can be accessed through its own website and mobile app. Our loyalty platforms enable our credit card holders to exchange their reward points for many products, services and travel benefits, including exclusive deals and discounts with a broader selection of partners such as some of Brazil’s largest retailers and a cinema chain, among others. Esfera also operates a marketplace offering cashback to is clients on purchases of products that aggregate more than sixty partners as of the date of this annual report.
Ben
Ben is an employee benefits company that provides greater flexibility, purchasing power and quality of life to its users by creating, supplying and managing types of employee benefit vouchers (e.g. meals, such as Vale Alimentação and Vale Refeição, as well as transportation) in the form of magnetic cards. These benefits are offered through an integrated digital platform.
Since 2019, Ben has provided transportation benefits in partnership with RB Serviços Empresariais Ltda.
Ben is currently working on development of new products, such as fuel cards and other benefit options to expand its portfolio.
Ben added Ben Único to its portfolio. This product allows customers to have two kinds of benefits in a single card, reducing the cost with card emission and logistics, contributing with ESG metrics,
According with new products developing planning, Ben submitted a request to the Brazilian Central Bank to issue a license to operate as a payment institution (instituição de pagamento) and it was granted in December 2021.
The following table sets forth certain key financial and operating data regarding Ben´s business for the periods indicated.
As of and For the Year Ended December 31,
2021 2020 2019
(in R$ millions, except as otherwise indicated)
Card Purchases 1,484 946 560
Number of Cards (in thousands) 565 217 98
Number of Transactions (in thousands) 20,477 12,192 9,534
Merchant accredited (in thousands) 365 338 253
For further information, see also “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
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Payroll Loans
Payroll loans support both account and non-account holders in the execution of projects and financial organization. Under these loans, monthly installments are deducted directly from the borrowers’ paychecks by their own employers, and then credited to Santander Brasil, significantly reducing our credit risk. We offer these payroll loans to our customers through our mobile banking platform and our branches. Our customers can refinance their payroll loans, as well as choose from other options to help them manage their debts. Furthermore, these loans are also offered to non-account holders through Olé Consignado. For further information on relevant events, relating to Olé Consignado’s corporate events, see “Item 4. Information on the Company—A. History and Development of the Company—Important Events.”
The following table sets forth certain key financial and operating data regarding our payroll loans as of the dates indicated.
As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 2020 2019
Market share in origination (1) 16.96 % 18.90 % 13.2 % (1.94) p.p 9.09 p.p
Payroll loan portfolio (R$ billion) 53.3 48.1 43.0 10.85 % 11.9 %
(1) Source: Brazilian Central Bank, as of December 31, 2021, 2020 and 2019, as applicable
SIM
SIM is a digital lending platform for individuals through which customers can apply, and be approved, for a loan completely online. After two years of operation, SIM has already achieved a positive net profit, a loan portfolio of R$1.6 billion as of December 31, 2021 and a market share of 0.7%, in the year ended December 31, 2021, as well as a total of 6.5 million registered users as of December 31, 2021. SIM also has a high level of customer satisfaction, with an NPS of 80 points in the year ended December 31, 2021.
emDia
emDia is an online debt renegotiation platform. It provides customers with a simple platform to access debt renegotiation services on a 24/7 basis, As of December 31, 2021, emDia had 6.5 million customers and had contributed to the recovery of R$78 million in credit volume in 2021.
Mortgages
We offer long-term financing to our customers for real estate purchases, secured by deeds of trust. We consider mortgages to be a strategic product due to their lower risk (since the acquired property serves as collateral) and their ability to increase our customer loyalty (especially since we offer customers more attractive rates if they choose to bank with us). In this market, our customers, and those of our competitors, are primarily individuals.
We do not offer mortgage loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 90% of the value of the property to be purchased, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of the borrower’s monthly gross income,
To facilitate the process for our customers, we provide a real estate digital platform where customers can obtain mortgages completely online. We were the first bank in Brazil to offer customers the opportunity to secure a mortgage without being physically present, except for the signing of the agreement and returning it duly registered. We have a partnership with the largest real estate platform in Brazil in order to improve our sales network and strengthen our digital presence.
The following table sets forth certain key financial and operating data regarding our mortgage business for the periods indicated:
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As of December 31, Change between 2020 and 2021 Change between 2019 and 2020
2021 2020 2019
(in R$ billions, except percentages)
Mortgage loan portfolio 54.8 45.8 39.7 19.7 % 15.4 %
Individual sector mortgage loans 53.0 44.0 37.2 20.5 % 18.3 %
Loan to value(1) – Production (% quarterly average) 65.5 % 64.9 % 62.9 % 0.06 p.p. 2.0 p.p.
Loan to value – Portfolio (%) 52.5 % 52.2 % 49.4 % 0.30 p.p. 2.75 p.p.
(1) Ratio between loans and the value of the collateral, excluding home equity.
Home Equity
In our portfolio of loan products, we also offer a “home equity” financing product called “UseCasa” in which clients can receive a loan if they provide real estate as collateral. This product enables clients to access financing to pursue their personal objectives. “UseCasa” has increased its market share to 23.5% in 2021, maintaining our position as the leading private sector bank for these types of loans in Brazil. Our portfolio was R$3.2 billion in 2021, an increase of 27% in the year ended December 31, 2021 compared to the year ended December 31, 2020. Efficiency has also improved as approximately 50% of loans are now approved in less than 10 days. We do not offer home equity loans that do not meet prime lending regulatory standards, which means that (i) we do not finance more than 60% of the value of the property, (ii) borrowers must meet certain minimum monthly income levels evidenced by recent payroll information and tax returns to confirm their employment status or other revenue sources, allowing us to evaluate their credit risk profile, and (iii) any other indebtedness added to the financing cannot exceed 35% of borrowers’ monthly gross income.
To facilitate the process, customers can obtain home equity loans completely online through our real estate digital platform. When using this option, customers only need to be physically present when signing the contract and when returning it once it is duly registered.
Tailored Products and Services
As mentioned above, we offer a complete set of services and products worldwide. In this way, we have a portfolio that ranges from basic to tailor-made and highly complex solutions in the following areas:
● Global Transaction Banking – Responsible for the sale and management of local transactional banking products, which include local loans, commercial financing such as on-lending of funds from development banks, structuring of local loans and cash management solutions).
● Global Transactional Services – Responsible for the sale of global transactional products, financing for export and import, guarantees, structuring of assets in foreign currency, in addition to raising funds from international banks.
● Global Debt Financing – Responsible for the provision of financing and financial advice on infrastructure projects, origination, and distribution of fixed income instruments in capital markets both locally and internationally, financing for acquisitions and syndicated loans in local and foreign currency.
● Investment Banking – Advice on mergers and acquisitions and equity transactions in the capital markets.
● Equities – It operates brokerage services for individual, corporate and institutional investors in stocks, listed derivatives and research.
● Treasury Customers – Responsible for structuring and offering foreign exchange products, derivatives and investments to clients in our various segments, including institutional investors, corporate clients and individuals.
● Market Making – Responsible for the pricing of operations (foreign exchange and derivatives) for customers originating from the sales efforts of our corporate, institutional, corporate, private banking and retail. This area is also responsible for managing our proprietary books.
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● Energy Trader – Performs transaction with qualified customers and end consumers, and also acts as a hedge and market making provider in the energy markets.
We are one of the leading banks in capital markets and financial advisory services in the Brazilian and international markets as evidenced by the awards we have received, of which the most significant are listed in the table below.
Company
Acknowledgments
Dealogic
Full Year 2021
#8 Latin America & Caribbean ECM Revenue
#9 Latin America ECM Volume by Bookrunner
#10 Brazil M&A Revenue by Advisor
#6 Brazil M&A Volume by Advisor
#4 Latin America & Caribbean DCM Volume by Bookrunner
#8 Latin America and Caribbean Loans Volume by Bookrunner
#8 Latin America and Caribbean IB Revenue by Bookrunner
#5 Brazil Investment Banking by Bank¹
#1 Latin American & Caribbean Project Finance Loans Volume by MLA²
#1 Americas Project Finance Volume by Finance Adviser to Consortium²
#1 Americas Project Finance Volume by Finance Adviser²
#4 Americas Renewable Energy Project Finance Volume by MLA²
¹ For the third quarter of 2021
² For the first half of 2021
Global 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 Provider of Short-Term Investments Money 2021
Market Funds in Latin America 2020
Best Trade Finance Bank in LatAm 2020
World’s Best Payment Hub Solution 2020
Best Trade Finance Provider for LatAm 2020
Institutional Investors
#1 The Latin America Strategy Team
#4 The Latin America Sales Team
# Sales Trading Institutional Team
#5 Research Team
First Quarter of 2020
TMI Awards Best Trade & Supply Chain Finance Bank in South America 2020
Euromoney
The Best Bank for SMEs Award in LatAm.
October 2020
FX Markets
Best Bank for emerging LatAm currencies 2020
Best Bank for LatAm 2020
Best Bank for USD/BRL 2020
Global Trade Review
Best Trade Finance Bank in LatAm 2020
Best Deal Award Route 2020
Best Supply Chain Bank 2020
First Quarter of 2020
Bond Radar
#1 DCM Distributed in the International Market
Brasil Bonds & Corporate Bonds
Full Year 2020
Trade Finance an IJ Global
Best Supply Chain Finance Bank 2020
Best Receivables Financier 2020
PFI Awards
Global Adviser of the year
First Quarter of 2020
Anbima
#2 DCM Distributed in the Local Markets
#4 DCM Originated in Local Markets– Fixed Income Consolidation
Project Finance
Financing advisory #1 Announced value
First Quarter of 2021
Full Year 2020
Risk Net
Risk Solutions House of the Year 2020
Deals: Cosan (EDQ) / Syngenta (Special Sits)
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Latin Finance
Corporate High-Grade Bond of the Year: Suzano FY2020
Equity Follow-On of The Year: Via Varejo
Infrastructure Bank of the Year – Brazil
Syndicated Loan of the Year: LD Celulose
Domestic M&A Deal of the Year: Grupo Notre Dame Intermédica purchases Clinipam
Corporate High-Yield Bond of the Year: Braskem
Bank of the Year: Southern Cone
Bacen
#1 Total FX
September 2021
The Banker Best Transaction Bank for Latam 2021
Customer Solutions
Agribusiness
Agribusiness remains one of our key areas of expansion, and we believe that expanding our agribusiness network will help broaden our reach into the Brazilian countryside to strategic areas in which we are not yet present. We provide a full range of products and services focused on the agribusiness sector. Our approach towards rural producers differs from the one taken with our other customers in that we offer a specialized relationship to our rural producers. We believe that a network of physical stores and digital solutions will result in a more agile and efficient communication with these customers.
The following table sets forth certain key financial and operating data regarding our agribusiness for the periods indicated.
As of and For the Year Ended December 31,
Change between
2020 and 2021
Change between 2019 and 2020
2021 2020 2019
Number of agribusiness-focused stores 42 40 34 5 % 6 %
Agribusiness loan portfolio (R$ billion) 13.9 13.7 10.9 1.5 % 26.2 %
Microfinance
We believe that Prospera Santander Microfinance is a leading microcredit-oriented operation among privately owned banks in Brazil, based on market share and portfolio value. This product aims to support formal and informal microentrepreneurs by generating business and income with a 100% digitalized service process, in addition to products intended to improve business management skills, we have customers who hire us for services previously not available to them, because they do otherwise have access to financial services, such as property finance, consortium and investment services.
As of and For the Year Ended December 31, Change between 2020 and 2021
Change between
2019 and 2020
2021 2020 2019
Number of Prospera stores 119 99 100 20.02 (1.0 %)
Microfinance loan portfolio (R$ billion) 1.9 1.3 1.2 49.2 % 8.3 %
Webmotors
Webmotors is the first and largest Brazilian technology company focused on providing automotive purchase and sale solutions for dealers, original equipment manufacturers and private sellers, holding the largest online automotive listing in Brazil.
Webmotors received an average of more than 30 million visits per month in 2021. Through Cockpit, a pioneering and disruptive platform for utilities, which brings together solutions for the entire network described above, we offer the following solutions: business management/ performance, buyer profile (CRM), data intelligence, predictive pricing models and market data (AutoGuru).
Webmotors endeavors to be a platform that accompanies private and corporate users throughout the life of their vehicle, from purchase, to use and sale. In order to do so, Webmotors reformulated the business of its subsidiary Loop, which was a traditional auctioning business, into an omnichannel dealer which is able to increase the sale value of demobilized fleets in its digital and physical stores. Webmotors also launched “Agenda Fácil,” a product focused on scheduling services through WhatsApp.
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Santander Auto
In 2019, we launched Santander Auto, a fully digital car insurance solution which relies on the use of big data analytics for pricing.
The Brazilian insurance market is characterized by: (i) low insurance penetration in proportion to its GDP; (ii) low technological evolution, dominated by companies with low innovation rates, still focused on financial results (due to a history of high interest rates); and (iii) retail brokers as the main distribution channel. As a result, the subscription process still requires that the customer complete a question form (approximately 40 questions). As a result, only approximately 20% of Brazilian vehicles are insured.
Actuarial techniques and behavioral models enable Santander Auto to make an insurance proposal, without making additional information requests from the customer, based on information already available to us.
During 2019, its first year of operation, almost 110 thousand policies were sold, which represents a penetration rate of 16% (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos). These results are based on a pricing system based on information bureaus which provides have a more accurate price, which makes it possible to make an offer at the time the vehicle is purchased, and which enables customers to include insurance in their purchase with a single click.
During 2020, we focused on consolidating our insurance offer, by ensuring that all customers have at least one insurance offer, while also covering the most diverse types of risk. We intend to expand the business through the optimization of our ecosystem and penetration in our customer base.
In 2021, Santander Auto expanded its product offering to cover 95% of all vehicles financed by Santander Financiamentos, reaching a penetration rate of 20% in the year ended December 31, 2021 (i.e., total insurance contracts sold as a percentage of the contracts relating for loans by Santander Financiamentos), and registering an increase of 80% in the number of policies sold in the year ended December 31, 2021 compared to the year ended December 31, 2020. In the fourth quarter of 2021, Santander Auto started to offer car insurance to customers who are not financing their vehicle with Santander Financiamentos in order to expand its distribution channel further.
Solution4fleet and Car10
In 2021, we acquired Solution4fleet, a company specialized in leasing vehicles to third parties. Solution4fleet offers services such as assistance, fleet management, inspection, vehicle maintenance and fine management. It is the only company in the Brazilian market that has a complete ecosystem for fleet management and leasing operations.
We also acquired Car10, a company which provides a marketplace to simplify auto repair shops and services with over 7,000 registered garages across Brazil.
+ Negócios and +Vezes | Santander Financiamentos
In 2017, we launched “+Negócios,” which we believe to be an innovative digital trading platform. This simple and intuitive platform enables faster execution of loan simulations, receipt of credit approval and proposal formalization for vehicles, in addition to providing portfolio management reports. In the same year, we also introduced “+Vezes,” a digital trading platform allowing retailers to offer installment payment options for the sale of goods and services.
In 2021, approximately 15 million separate Brazilian individual taxpayer identification numbers were used to simulate vehicle leasing through the “+Negocios” platform, which makes it one of the most widely used platform in Brazil’s vehicle leasing market.
+Vezes has a strong focus on digital channels. With the use of +Vezes website, two editions of “Decora +” and “Energia +” have been launched, both focused on the development of digital showcases to bring main resellers closer to the end customers, mostly on the furniture and photovoltaic segments. Additionally, Crédito Pessoal +Vezes has also been launched, which is a complementary offer of credit for end customers in their checking account, without a specifically required purpose. We have also advanced multiplying +Vezes presence and service throughout the national territory for the implementation of the CONSULTANT + Model, strengthening the relationship with intermediary customers.
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Moreover, “+Fidelidade” is a loyalty program with the objective of offering incentives to agents based on their relationship with Santander Brasil and Webmotors. Accordingly, we have sought to improve the customer’s post-sales experience by implementing several features on +Fidelidade’s online portal.
Cash Management
We offer cash management solutions to corporate customers and SMEs online through our Internet banking and mobile banking services.
Our revenues from cash management include fees charged for offering the following products: (i) collections, in which we assist customers in carrying out commercial transactions using printed or online payment slips; (ii) payments, consisting of simple and automatic management of our customers’ accounts payable activities through individual transactions or via electronic file transfer; (iii) instant Payments, in which our customer pays and receives funds online with an immediate credit or debit to the account (this can be added to our collection, payments or acquiring products); (iv) payroll, which is intended to facilitate the management of salary and benefits payments to our customers’ employees via an online tool;(v) collection of values, which consists of the payment of cash values and checks at the customer’s points of sale; and (vi) custody, by which we perform the custody, control and deposit of predated checks up to the date of clearing.
In addition, we also provide other revenue-generating products which are structured and tailored to the customer’s operation.
Customer Funding
Our main sources of liquidity are customer funding through deposits and other bank funding instruments. These deposits, combined with equity and other instruments, enable us to meet most of our liquidity and legal reserve requirements.
For further information, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Liquidity and Funding.”
Investments
Our investment process for retail customers seeks to provide qualified guidance and help them achieve their financial objectives based on five major pillars:
● Client investment profile – We assess our customer’s situation to understand their level of financial knowledge, investment horizons, liquidity needs and the levels of risk they are willing to assume, among other factors. This analysis is reviewed periodically, according to the customer’s needs and local regulations;
● Investment strategy – Our investment philosophy aims to provide long-term returns through a structured asset allocation process and mitigate market risks by diversifying among different asset classes;
● Model Portfolio – We define strategic portfolios for each customer profile and build our “Model Portfolio” on a monthly basis according to market conditions and trends. This tactical view arises from the Asset Allocation Committee, which consists of our advisory team and economists from our economics department, our Santander Asset Management division, our Private Banking unit and our brokerage house (Santander Corretora);
● Execution and implementation – To assure a successful execution of investment strategy, we provide a complete array of financial products, ranging from banking instruments, bonds, stocks, structured notes, investment funds with an open architecture and selected investment providers, real estate funds and exchange traded funds, among other capital markets instruments. Our partnership with Zurich Santander completes this offering with a wide range of private pension plans. Furthermore, our recent acquisition of Toro Corretora has further enhanced our PI DTVM investment platform by expanding our product offering. For more information regarding this acquisition, see “—A. History and Development of the Company—Important Events—Purchase of Equity Interest in Toro Corretora de Títulos e Valores Mobiliários Ltda.;” and
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● Follow-up – Our advisory team performs a thorough and frequent review of our clients’ profile, objectives and results alongside each client in order to maintain the client’s investment within the parameters established and the guidance provided by the model portfolio.
In order to identify possible deviations from the investment profile’s recommended positions, we also rely on automated monitoring systems. These controls alert customers of any transactions that compromise the suitability of their portfolio and are in line with our commitment to protect our customers’ interests.
Furthermore, each customer has direct access to their positions through a private access on the internet and mobile app, where they can view the evolution of their investment strategies.
Programa Avançar
We also have a non-financial solution, known as “Programa Avançar,” which is aimed at entrepreneurial customers. By means of this solution, SMEs can access content and solutions related to management and innovation, internationalization, team building, and other topics relevant to businesses via a web platform. We see this program as a key component of our offering to Brazilian entrepreneurs.
In addition, we offer a digital account solution where individual entrepreneurs can purchase banking products and services in a 100% digital experience.
Similarly, we offer “Santander Copiloto,” an enterprise resource planning tool designed for our SME customers. This tool is integrated with the Santander Digital channels, and provides solutions such as e-commerce, sales point software and tax compliance.
Service Channels
We offer our financial services and products to our customers through our multichannel distribution network composed of: (i) physical channels, such as branches, mini-branches and ATMs; (ii) call centers; and (iii) digital channels, such as Internet banking and mobile banking.
Physical Distribution Network
Our distribution network provides integrated financial services and products to our customers. The following table presents our physical distribution network as of the dates indicated.
As of December 31,
2021 2020 2019
Branches 1,987 2,153 2,328
Mini-branches 1,384 1,411 1,512
Own ATMs 12,561 12,949 13,296
Shared ATMs 24,255 23,798 23,780
Branch Network
Our branch network offers our entire portfolio of products and services to our customers through a personal and customized approach. The table below shows the geographic distribution of our branch network as of the dates indicated.
As of December 31,
2021 2020 2019
Northeast 9.74 % 9 % 9 %
North and Midwest 8.42 % 7 % 7 %
Southeast 67.31 % 70 % 70 %
South 14.53 % 14 % 14 %
PABs (Mini-branches)
We offer daily banking services to our SMEs, as well as corporate customers and their employees through our PABs (“Postos de Atendimento Bancário”), which are exclusive sales points located at our customers’ buildings, as well as in hospitals and universities. The presence of PABs in our customers’ offices strengthens our relationship and builds loyalty with those customers, who benefit from the convenience of conducting their banking transactions at their workplace.
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ATMs
We operate an extensive network of 12,561 ATMs, including those located in our branches and mini-branches. In addition, our customers have access to the “Banco24Horas” network, which operates 24,255 ATM units. Through this network, our customers can access their accounts and conduct banking transactions, as well as purchase most of the products and services available in our portfolio.
Remote Channel
Our remote channel consists of call centers, online messaging services and contact emails available to all our customers. These allow customers to solve issues, engage new products and services and generally interact with us to fulfil their banking requirements. We received over 25 million contacts per month through our remote channel in the year ended December 31, 2021.
In, we began a process to reshape the way in which we interact with customers through our remote channel. In 2021, this transformation allowed us to achieve more than 740,000 sales in December 31, 2021.
Digital Channels
Our digital channels include Internet banking, mobile banking and other digital solutions aimed at facilitating our customers’ access to the products and services that we offer.
The last few years have been marked by a significant digital transformation for us. We believe that in 2021 we have strengthened our focus on customers with a digital mindset while also leveraging digital tools to enhance our efficiency and scalability. In this context, we highlight the following:
● We have created an online store to receive and serve our customers on an ongoing basis. In the year ended December 31, 2021 we recorded an average of approximately 442 million total visits per month and we increased the number of digital buyers in comparison with the year ended December 31, 2020.
● We added 557,000 new accounts in December 2021, an increase of 190% when compared to December 2020. We believe this growth is due to our streamlined account opening process, which improved our customers’ experience, and to an increase in our approval rates as a result of improvements in our fraud detection and offline processes.
● We have performed an average of approximately 3.2 million sales per month in the year ended December 31, 2021, an increase of 45% when compared to the year ended December 31, 2020. This increase has been primarily driven by an increase in credit cards sales, representing an average of 297,000 sales per month in the year ended December 31, 2021, an increase of 99% when compared to the year ended December 31, 2020. We have consolidated our position as a leading credit and digital recovery platform in Brazil, with more than 2.4 million contracts per quarter in the year ended December 31, 2021 (considering only individuals) an increase of 69% when compared to the year ended December 31, 2020, and with a share of sales amounting to 64% in loans in the year ended December 31, 2021.
● We have also taken steps to improve our digital customer service, in the form of Gent&, our virtual assistant. Gent& is an artificial intelligence launched in 2020. This solution offers a more personalized digital service that provides greater autonomy for our customers.
The following table provides certain key operating information with regards to our digital channels as of the dates indicated.
For the Year Ended December 31,
2021 2020 2019
(in millions)
Number of digital customers (1) 18.8 15.6 13.4
Number of digital channel transactions (2) 7,482 5,262 4,311
(1) We define digital customers as those who used at least one of Santander Brasil’s digital channels (e.g., mobile banking and internet banking) in the 30 days preceding the end of the applicable year.
(2) Refers to transactions carried out through internet banking, mobile banking and other digital platforms. The data refers to the year ended December 31.
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The following table provides an overview of the weight of each key distribution channel in our overall distribution system.

For the Year Ended
December 31,
2021 2020 2019
(%)
Internet banking 27.7 37.8 39.7
ATMs 3.6 5.9 8.9
Mobile (1) 62.3 46.9 39.0
Branch 1.1 2.2 4.1
IVR (2) 4.6 6.4 7.4
Call Center 0.7 0.9 0.9
(1) Refers to total transactions (account holder and unique product-holder).
(2) Interactive voice response is an automated telephone system in which a computer interacts with callers (who can use their voice or the telephone keypad to communicate with the computer), gathers information and transfers caller to the appropriate representative.
Technology and Infrastructure
In 2021, we have performed significant investments in our technology systems. We put customers at the center of our strategy. We are continuously seeking improvements in customer experience and satisfaction by launching new services, as well as combining self-service features with human and personalized services and channels.
Therefore, we have strengthened our technological culture and our business systems capacity, which supports an intense flow of more than 53 million customers as of December 31, 2021 and an average of 442 million total visits per month to our digital channels in the year ended December 31, 2021, along with an efficient and secure processing of an average of more than 367 million transactions per day in the year ended December 31, 2021. We believe that this continuous improvement of our customer services, combined with the offer of new solutions and the expansion of the range of our channels contributed to the growth of our customer base by 11% in the year ended December 31, 2021 compared to the year ended December 31, 2020.
We have increased our operational efficiency and scalability, expanding the use of computing to over 75% of operations, and improving the time-to-market of products and services, by using Agile and DevOps methodologies in the execution of 85% of our projects. Furthermore, we have reduced the number of relevant incidents (which we define as high priority incidents, i.e., those that could result in the unavailability of a wide range of critical services) in the last three years by more than 90% on average, ensuring greater availability of our products and services to our customers. We have listed below other initiatives carried on throughout 2021:
● Investments: We have launched the Algo+ service (stands for “algorithm”), which simplifies the investment process to our customers, allowing them to invest in stocks from the bank’s recommended portfolios without having to sign-in to the home broker. This initiative ensures diversification and time saving in investments, also protecting investors from cognitive biases and human failures.
● Open Banking: We have started to provide the “Open Finance” service to our customers, which allows them to authorize the sharing of their financial data to other financial institutions. This enables us to understand customers’ profiles better, so we can offer personalized products, services, and other benefits, such as increases in credit card limits and competitive banking fees. Customers can also concentrate the management of their finances in a single place, and they will soon be able to manage all their accounts from other banking institutions (e.g., balance and statement checking, making payments and investments) by means of our digital channels. We have also implemented resources and mechanisms to ensure data privacy and security to conform to government regulations.
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● Security: Aiming to provide our customers with a streamlined digital experience, we have offered authentication via facial recognition, eliminating the need to authorize mobile devices at an ATM in order to use all the features of our digital channels. The new security system recognizes the customer with the use of artificial intelligence, including legitimacy checks through advanced Machine and Deep Learning models developed internally, ensuring proof of life and facial verification. Customers only need to register face biometrics when opening an account and afterwards in their mobile application, which grants our customers with a more digital and secure experience.
● Individual Bank Account (Mobile): We have added new resources and features in order to provide a better experience for our customers. Regarding customer service, we provide the DialMyApp service. When the customers access our call center, they are guided to online services (App, Website and Virtual Assistant) through a graphic menu displayed on his cell phone concurrently with the phone call they have placed, which improves engagement and reduces customer service costs. With respect to foreign exchange, we have included a new feature for uploading documents through the OnePay service, optimizing the time of carrying out exchange transactions, in addition to improvements in exchange rates checking for the main currencies. With respect to investments, we have offered our customers a new feature to monitor and analyze the evolution of their investment portfolio for a given period of time by means of the Investment Profitability Chart (GRENT).
● Corporate Bank Account (Mobile): In order to ensure greater support to our corporate customers, we offer new assistance service channels, such as our AI virtual assistant, as well as direct contact with one of our managers in our corporate mobile App. This service also includes a feature that enables our customers to contract our business management system (Santander CoPilot), by means of which they can control their business sales and inventory. Moreover, the Open Banking feature gives customers an opportunity to share their company data, which ensures a better understanding of their business profiles.
● Credit Cards: In the context of the COVID-19 pandemic, we have expanded the digitalization of our card transactional services, enabling customers to self-serve through digital channels for acquisition and post-sales purposes, such as invoice checking via WhatsApp. Another disruptive initiative is the generation of the online card before the physical card, allowing customers to make their purchases in e-commerce and also by cell phone approximation before they receive their physical card by mail.
● Customer Service: Combining entrepreneurship, technology and focus on customer experience, we developed a Voice Analytics solution to scale our capabilities of listening to our customers by means of the use of machine learning, Graphics Processing Units (GPU) and cloud computing, which accelerates our deliveries and adds value to our shareholders. Currently, we have already studied and addressed the needs of our customers going through credit recovery processes and with reduced investments.
● Software Development Agility: We have transformed our software deployment process through the adoption of a new solution focused on the integration of software development lifecycle tools, providing greater autonomy to the development teams, in addition to ensuring production environment stability through automatic deploy and rollback processes without manual interventions (Zero Touch). As a result, our development teams are able to better meet customer needs, delivering new features with more assertiveness, speed and quality. In just nine months after the process was implemented, twice as many software deploys were made compared to the entire year of 2020.
● Cloud: In order to improve the availability and resilience of our main applications, we expanded the use of our computing capacity with two public cloud services providers, extended our on-premises datacenter network using these cloud providers, and created a full mesh connectivity model. Using this model, we have updated software applications to use cloud capabilities adopting an abstraction strategy for the providers’ Cloud products (for example: accessing products through open and common protocols), ensuring code standardization and reduction of lock-in (dependency on a single cloud provider technology implementation), in addition to the implementation of normal/peak/special day auto-scaling strategies and the creation of automated capacity to balance applications in multi-cloud service.
Communications and Marketing
We use and monitor several tools in order to communicate effectively with our customers. These include not only traditional media, such as television and printed media, but also the internet, mobile advertising and social networks.
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We regularly provided information through all available media, seeking to make a real and positive difference in the lives of our clients. Such information includes guidance on what open finance is, i.e., an ecosystem that allows financial institution customers to share their information to other banks which enables banks to develop more tailored products. We publicized updated solutions, like Gent& and Algo+, an algorithm that helps investors to follow our monthly portfolio recommendations. Internally, we released more than 200 videos aimed at instructing our teams on how to best-serve our customers, and guidelines to prevent COVID-19 in the workplace. Externally, we ran 297 video advertisements on TV and social networks. Our communications campaign generated significant feedback, with 100,000 articles published in newspapers and magazines, and 120 stories featured in Brazilian national media outlets as well. On social media, we averaged 10 posts per day, with 2.6 million impressions. We have also joined new media formats on networks such as Telegram, WhatsApp and games. Additionally, we conducted more than 120 live broadcasts and events where our senior management, as well as experts and government officials were invited to address several topics, including the current economic scenario, social investment, sustainability, diversity, women’s leadership, entrepreneurship, and culture and entertainment, The Fourth Edition of Global Citizen, organized in collaboration with newspaper Valor Econômico and featuring Al Gore, the 2007 Nobel Peace Prize winner, received more than 935,338 views. Also, the 22^nd Annual Santander Conference showed discussions on politics, sustainable businesses, health and technology, with the participation of major chief executive officers, public authorities and our leadership. The conference was broadcasted on YouTube, garnering a total of 7.1 million views.
Sustainability
In Brazil, sustainability governance is based on global guidelines, locally identified commitments and demands, and our local business strategy. Decision-making goes through the Board of Directors, the Executive Committee and the Sustainability Executive Superintendents. The Sustainability Committee is responsible for providing clarification and recommendations to the Board of Directors regarding the development of sustainability-related guidelines.
Our sustainability strategy is based on three pillars: (i) strategic and efficient use of environmental resources, (ii) developing potential and (iii) resilient and inclusive economy. Our vision, based on these three pillars, is to contribute to a better society, while maintaining management excellence and responsibility, in accordance with our ethical values and using our technology to serve people and businesses.
Resilient and Inclusive Economy
Our broad commercial activity allows us to advise and support of our customers and projects. We believe we can play a role as facilitator and contribute to the generation of jobs and income, and the improvement of logistics and infrastructure for Brazil’s development.
Through this pillar, for example, we offer access to banking services, products and non-financial initiatives. We have specific products to support microentrepreneurs and SMEs, such as the “Prospera Santander Microfinanças,” “Programa Avançar” and “Parceiros em Ação” programs. Additionally, we increasingly seek to include the topic of financial management in the client's relationship with the Bank, using tools such as Santander On.
In 2021, we helped 341,000 people through financial inclusion products and financial education guidance.
Development of Potentials
Our commitment to the development of potential begins with our employees. We have ranked as one of the best companies to work for in the GPTW survey since 2016, ranking top ten in 2021. Guided by our corporate culture and internal policies, we offer opportunities that promote development and professional growth, in order to build a culture of delivering results, respect, innovation, inclusion and diversity.
We work to create a culture of respect, inclusion and equity, where everyone can develop their talents with their unique attributes. Diversity is one of the five principles of our Code of Ethical Conduct. Our priorities are gender and racial equity, inclusion of LGBTI+ and people with disabilities, as well as diversity of experience and generational diversity. Since 2018, we have set inclusion targets for black employees in the bank and female employees in leadership, which in 2021, were 27.3% and 31.4%, respectively. Additionally, in 2021, we received two diversity awards from GPTW: one for our ethnic-racial practices and another, for the fourth time, as one of the best companies for women to work.
Through the Santander Universities Program, we offer initiatives focused on granting national and international scholarships, programs for entrepreneurial development, as well as internship and employment programs.
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As of December 31, 2021, about 33,000 scholarships and entrepreneurships were granted with a total investment of approximately R$33 million.
We maintained our actions to support society and continued with our private social investment strategy with our programs to support children, teenagers, the elderly and entrepreneurs.
● In the 19th edition of the Amigo de Valor Program, we raised R$19.8 million to support 100 initiatives throughout Brazil, benefiting over 12,400 people.
● Campanha Brasil sem Fome: we are responsible for the donation of 200,351 baskets of staple food.
Our initiatives, including Amigo de Valor, Parceiro do Idoso, Blood Donation Campaign and Volunteer Program, had an impact on 542,545 people in 2021.
Efficient and Strategic Use of Natural Resources
We are implementing changes to our business that contribute to a responsible and more efficient use of our national environmental resources, including with respect to a reduction in carbon emissions. In this sense, in addition to the responsible environmental management of our operations, we finance and advise companies in the fields of infrastructure and renewable energy, while also providing support for sustainable agribusiness.
In the year ended December 31, 2021, we have destined R$ 51.6 billion to foster sustainable businesses, 96% more than in the year ended December 31, 2020. We believe these operations are in line with market benchmarks and include the issuance of green bonds, advisory services to sanitation businesses and financing for renewable energy (such as CDC Solar). For instance, we have transformed the Vila Olímpia station, at the city of São Paulo, into the first sustainable station in Brazil, increasing its efficiency in the use of natural resources on site. As a consequence of our investments, 70% of the energy now used by the station derives from solar panels and it has implemented a system to recycle its water usage.
One year after the launch of Plano Amazônia, a commitment signed by Santander Brasil, Bradesco and Itaú in connection with measures to enhance and scale up solutions that promote the sustainable regional development, we highlight the following initiatives from Santander Brasil:
● We made available over R$ 270 million in credit lines directed to cooperatives and agribusinesses in the Amazon region.
● We held the Bioeconomy in the Spotlight conference that has promoted a debate related to bioeconomy, preservation and sustainable development of the Amazon region, with market specialists and the CEOs of Santander, Bradesco and Itaú.
● We have been in contact with regional meatpacking companies to inform them about credit restrictions starting in 2025.
● In early 2021, we have announced our commitment to achieve zero net carbon emissions by 2050. The commitment applies to the Santander Group’s and also to Santander Brasil’s activities, as well as to all emissions from customers from any financial, advisory or investment service the bank offers.
Since 2002, we have adopted social and environmental parameters in the credit risk analysis for projects and companies. Our analyses seek to identify issues such as contaminated land, deforestation, labor practices in conditions analogous to slavery and child labor, among other matters that would prevent us from doing business with such projects and companies.
We have been carbon neutral since 2010, by completely offsetting our Scope 1 and 2 emissions. Since 2013, we follow a methodology for selecting projects from which to purchase Verified Emission Reductions, or “VERs,” in order to ensure the social and environmental benefits for the Amazon region. In recent years, we bought VERs from reforestation and renewable energy ventures.
In addition, we have made a commitment to supply 100% of our operations with renewable energy by 2025, establishing specific metrics for electricity, water, paper and internal renewable energy consumption. In the year ended December 31, 2021, 53% of our energy consumption came from renewable sources.
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In 2021, we will renew our ISO 14,001 certification in our administrative buildings, including our headquarters, Campinas radar and data center, and we will also implement the Zero Landfill Program, with the objective of giving a more sustainable destination for our waste.
Socio-Environmental Responsibility Policy
Our Socio-Environmental Responsibility Policy, or “PRSA,” meets the requirements of CMN Resolution No. 4,327/14 and SARB Regulation 14 of FEBRABAN. These regulations define guidelines and consolidate specific policies for socio-environmental practices in business and relationships with certain parties. These practices include socio-environmental opportunities and impacts, and risk management such as suitability in granting and using credits, management of suppliers and socio-environmental risk analysis. We also have a PRSA Senior Group, which consists of our vice-presidents of Risks, Legal Issues, Corporate, Human Resources, Finance and Communication, Marketing, Institutional Relationships and Sustainability, and officers of Agribusiness and Compliance. This Group is involved in decision-making related to the PRSA and operates in connection with our Executive Committee.
On September 2021, the Brazilian Central Bank published the new CMN Resolution No. 4.945, which provides for the Social, Environmental and Climate Responsibility Policy (PRSAC) and the actions aimed at its effectiveness. As of July 1, 2022, the PRSA will be revoked and the PRSAC will come into effect.
Competition and Industry Transformation
Currently, there are five commercial financial institutions at the forefront of the Brazilian financial industry in terms of assets: Santander Brasil, Bradesco, Itaú Unibanco, Banco do Brasil and Caixa Econômica Federal, Together, these financial institutions accounted for 71.7% of the credit and 73.9% of the deposits available in Brazil as of September 30, 2021, according to the Brazilian Central Bank and the financial statements of the aforementioned banks,
The following table shows the total loans and deposits of the five leading financial institutions in Brazil at the dates indicated:
Santander Brasil Bradesco Itaú
Unibanco Banco
do Brasil Caixa Econômica Federal Financial System
September 2021 (R$ billion)
Total loans (1) 450.3 581.3 567.4 745.3 842.0 4,442.0
Total deposits (1) 389.8 559.8 792.6 475.2 472.5 3,641.7

(1) According to the Brazilian Central Bank, reported and presented in accordance with Brazilian GAAP (September 2021).
Insurance Coverage
We maintain insurance policies that are renewed annually in order to protect our assets. All of our branches, affiliates and administrative buildings are insured against losses caused by fire, lightning, explosions and other risks. Such coverage establishes reimbursement for the asset replacement value.
● In addition, we also maintain the following insurance policies:
● policies against material and/or bodily damage caused to third parties for which we are held responsible;
● policies against financial losses due to fraud or employee misconduct, among others;
● directors’ and officers’ insurance policy for our management against third-party complaints regarding management acts. There are insurance policies against crimes, employee dishonesty and damages arising out of public offerings; and
● policies against hacker attacks and cyber-crimes.
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Dependence on Patents, Licenses, Contracts and Processes
The major trademarks we use, including, among others, the “Santander” trademark, are owned by Santander Investment Bank. Santander Brasil has a license to use this trademark. All trademarks of our business are registered or applied through the Brazilian Patent and Trademark Office (Instituto Nacional de Propriedade Industrial, or “INPI”), the agency responsible for registering trademarks, patents and designs in Brazil. After registration, the owner has exclusive rights to use of the trademark in Brazil for a 10-year period that can be successively renewed for equal periods.
As of the date of this annual report, we own a total of 568 trademarks in Brazil, with Santander Brasil owning over 117 of these trademarks, while the remaining are owned by other companies of the Santander Group.
REGULATION AND SUPERVISION
The basic institutional framework of the Brazilian financial system was established by Law 4,595/64, as amended from time to time, or the “Banking Reform Law.” The Banking Reform Law created the CMN, responsible for establishing the general guidelines of monetary, foreign currency and credit policies, as well as regulating the institutions of the financial system.
Principal Regulatory Agencies
CMN
The CMN oversees the Brazilian monetary, credit, budgetary, fiscal and public debt policies. The board of the CMN is composed of the president of the Brazilian Central Bank, the Minister of Planning and the Minister of Finance, who also chairs the Board, Pursuant to the Banking Reform Law, the CMN is the highest regulatory entity within the Brazilian financial system, and is authorized to regulate the credit operations of Brazilian financial institutions, to regulate the Brazilian currency, to supervise Brazil’s gold reserves and foreign exchange, to determine Brazilian savings and investment policies and to regulate the Brazilian capital markets with the purpose of promoting the economic and social development of Brazil. In this regard, the CMN also oversees the activities of the Brazilian Central Bank and the CVM.
Brazilian Central Bank
The Brazilian Central Bank is an autonomous authority responsible for the implementation of CMN policies related to foreign currency and credit, the regulation of Brazilian financial institutions, particularly in regards to the minimum capital and compulsory deposit requirements, as well as the disclosure of the transactions carried out by financial institutions and their financial information. The Brazilian Central Bank addresses specific issues through the Monetary Policy Committee (COPOM), a committee responsible for adopting measures to meet inflation targets defined by the CMN and establishing monetary policy guidelines. In order to meet inflation targets, the COPOM must set the target for the SELIC rate (the average rate for daily financing, backed by federal instruments, as assessed under the SELIC) and publish reports on the Brazilian economic and financial environment and projections for the inflation rate.
CVM
The CVM is responsible for the implementation of CMN policies related to securities, with the purpose of regulating, developing, controlling and inspecting the securities market and its participants (companies with securities traded in the market, investment funds, investors, financial agents, such as custodians of instruments and securities, asset managers, independent auditors, consultants, as well as instruments and securities analysts).
Self-Regulating Entities
The Brazilian financial and capital markets are also subject to the regulation of self-regulating entities that are divided by field of activity. These self-regulating entities include, among others, the ANBIMA, the ABECS, the FEBRABAN, the Brazilian Association of Publicly-Held Companies – ABRASCA and the B3.
Principal Limitations and Obligations of Financial Institutions
In line with leading international standards of regulation, Brazilian financial institutions are subject to a series of limitations and obligations. In general, such limitations and obligations concern the offering of credit, the concentration of risk, investments, operating procedures, loans and other transactions in foreign currency, and the
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administration of third-party funds and microcredit. The restrictions and requirements for banking activities, established by applicable legislation and regulations, include the following:
● No financial institution may operate in Brazil without the prior approval of the Brazilian Central Bank, In December 2017, the CMN enacted a new rule establishing that all such requests submitted to the Brazilian Central Bank must be approved within 12 months (subject to suspension of the term in some instances);
● A Brazilian financial institution may not hold direct or indirect equity interests in any company located in Brazil or abroad registered as permanent assets without prior approval of the Brazilian Central Bank. The corporate purpose of such company shall be complementary or subsidiary to the activities carried out by the financial institution;
● Brazilian financial institutions must submit for prior approval by the Brazilian Central Bank the corporate documents that govern their organization and operation, such as capital increases, transfer of headquarters, opening, transfer or closing of branches (whether in Brazil or abroad), election of the members of the statutory bodies and any corporate restructuring or alteration in the composition of their equity control. The requests for changes in control submitted to the Brazilian Central Bank must be approved within 12 months and requests for changes to organizational documents must be approved within three months (in both cases subject to suspension of the term in some instances);
● Brazilian financial institutions must fulfill minimum capital and compulsory deposit requirements and must comply with certain operational limits;
● A Brazilian financial institution may not own real estate, except for properties it occupies and subject to certain limitations imposed by the CMN. If a financial institution receives real estate, for example, in satisfaction of a debt, such property must be sold within one year, unless otherwise authorized by the Brazilian Central Bank;
● Brazilian financial institutions must comply with the principles of selectivity, guarantee, liquidity and risk diversification;
● A Brazilian financial institution belonging to the S1 segment, as is the case of Santander Brasil, cannot lend more than 25% of its Tier 1 Regulatory Capital (patrimônio de referência) to a single person or a group and the maximum exposure to concentrated individual customers or group of connected customers of such Segment 1 financial institution is 600% of its Tier 1 Regulatory Capital (a concentrated individual client would mean, for the purpose of the proposed rule, as any one client to which exposure is equal to or higher than 10% of its Tier 1 Regulatory Capital);
● According to the Banking Reform Law, a Brazilian financial institution cannot carry out credit transactions with (i) its controlling shareholders, directors and members of other statutory bodies (fiscal, advisory and other) and their respective spouses and relatives up to second degree, (ii) the individuals or legal entities that hold a qualified interest (15% of the capital stock) in their capital, (iii) the legal entities in which they have qualified interest (direct or indirect), (iv) the legal entities in which they have effective operational control or preponderance in the deliberations, regardless of the equity interest, and (v) the legal entities with common directors or members of the board of directors. Such prohibition does not apply, subject to limits and conditions established by the CMN through the enactment of Resolution No. 4,693 in October 2018, to: (i) transactions with a counterparty that has an officer or director in common with the financial institution providing credit, provided that the officer or director is considered an independent member in both entities; (ii) transactions carried out under market-compatible conditions, without additional benefits or different benefits when compared to the operations deferred to the institution to other customers with the same profile, (iii) credit operations that have as counterparty a financial institution that is part of the institution prudential conglomerate, provided that they contain contractual clauses of subordination, except in the case of overnight and loan transactions with other financial institutions specified by the law, (iv) the interbank deposits, according to the law, (v) the obligations assumed by related parties under the compensation and settlement services authorized by the Brazilian Central Bank or by the CVM and their respective counterparties, and (vi) other cases authorized by the CMN; the management of third-party assets must be segregated from other activities and must follow the regulations issued by the CVM;
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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 which it deems useful in performing its supervisory functions, which includes supervising changes in solvency and capital adequacy of banks.
The main principle that guides the directives set forth in the Basel Committee is that a bank’s own resources must cover its principal risks, including credit risk, market risk and operational risk.
Brazilian financial institutions are subject to capital measurement and standards based on a risk weighted asset ratio. The parameters of this methodology resemble the international framework for minimum capital measurements adopted by Basel III.
Basel III
On December 16, 2010, the Basel Committee issued its Basel III framework, which was revised and republished on June 1, 2011. The Basel III framework increases minimum capital requirements, creates new conservation and countercyclical buffers, changes risk-based capital measures, and introduces a new leverage limit and new liquidity standards in comparison to the former framework. The rules were phased in gradually and were fully implemented by January 1, 2019. Regulatory Capital is composed by Core Capital and two additional tiers:
Tier I capital will have to reach a minimum ratio of 6.0% (according to the schedule established by the Brazilian Central Bank), divided into two portions: (i) Core Capital consisting mainly of corporate capital and profit reserves (shares, units of ownership, reserves and earned income) of at least 4.5%, and (ii) Additional Tier I consisting mainly of perpetual hybrid securities and capital instruments authorized by the Brazilian Central Bank (but excluding amounts relating to funding instruments issued by other local or foreign financial institutions) and any of our own shares purchased by us and the integration of which into the Additional Tier I Capital is permitted. To improve the quality of the capital of financial institutions, Basel III restricts the acceptance of financial instruments that fail to demonstrate effective capability of absorbing losses and requires the reduction of assets that in certain situations could jeopardize the financial institution’s capital value due to the instruments’ low liquidity, dependence on future profits for realization or difficulty of value measurement.
There is also an additional 2% of Tier II capital requirement, for a total of 8% of minimum capital ratio. Current hybrid subordinated debt approved by the Brazilian Central Bank as additional capital requirements, or Tier II, are expected to be maintained if they also comply with requirements introduced by Basel III, including the mandatory conversion clauses into equity or write-off upon the occurrence of triggering events provided for in the regulations.
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In accordance with the Basel III standards, the Brazilian Central Bank created the Additional Core Capital buffer (Adicional de Capital Principal), which is composed by the sum of three buffers:
● Core Capital Conservation buffer (Adicional de Capital Principal de Conservação), which was introduced to ensure that banks have an additional layer of usable capital that can be drawn down when losses are incurred. Whenever the buffer falls below 2.5%, automatic constraints on capital distribution (for example, dividends, share buybacks and discretionary bonus payments) will be imposed so that the buffer can be replenished. Countercyclical capital buffer (Adicional Contracíclico de Capital Principal), which aims to protect the banking sector from periods of excess aggregate credit growth that have often been associated with the build-up of system-wide risks. The countercyclical capital buffer is fixed by the Financial Stability Committee (Comitê de Estabilidade Financeira) based on discussions about the pace of credit expansion, and currently is set zero (Brazilian Central Bank Communication No. 36,830/21). Should the requirement increase, the new percentage takes effect twelve months after the announcement,
● Core Capital Systemic buffer (Adicional de Importância Sistêmica de Capital Principal), which is applicable to the S1 bank segment (banks with an asset base equivalent to over 10% of Brazil’s GDP or that engage in relevant international activity).
On March 16, 2020, due to the challenging macroeconomic environment resulting from the COVID-19 pandemic, the Brazilian Central Bank issued Resolution No. 4,783 which establishes the percentage to be applied to the risk-weighted assets value for the purpose of calculating the capital conservation buffer. This percentage increases gradually until April 2022, when it reaches 2.5%.
This level will phase-in towards the 2019 level by 2022, as shown in the image below. This buffer change decreased the minimum Core Capital requirements, reaching 6.75% to 10.5%, as of December 31, 2021.
The Basel III rules also provide for the implementation of a leverage ratio calculated by dividing the Tier I capital by the bank’s total exposure. In early 2015, the Brazilian Central Bank issued a new regulation governing the calculation and reporting of the leverage ratio of Brazilian financial institutions in line with the Basel III rules, which became effective in October 2015. Financial institutions classified as segment 1 (S1), as is the case for Santander Brasil, or segment 2 (S2), for purposes of the application of prudential rules, are required to maintain a minimum RA of 3% as from January 1, 2018.
Additionally, in order to enable the implementation of the Basel III framework in Brazil, certain legislative changes were made. Among others, Law No. 12,838, enacted on July 9, 2013, granted powers to the Brazilian Central Bank to limit the payment of dividends by financial institutions in case of non-compliance with the prudential capital requirements defined by the CMN.
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In 2015, the CMN and the Brazilian Central Bank also issued a set of rules for the implementation of the liquidity coverage ratio or “LCR,” a short-term liquidity index. The purpose of the LCR is to demonstrate that financial institutions have sufficient liquid assets to make it through a stress scenario lasting one month. According to these rules, the largest Brazilian banks were required to maintain an LCR of at least 60% since October 2015. This ratio increased 10% annually until it reached 100% in 2019. The Brazilian Central Bank also released, in 2015, the local methodology for calculating the LCR so as to align the existing rules with the guidelines of the document “Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools” issued by the Bank for International Settlements in January 2013. In January 2017, the Brazilian Central Bank enacted a new rule amending the calculation method and procedures for disclosure of LCR information. The new regulation establishes a new possible stress scenario and, for purposes of LCR retail, includes spot and forward deposits.
As mentioned above, the LCR is a short-term liquidity ratio for a 30-day stress scenario. It represents the ratio of high-quality liquidity assets to net outflows. High Quality Liquidity Assets are composed mainly of Brazilian federal government bonds and reserve requirement returns. Net Outflows are mainly composed of losses on deposits, offset in part by Inflows, which are mainly credits.
In November 2017, the CMN established a minimum limit for the Net Stable Funding Ratio (Índice de Liquidez de Longo Prazo, or “NSFR”) and the Leverage Ratio (Razão de Alavancagem, or “RA”) with which Brazilian financial institutions are required to comply. The NSFR corresponds to the ratio between the Available Stable Funds (Recursos Estáveis Disponíveis, or “ASF”) and the Required Stable Funds (Recursos Estáveis Requeridos, or “RSF”) of the financial institution. The financial institutions classified as “segment 1” for purposes of the application of prudential rules, as we are, must maintain, as from October 1, 2018, a minimum NSFR of 1.00. Regarding the leverage ratio, the financial institutions classified as “segment 1,” as we are, or “segment 2” for purposes of the application of prudential rules are required to maintain a minimum RA of 3% as from January 1, 2018.
Other Applicable Laws and Regulations
Consolidated Enterprise Level (conglomerado prudencial)
Financial institutions must submit to the Brazilian Central Bank, monthly and semiannually, consolidated financial statements based on the “consolidated enterprise level” (conglomerado prudencial) of which the financial institution is a member. Such information serves as the basis for calculation of the required Regulatory Capital of the Brazilian institutions. The “consolidated enterprise level” includes data relative to the financial institutions and other institutions authorized to operate by the Brazilian Central Bank, consortium administrators, payment institutions and credit factoring companies, including real estate credit, or of credit rights, such as mercantile foment companies, securitization companies and specific purpose companies, located in Brazil or abroad, as well as other legal entities headquartered in Brazil that have equity participation in the mentioned entities as their exclusive business purpose.
On January 29, 2020, the CMN published Resolution No. 4,818, which requires financial institutions categorized as S1, S2 and S3 to publish IFRS financial statements. The requirement is already in force for publicly held financial institutions and financial institutions which are leaders of a prudential conglomerate and came into effect for all remaining financial institutions on January 1, 2022.
New accounting criteria applicable to financial instruments, hedging and leasing agreements
On November 25, 2021 and December 16, 2021, the CMN issued Resolution No. 4,966/2021 and Resolution No. 4,975/2021. These rules establish, respectively, new accounting principles and criteria applicable to financial instruments, as well as to hedging and financial leasing transactions contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank.
The rules intend to align the accounting criteria applicable to financial instruments and leasing agreements contracted by financial institutions and other entities supervised by the Brazilian Central Bank with best international practices, including the “IFRS 9 – Financial Instruments” and “IFRS 16 – Leases” standards issued by the IASB.
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CMN Resolution No. 4,966/2021 and Resolution No. 4,975/2021 will enter into effect on January 1, 2025, ensuring a transition period for the institutions subject to the changes.
Segmentation for the Proportional Application of Prudential Regulation
In January 2017, the CMN enacted a resolution establishing segmentation for financial institutions, financial institution groups, and other institutions authorized to operate by the Brazilian Central Bank for the purposes of proportional application of the prudential regulation. The segmentation is based on the size, international activity and risk profile of members of each segment. Pursuant to the resolution, the segments are as follows:
● Segment 1 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base equivalent or superior to 10% of Brazil’s GDP; or (b) which perform relevant international activities, irrespective of the size of the institution;
● Segment 2 comprises multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks with (a) an asset base lower than 10% of Brazil’s GDP; and (b) other institutions with an asset base equivalent to or greater than 1% of Brazil’s GDP;
● Segment 3 comprises institutions with an asset base lower than 1% and equivalent to or greater than 0.1% of Brazil’s GDP;
● Segment 4 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP; and
● Segment 5 comprises institutions with an asset base lower than 0.1% of Brazil’s GDP, that apply a simplified optional method for verifying the regulatory capital’s minimum requirements, except for multiservice banks, commercial banks, investment banks, foreign exchange banks and savings banks.
We have been categorized by the Brazilian Central Bank in segment 1, the highest level for application of regulation for banks in Brazil.
Regulation of Risk and Capital Management Structure
The rules enacted by the CMN and the Brazilian Central Bank provide that risk management must be conducted through an integrated effort by the relevant entity (i.e., not only must risks be analyzed on an individual basis, but must also control and mitigate the adverse effects caused by the interaction between different risks). The rules set out different structures for risk and capital management, which are applicable for different risk profiles. This means that a financial institution of limited systemic importance can have a simplified structure of management, while institutions of larger complexity have to follow stricter protocols.
Compulsory Reserve Requirements
Currently, the Brazilian Central Bank imposes a series of compulsory reserves requirements. Financial institutions must deposit these reserves with the Brazilian Central Bank. The Brazilian Central Bank uses these reserve requirements as a mechanism to control the liquidity of the Brazilian financial system for both monetary policy and risk mitigation purposes. Reserves imposed on time deposits, demand deposits and saving accounts represent almost the entirety of the amount that must be deposited at the Brazilian Central Bank.
● Time Deposits (CDBs), The Brazilian Central Bank imposes a reserve requirement of 20% in relation to time deposits. Financial institutions must deposit an amount equivalent to the surplus of (i) R$3.6 billion for financial institutions with consolidated Tier 1 capital under R$3 billion; (ii) R$2.4 billion for financial institutions with consolidated Tier 1 capital between R$3 billion and R$10 billion; (iii) R$1.2 billion for financial institutions with consolidated Tier 1 capital between R$10 billion and R$15 billion; and (iv) zero for financial institutions with a Regulatory Capital greater than R$15 billion.
Additionally, as from the issuing of Brazilian Central Bank Resolution No. 145 on September 24, 2021, collateral deposit for the new funding mechanism for financial institutions (called Linhas Financeiras de Liquidez) can be used to deduct up to three percentage points of this type of reserve requirements.
● Demand Deposits. As a general rule, the Brazilian Central Bank imposes a reserve requirement of 21% in relation to demand deposits.
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● Savings Deposits. The Brazilian Central Bank imposes a reserve requirement of 20% in relation to general savings deposits and to rural savings deposits.
Asset Composition Requirements
Permanent assets (defined as property and equipment other than commercial leasing operations, unconsolidated investments and deferred charges) of Brazilian financial institutions may not exceed 50% of their adjusted net equity, calculated in accordance with the criteria established by the Brazilian Central Bank.
Brazilian financial institutions, as a general rule, may not have more than 25% of their Tier 1 Regulatory Capital allocated to credit and leasing transactions and guarantees extended to the same customer or group of customers acting jointly or representing the same economic interest. In addition, Brazilian financial institutions must comply with an exposure limit of 25% of their Regulatory Capital in connection with underwriting for or investments in securities of the same entity, its affiliates, or controlled or controlling companies. Repurchase transactions executed in Brazil are subject to operational capital limits based on the financial institution’s Regulatory Capital, as adjusted in accordance with Brazilian Central Bank regulations. A financial institution may carry out repurchase transactions in an amount of up to 30 times its Regulatory Capital. Within that limit, repurchase transactions involving private securities may not exceed five times the Regulatory Capital. Limits on repurchase transactions involving securities backed by Brazilian governmental authorities vary in accordance with the type of security involved in the transaction and the perceived risk of the issuer as determined by the Brazilian Central Bank.
The regulation issued by the Brazilian Central Bank with respect to the classification and valuation of securities and derivative financial instruments - including government securities - owned by financial institutions, based on the investment strategy of the financial institution, determined that securities and derivatives are to be classified into three categories: (i) trading; (ii) available for sale; and (iii) held to maturity.
“Trading” and “available for sale” securities are to be marked-to-market with effects in income and stockholders’ equity, respectively. Securities classified as “held to maturity” are recorded at amortized cost, Derivatives are marked-to-market and recorded as assets and liabilities in the balance sheet. Changes in the market value of derivatives are generally recognized in income with certain modifications, if these are designated as hedges and qualify for hedge accounting under the regulations issued by the Brazilian Central Bank. Securities and derivatives in the “held to maturity” portfolio may be hedged for accounting purposes but their increase or decrease in value as derived from the marked-to-market accounting method should not be taken into account.
On June 31, 2018, the CMN enacted a rule providing that financial institutions categorized as “Segment 1” as per the Brazilian Central Bank’s classification system established in 2017 (which is our case) (1) may not have more than 25.0% of their Regulatory Capital allocated to a single legal or natural person, and (2) that the total exposure of such financial institutions to one individual customer may not exceed 600% of their Regulatory Capital allocated to focused exposure, that is 10% of their Regulatory Capital – Tier 1. The rule also subjects financial institutions categorized as segment 2, segment 3 or segment 4 to less restrictive rules.
Centralized Registration and Deposit of Financial Assets and Securities
Law No. 13,476/17 consolidates the provisions on creation of liens over financial assets and securities, CMN Resolution No. 4,593/2017, as amended, regulates the registration and deposit of financial instruments and securities by financial institutions as well as the provision of custody services by such institutions.
Resolution 4,734/19 sets out the guidelines applicable to the establishment of liens and encumbrances on credit and debit payment instruments due to credit operations with financial institutions and regulates credit operations guaranteed by receivables from payment arrangements. The amount of receivables perfected into guarantees for a certain credit transaction will be reduced, whenever applicable, so that they are limited to the outstanding balance of the transaction or to the maximum limit extended, in the case of an extension of a non-dischargeable credit facility by a financial institution on an absolute and unilateral basis.
Circular 3,952/19, deals in particular with the procedures for the registration of receivables, and requires a convention between market infrastructures to guarantee the uniqueness of the receivables as financial assets that can be registered, interoperability, exchange of information between registration systems and participants in the structure. Circular 3,952/19 came into effect on June 7, 2021.
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Brazilian Payment and Settlement System
The rules for the settlement of payments in Brazil are based on the guidelines adopted by the Bank of International Settlements, or “BIS,” and the current Brazilian Payment and Settlement System (Sistema de Pagamentos Brasileiro or the “SPB”). The Brazilian Central Bank and CVM (in relation to transactions with securities) have the power to regulate and supervise this system, SPB is composed of systems for the clearing of checks, clearing and settlement of debit and credit electronic orders, transfer of funds and other financial assets, clearing and settlement of transactions involving securities, clearing and settlement of transactions carried out in commodities and futures, and others, collectively designated as Financial Market Infrastructures, as well as the payment arrangements and payment institutions.
Within the scope of SPB, the Brazilian Central Bank operates the Reserves Transfer System, or “STR,” and the SELIC. STR is a system of transfer of funds with real-time gross settlement, which means that transfers are made at the processing time, one by one, and are subject to the existence of outstanding balance in the account. STR is composed of financial institutions, clearing and settlement houses and the National Treasury Office. SELIC is the Brazilian Special Settlement and Custody System (Sistema Especial de Liquidação e Custodia), a system intended for custody of book-entry securities issued by the National Treasury Office and for the registration and settlement of transactions involving such securities.
Instant Payment System
The Brazilian Central Bank also implemented an instant payment ecosystem in November 2020. The settlement of the system is centralized at the Brazilian Central Bank. In addition to increasing the speed at which payments or transfers are made and received, available 24 hours a day, seven days a week in all days of the year, the ecosystem has the potential to increase market competitiveness and efficiency; lower costs; and enhance customer experience.
On June 12, 2020, the Brazilian Central Bank issued Circular 4,027/20, which established the Brazilian Instant Payment System (Sistema de Pagamentos Instantâneos, or “SPI”). Circular 4,027/20 also approved the regulation with which the direct and indirect participants in the SPI must comply, and provided that the SPI started operating on November 3, 2020 with certain features and becoming available gradually until it was fully operational on November 16, 2020. Brazilian Central Bank Normative Ruling No. 47/20 establishes the procedures and timetable for the tests necessary to register as a direct participant in the SPI, Brazilian Central Bank Normative Ruling No. 129/21, in turn, establishes the procedures for the adherence to the instant payment arrangement (PIX).
According to the by-laws of the SPI, the participation in the SPI is mandatory for the participants of the PIX arrangement, and optional for (i) the clearing houses and other providers of clearing services, and (ii) the National Treasury Department.
There are two types of participation in the SPI: (i) direct, in which the participant holds an instant payment account and is directly connected to the SPI; and (ii) indirect, in which the participant institution does not hold an instant payment account and its participation occurs via a direct participant to the SPI, responsible for registering the indirect participant in the SPI and to act as its clearing agent in the SPI for instant payments, Circular 4,027/20 came into effect on July 1, 2020.
On August 12, 2020, the Brazilian Central Bank issued Central Bank Resolution No. 1, or “Central Bank Resolution 1/2020,” establishing the PIX System payment arrangement and approving the regulation governing it, or (the “PIX Regulation”).
Pursuant to Central Bank Resolution 1/2020, participation in the PIX System is mandatory for financial institutions and payment institutions authorized to operate by the Brazilian Central Bank that have more than 500,000 active customer accounts, considering cash deposit accounts, savings deposit accounts and prepaid payment accounts. Participation in the PIX System is optional for financial institutions and payment institutions that do not meet this threshold, as well as for the National Treasury Secretariat.
The PIX Regulation applies to all PIX System participants. According to the PIX Regulation, there are three types of participation: (i) transactional account provider, which is a financial institution or a payment institution that offers deposit accounts or payment accounts to end users; (ii) government entity, which is the National Treasury Secretariat, with the exclusive purpose of making collections and payments related to its activities; and (iii) special clearing houses, that are the financial institutions and payment institutions that (a) within the scope of the PIX System, have the exclusive purpose of providing settlement services to other participants, (b) meet the requirements to act as settlement participant in the Brazilian Central Bank’s SPI, and (c) do not meet the criteria of mandatory participation in the PIX System.
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Brazilian Central Bank Resolution 1/2020 came into effect on September 1, 2020. PIX System transactions started operating on a restricted basis through to November 3, 2020 and was fully as of November 16, 2020.
Furthermore, on September 2, 2021, the Brazilian Central Bank issued Resolutions No. 135 and 136, which regulate the offering of the PIX Withdrawal and PIX Change services by regulated institutions that participate in the Brazilian Instant Payments System. Both rules came into effect on November 1, 2021. The new services were established by the Brazilian Central Bank on August 24, 2021, in a meeting of its Collegiate Board, which approved changes to the PIX Regulations.
PIX Withdrawal will allow all the clients of any participating institution to make a withdrawal in kind at one of the points that offer the service. Merchants, shared ATM networks and PIX participants, through their own ATMs, may offer the service. In order to withdraw funds in kind through PIX, the client simply executes a PIX transaction to the withdrawal agent, in a similar dynamic to a normal PIX transaction, by reading a QR Code or through the service provider's API.
With the PIX Change, the dynamic is almost identical. The difference is that the withdrawal of cash can be carried out during a purchase transaction with a merchant that offers PIX as a mean of payment. In this case, the PIX transaction is executed for the total amount (purchase + cash withdrawal). The customer's invoice will show the amount corresponding to the cash withdrawal and the purchase amount.
The offer of the two new products on PIX’s evolving agenda to users is optional, and the final decision to implement PIX Withdrawal and PIX Change is up to the merchants that accept PIX, the companies that own ATM networks, and the financial institutions that have their own ATMs.
Further, on September 23, 2021, the Brazilian Central Bank issued Resolution No. 142, introducing security measures to be adopted by institutions under its regulation and supervision to prevent frauds in the provision of payment services.
Resolution No. 142 establishes that financial and payment institutions must limit the provision of payment services for the period from 8 p.m. to 6 a.m. to a maximum of R$1,000 per deposit or prepaid payment account, as applicable. This limit may be increased at the client's request, which must be submitted formally through the relevant electronic service channels, but the institution must establish a minimum period of 24 hours for the change to take effect. Resolution No. 142 required payment service providers to implement the new transaction limit by October 4, 2021.
Pursuant to Resolution No. 142, financial and payment institutions must also implement, by November 16, 2021: (i) procedures aimed at evaluating the customer prior to offering the anticipation of the settlement of payment receivables on the same date of the execution of a payment transaction within the scope of payment schemes in which the institutions participate; and (ii) daily registration of the occurrence of fraud or attempted fraud in the rendering of payment services, including the corrective measures adopted by the institution. Based on these records, the institutions must prepare a monthly report consolidating the occurrences and the preventive and corrective measures adopted. This report must be forwarded to the institution audit and risk committees (if instituted), internal audit unit, Executive Board and Board of Directors (if instituted).
Furthermore, on September 28, 2021, the Brazilian Central Bank issued Resolution No. 147, which established security mechanisms specific to PIX transactions. The rule also details, within the scope of PIX, the measures established by Resolution No. 142, which applies to all electronic payment methods (including other types of electronic transfers available in Brazil, such as Transferência Eletrônica Disponível – TED or Documento de Ordem de Crédito – DOC). The security measures came into effect on November 16, 2021, with the exception of the new transaction limits, which came into effect on October 4, 2021.
Open Banking Regulation in Brazil
On May 4, 2020, the Brazilian Central Bank and the CMN enacted Joint Resolution No. 1, which regulates open banking. Open banking consists of the sharing of data and payment initiation services and forwarding credit transaction proposals, by financial institutions and other authorized entities (with customers permission) and the integration of information systems.
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Among other topics, the resolution sets forth the mandatory and voluntary participating institutions, the data and services covered, the requirements for sharing, the responsibilities for sharing, the implementation schedule and the form of agreement to be entered into by the participating institutions.
According to the resolution, financial institutions and prudential conglomerates belonging to the S1 and S2 segments, as is our case, are required to participate in open banking.
Open banking has a four-stage implementation plan, as follows:
● Stage 1 (completed on February 1, 2021): public access to participating institutions’ data on their access channels and product/service channels related to checking, savings, prepaid payment accounts and to lending transactions.
● Stage 2 (completed on August 13, 2021): sharing of customer reference data and customer transactional data among the participating institutions.
● Stage 3 (completed October 29, 2021): start of PIX transactions by payment transaction initiators, as well as the gradual entry of other payment arrangements.
● Stage 4 (starting on December 15, 2021): sharing of customer transactional data related to additional products, pursuant to the following deadlines: (i) insurance, open-end private pension and capitalization products: until March 4, 2022; (ii) merchant acquiring services: until March 11, 2022; (iii) foreign exchange transactions: until March 18, 2022; and (iv) time deposit accounts and other investment products: until March 25, 2022.
On October 29, 2020, the Brazilian Central Bank issued Central Bank Resolution 32/2020, which sets forth the technical and operational requirements to be observed by institutions which participate in the Brazilian Open Banking System.
The new rule lays out, among others, rules relating to (i) the scope of the data and services to be shared by participating institutions within Open Banking, detailed in a specific manual; (ii) the standards for the development of application programming interfaces (APIs) by participating institutions, detailed in a specific manual, which deals with their design, data transmission protocols, data exchange formats, control accesses, version control systems and specification parameters; among other things; (iii) criteria for registration and cancellation of registration in Open Banking; (iv) services to be rendered by the Open Banking Governance Structure, which also is detailed in a specific manual, including the maintenance of a repository of participating institutions and a website containing updated information about Open Banking and its implementation; and (v) minimal security standards and certifications.
Additionally, on September 9, 2021, the Brazilian Central Bank published Resolution No. 138, which disclosed the minimum scope of data to be available for sharing on Stage 4 of Open Banking, to be further detailed by the Open Banking Governance Body. The fourth stage of the ecosystem, which covers data on foreign exchange, investment, insurance, and open-end private pension transactions, as well as merchant acquiring services, began on December 15, 2021, when the participating institutions must make the information about the mentioned products and services available to other financial institutions.
Regarding investment transactions, the main financial and capital market products offered in Brazil were included in the scope of Stage 4, such as: (i) Banking Time Deposit Certificates (Certificados de Depósito Bancário or CDBs); (ii) Banking Time Deposit Receipts (Recibos de Depósito Bancário or RDBs); (iii) Real Estate Credit Bills (Letras de Crédito Imobiliário or LCIs); (iv) Agribusiness Credit Bills (Letras de Crédito do Agronegócio or LCAs); (v) investment fund quotas; (vi) direct treasury government bonds (títulos do tesouro direto); (vii) stock; (viii) quotas of exchange-traded investment funds (ETFs); (ix) debentures; (x) Certificates of Real Estate Receivables (Certificados de Recebíveis Imobiliários or CRIs); and (xi) Certificates of Agribusiness Receivables (Certificados de Recebíveis do Agronegócio or CRAs).
With regard to foreign exchange transactions, effective total value of transactions (VET) and commercial exchange rates will need to be made available. The data referring to merchant acquiring services will cover applied service fees and rates.
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Finally, the data referring to insurance products and pension plans will follow the scope defined by the CNSP and the SUSEP in CNSP Resolution No. 415/2021 and SUSEP Circular No. 635/2021, respectively, which establish a specific timeline for the implementation of Open Insurance, an exclusive governance body responsible for Open Insurance, as well as specific implementation manuals.
Stage 4 of Open Banking introduced information sharing beyond traditional banking products and services, marking the beginning of the migration from Open Banking to Open Finance in Brazil.
Regulatory Sandbox
On November 28, 2019, the Brazilian Central Bank published Public Consultation No. 72/2019, which ended on January 31, 2020, regarding the Controlled Testing Environment for Financial Innovations or “Sandbox” which is intended to enable institutions test innovative financial and payment projects for a specified period.
After receiving comments on such Public Consultation, the CMN and the Brazilian Central Bank issued, on November 26, 2020, CMN Resolution 4,865/20 and BCB Resolution 29/20, to regulate the Sandbox. These rules set forth the applicable conditions for the implementation of the Sandbox, among which are the specific rules for the first cycle of tests, such as duration and number of participants, required documentation, criteria for the classification of institutions and the schedule for registration, selection and authorization processes of such entities. In November 2021, the Brazilian Central Bank selected developers’ projects for the first cycle, which will last for one year and may be extended for another year.
Treatment of Overdue Debts
The Brazilian Central Bank requires financial institutions to classify credit transactions in accordance with their level of credit risk and to make provisions according to the level attributed to each transaction. Such credit classifications shall be determined in accordance with criteria set forth from time to time by the Brazilian Central Bank, relating to the conditions of the debtor and the guarantor and the transaction terms. Where there are several credit transactions involving the same customer, economic group or group of companies, the credit risk must be determined by analyzing the particular credit transaction of such customer or group that represents the greatest credit risk to the financial institution.
Credit transactions of up to R$50,000 may be classified either by the financial institution’s own evaluation method or according to the number of days such transaction is past due, whichever is the more stringent. Credit classifications are required to be reviewed (i) monthly, in the event of a delay in the payment of any installment of principal or interest, in accordance with the maximum risk classifications; (ii) every six months, in the case of transactions involving the same customer, economic group or group of companies, the amount of which exceeds 5% of the adjusted net worth of the financial institution in question; and (iii) once every 12 months, in all circumstances, except in the case of credit transactions with a customer whose total liability is lower than R$50,000, the classification of which may be reviewed as provided above. Such R$50,000 limit may be amended by the Brazilian Central Bank from time to time.
The provisions set forth above are not applicable to our IFRS consolidated financial statements, which are based on the criteria described under “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Impairment Losses on Financial Assets.”
Regulation of the Transfer of Customer Data by Financial Institutions to Database Managers
Brazilian law regulates the formation and consultation of databases with information regarding performance, individuals or legal entities, for the formation of credit history, Resolution No. 4,737 determines that the history of the following operations should be provided: (i) credit operations; (ii) leasing operations; (iii) self-financing operations executed upon consortium groups; and (iv) other operations with characteristics of credit granting; and defines the criteria for the registration of database managers, such as the identification of the natural and legal persons that are part of the control group of the database manager.
Collection of Bank Fees
Bank services to individuals are divided into the following four groups: (i) essential services; (ii) priority services; (iii) special services; and (iv) specific or differentiated services.
Banks are not able to collect fees in exchange for supplying essential services to individuals with regard to checking accounts, such as (i) supplying a debit card; (ii) supplying 10 checks per month to account holders who meet the requirements to use checks, as per the applicable rules; (iii) supplying a second debit card (except in cases of loss, theft, damage and other reasons not caused by the bank); (iv) up to four withdrawals per month, which can be made at a branch of the bank, using checks or in ATM terminals; (v) supplying up to two statements describing the transactions during the month, to be obtained through ATM terminals; (vi) inquiries over the internet; (vii) up to two transfers of funds between accounts held by the same bank, per month, at a branch, through ATM terminals or over the internet; (viii) clearing checks; and (ix) supplying a consolidated statement describing, on a month-by-month basis, the fees charged over the preceding year with regard to checking accounts and savings accounts.
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Certain services rendered to individuals with regard to savings accounts also fall under the category of essential services and therefore are exempt from the payment of fees. CMN prohibits banks from charging fees for supplying essential services in connection with deposit and savings accounts where customers agree to access and use their accounts by electronic means only (being authorized to charge fees for supplying essential services only when the customer voluntarily elects to obtain personal service at the banks’ branches or customer service locations),
Priority services are those rendered to individuals with regard to checking accounts, transfers of funds, credit transactions, leasing, standard credit cards, over-the-counter exchange transactions for the purchase or sale of foreign currency in respect of international travel, and records, and are subject to the collection of fees by the financial institutions only if the service and its nomenclature are listed in its regulations. Commercial banks must also offer to their individual customers a “standardized package” of priority services, whose content is defined, as well as the customers’ option to acquire individual services instead of adhering to the package.
The collection of fees in exchange for the supply of special services (including, among others, services relating to rural credit, currency exchange market and on lending of funds from the real estate financial system) is governed by the specific provisions found in the laws and regulations relating to such services. The regulation authorizes financial institutions to charge fees for the performance of specific services, provided either that the account holder or user is informed of the conditions for use and payment or that the fee and charging method are defined in the contract.
It is worth pointing out: (i) the prohibition against charging fees in cases of adhesion contract amendments, except in the cases of asset replacement in leasing transactions, early liquidation or amortization, cancellation or termination; (ii) the prohibition against including services related to credit cards and other services not subject to fees in service packages that include priority, special and/or differentiated services; (iii) the requirement that subscription to service packages must be through a separate contract; (iv) the requirement that information given to the customer with respect to a service package must include the value of each service included in the package, the number of times that each service may be utilized per month, and the total price of the package; (v) the requirement that a customer’s annual banking statement must separately identify default interest, penalties and other costs charged on loans and leasing transactions; (vi) the requirement that registration fees cannot be cumulatively charged; and (vii) the requirement that overdraft fees can be charged, at most, once over the course of 30 days.
In addition, CMN regulations establish that all debits related to the collection of fees must be charged to a bank account only if there are sufficient funds to cover such debits in such account and thus forbid overdrafts caused by the collection of banking fees. Furthermore, a minimum of 30 days’ notice must precede any increase or creation of fees (except if related to credit card services, when a minimum of 45 days’ notice is required), while fees related to priority services and the “standardized package” can be increased only after 180 days from the date of the last increase (except if related to credit card services, when a minimum of 365 days’ notice is required) whereas reductions can take place at any time.
Late Payment Fees
The default payment fees charged by financial institutions, consumer credit companies (financeiras), and leasing companies are expressly limited to compensatory interest per day on the amount that is overdue, interest on arrears and fines on arrears.
Credit Cards
The banking regulations also have specific rules relative to the charging of credit card fees, the publication of information in the card invoices and the obligation to provide a package of basic services upon offering credit cards to customers.
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Revolving credit for financings of credit card bills may only be extended to customers until the due date of the following credit card bill. After this term, financial institutions offer customers another product with conditions more favorable than the ones typically found in the credit card market. Banks are prohibited from offering this type of credit to customers who have already contracted one revolving credit for financing of credit card bills which were not repaid in a timely manner.
Payment Agents and Payment Arrangements
The regulation issued by the Brazilian Central Bank, determines, among other aspects: (i) consumer protection, anti-money laundering compliance and risk prevention systems that should be observed by payment agents and payment arrangers; (ii) the procedures for incorporation, organization, authorization and operation of payment agents, as well as transfer of shareholding control, subject to the Brazilian Central Bank’s prior approval; (iii) capital requirements; (iv) definition of arrangements excluded from the SPB; and (v) rules related to payment accounts, which are divided into prepaid and postpaid accounts and require the allocation of the totality of their balance to a special account at the Brazilian Central Bank or investment in government bonds.
Portability of Credit Transactions
Financial institutions’ customers can transfer their credit transactions from one institution to another. Such transfers must comply with the specific rules established by the Brazilian Central Bank, including, among others, the requirement that the amount and term of the transaction in the receiving financial institution must not be higher than the amount due and term of the original transaction.
Digitalization of Documents and Record Keeping
Financial institutions and other institutions authorized to operate by the Brazilian Central Bank may keep in their records digital documents instead of physical documents, provided that certain requirements to ensure the documents’ authenticity and validity are met.
Anti-Money Laundering Regulations
Under the Brazilian Anti-Money Laundering Law, it is a crime to conceal or dissimulate the nature, origin, location, availability, transaction or ownership of assets, rights or amounts resulting, directly or indirectly, from any criminal offense, as well as their use in economic or financial activity and to participate in a group, association or office while being aware that its principal or secondary activities are directed toward the practice of such acts.
The Brazilian Anti-Money Laundering Law also created the Financial Activities Control Council (Conselho de Controle de Atividades Financeiras or “COAF”), which operates under the jurisdiction of the Ministry of Finance. The purpose of the COAF is to investigate, examine, identify and impose administrative sanctions in respect of any suspicious occurrences of illicit activities related to money laundering in Brazil.
The COAF is composed of individuals with recognized competence in this area, appointed by the Minister of Finance, all of whom are nominated by each of the following entities: (i) the Brazilian Central Bank; (ii) the CVM; (iii) the SUSEP; (iv) the Brazilian Treasury Attorney-General’s Office; (v) the Brazilian Federal Revenue; (vi) the Federal Intelligence Agency; (vii) the Ministry of Foreign Affairs; (viii) the Ministry of Justice; (ix) the Federal Police Department; (x) the Ministry of Social Security; and (xi) the General Comptroller’s Office, one of whom will be the president, which shall be appointed by the President of Brazil on the basis of recommendations by the Minister of Finance.
Financial institutions must maintain specific records of (i) the transactions in cash (deposit, withdrawal, withdrawal by means of a prepaid card or request of provision for withdrawal) so as to enable the identification of a deposit in cash, withdrawal in cash, withdrawal in cash by means of a prepaid card, or request of provision for withdrawal, of (a) an amount equal to or greater than R$100,000.00 or (b) that presents evidence of concealment or dissimulation of the nature, of the origin, of the location, of the disposal, of the movement or of the ownership of assets, rights and valuables; and (ii) the issuances of cashier’s checks, funds electronic transfers (TED) or of any other instrument of transfer of funds upon payment in cash, for an amount equal to or greater than R$100,000.00.
Financial institutions must maintain records of all operations, products and services contracted, including withdrawals, deposits, contributions, payments, receipts and transfers of funds. Additionally, the institutions must also keep specific records of (i) transactions in cash with an individual value greater than R$2,000.00; (ii) deposit or cash transactions of an individual value equal to or greater than R$50,000.00; and (iii) withdrawal transactions, including those carried out by check or money order, with an individual value equal to or greater than R$50,000.00.
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The regulations also impose an obligation on financial institutions to request that both customers and non-customers are providing a withdrawal request at least three working days in advance for withdrawals (including those carried out by check or money order) in an amount equal to or greater than R$50,000.00.
On January 23, 2020, the Brazilian Central Bank published Circular No. 3,978, which improves the regulation applicable to financial institutions, by expanding the adoption of a risk-based approach and came into effect on July 1, 2020. Regulated institutions must carry out specific internal risk assessments in order to identify and measure the risk of using their products and services in the practice of money laundering and terrorist funding.
In connection with the aforementioned change, the Know-Your-Client procedures were also improved and include the identification, qualification and classification of the customer, compatible with the risk profile, the nature of the relationship with the AML policy and the institution’s internal risk assessment, which must be permanently reassessed, according to the evolution of the business relationship and the risk profile of the client. The procedures must also include the verification of the client’s (including their representatives’, family members’ or close collaborators) condition as a Politically Exposed Individual, as well as consider them in the monitoring, selection and analysis of operations and situations with indications of suspected money laundering or terrorist funding.
On July 27, 2021, the Brazilian Central Bank published Resolution No. 119, which came into effect on September 1, 2021 and introduced certain changes to Circular No. 3,978/2020, which establishes the regulations and procedures related to anti-money laundering and combating the financing of terrorism applicable to entities subject to the Brazilian Central Bank´s regulation and supervision.
Among other changes brought by the new rule, financial institutions (and other entities regulated by the Brazilian Central Bank) are now required to obtain information about their customers’ place of residence, in the case of a natural person, or the location of the head office or branch, in the case of a legal entity, as part of their mandatory Know-Your-Client (KYC) procedure. The CVM also issued CVM Resolution No. 50 in August 31, 2021, which establishes the framework for the prevention of money laundering and the financing of terrorism in the Brazilian securities market. CVM Resolution No. 50 is in line with the practices currently implemented in the principal global securities markets, including with regard to the recommendations of the Financial Action Group against Money Laundering and the Financing of Terrorism (GAFI/FATF), as well as with the duties arising from Brazilian anti-money laundering laws.
Brazilian Anti-Corruption Law
Law No. 12,846/13 of August 1, 2013, or the “Brazilian Anti-Corruption Law” establishes that legal entities will have strict liability regardless of fault or willful misconduct for acts against the public administration carried out in their interest or for their benefit. The Law encompasses not only performance of acts of corruption but also performance of other injurious acts contrary to the Brazilian or foreign public administration.
Corporations that violate the Brazilian Anti-Corruption Law’s provisions will be subject to heavy penalties, some of which may be imposed through administrative proceedings and others solely through judicial channels. The Brazilian Anti-Corruption Law also creates a leniency program under which self-disclosure of violations and cooperation by corporations might result in the reduction of fines and other sanctions.
Politically Exposed Individuals
Financial institutions and other institutions authorized by the Brazilian Central Bank to operate must take certain actions and have certain controls in order to establish business relationships with and to follow up on the financial transactions of customers who are deemed to be politically exposed individuals (public agents and their immediate family members, spouses, life partners and stepchildren who occupy or have occupied a relevant public office or position over the past five years in Brazil or other countries, territories and foreign jurisdictions). The internal procedures developed and implemented for this purpose by financial institutions must be structured in such a way as to enable the identification of politically exposed individuals, as well as the origin of the funds involved in the transactions of such customers. One option is to verify the compatibility between the customer’s transactions and the net worth stated in such customer’s file.
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Bank Secrecy
Brazilian financial and payment institutions shall also maintain the secrecy of their banking operations and services provided to their customers. The only circumstances in which information about customers, services or transactions of Brazilian financial and payment institutions may be disclosed to third parties are the following:
● the disclosure of information with the express consent of the interested parties;
● the exchange of information between financial institutions for record purposes;
● the supplying to credit reference agencies of information based on data from the records of issuers of bank checks drawn on accounts without sufficient funds and defaulting debtors; and
● the occurrence or suspicion that criminal or administrative illegal acts have been performed, in which case the financial institutions and the credit card companies may provide the pertinent authorities with information relating to such criminal acts when necessary for the investigation of such acts.
Complementary Law 105/01 also allows the Brazilian Central Bank or the CVM to exchange information with foreign governmental authorities, provided that a specific treaty has previously been executed.
The governments of Brazil and the United States executed an agreement on March 20, 2007, by means of which these governments established rules for the exchange of information relating to tax, or the “2007 Agreement.” Under the 2007 Agreement, the Brazilian tax authority would be able to send information it receives by virtue of Section 5 of the Bank Secrecy Law to the U.S. tax authority.
Data Protection Requirements
The LGPD (Lei Geral de Proteção de Dados) was published in the Federal Official Gazette on August 15, 2018 and was amended by Law 13,853/19. The LGPD came into effect in September 2020, except for administrative sanctions, which came into effect on August 1, 2021, pursuant to Law No. 14,010/20, which delayed the applicability of certain provisions of the LGPD.
Before the LGPD, Brazil lacked regulations specific to data privacy and a data protection authority. Despite this, privacy has been generally protected through the Brazilian Federal Constitution, the Civil Code (Law No. 10,406/2002), the Consumer Protection Code (Law No. 8,078/1990) and the Civil Rights Framework for the Internet (Law No. 12,965/2014 and the Decree 8,771/2016).
The LGPD brings about profound changes in the rules and regulations applicable to the processing of personal data, with a set of rules to be complied with in activities such as the collection, processing, storage, use, transfer, sharing and erasure of information concerning identified or identifiable natural persons.
The LGPD has a wide range of applications and extends to individuals as well as private and public entities, regardless of the country where they are headquartered or where data are hosted, as long as (i) the data processing takes place in Brazil; (ii) the data processing activity is intended to offer or supply goods or services to, or to process data of individuals located in Brazil; or (iii) the subjects of the data are located in Brazil at the time their personal data are collected. The LGPD will apply irrespective of the industry or business when dealing with personal data and is not restricted to data processing activities performed through digital media and/or on the internet.
The LGPD sets out several rules related to data processing such as principles, requirements and duties imposed to data controllers and data processors; rights of data subjects; requirements in connection with cross-border transfers of data; the obligation to appoint a data protection officer; data security and data breach notification; corporate governance practices; and the regime for civil liabilities and penalties in case of a breach of the provisions of the LGPD. Penalties include warnings, blocking and erasure of data, public disclosure of the offense and fines of up to 2% of the economic group’s turnover in Brazil in the preceding year, capped at R$50 million per offense.
Moreover, Law 13,853/2019 created the Brazilian National Data Protection Authority, or “ANPD,” which will have powers and responsibilities analogous to the European data protection authorities, exercising a triple role of (i) investigation, comprising the power to issue norms and procedures, deliberate on the interpretation of the LGPD and request information of controllers and processors; (ii) enforcement, in cases of noncompliance with the law, through an administrative process; and (iii) education, with the responsibility to disseminate information about and foster knowledge of the LGPD and security measures, fostering standards for services and products that facilitate control of data, and elaborating studies on national and international practices for the protection of personal data and privacy, among others.
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The ANPD has been assured technical independence, although it is subordinated to the Presidency of the Republic. It will be composed of five commissioners, to be appointed by the President of Brazil, and advised by a National Council for the Protection of Personal Data and Privacy, composed of 23 unpaid members.
Regulations on Cybersecurity
Financial institutions must follow certain cyber risk management and cloud outsourcing requirements which apply to the design and adaptation of internal controls, namely CMN Resolution No. 4,893/2021, which requires financial institutions to institute a Cybersecurity Policy, as well as regulates the outsourcing of relevant data processing and storage and cloud computing services and CVM Ruling No. 35/2021, which sets forth the standards and procedures to be observed in security transactions carried out in regulated securities markets requiring the implementation of cybersecurity controls and data protection. Policies and action plans to prevent and respond to cybersecurity incidents were fully compliant and in place by December 2021. Data location and processing may occur inside or outside Brazil, but access to data stored abroad must be granted at all times to the Brazilian Central Bank for inspection purposes. The contracting of relevant processing services must be communicated to the Brazilian Central Bank within 10 days from the execution of the agreement. See “Item 3. Key Information—D. Risk Factors— Risks Relating to the Brazilian Financial Services Industry and Our Business—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”
Auditing Requirements
The legislation and regulations issued by the CMN, CVM and B3 determine that the periodic financial statements of financial institutions must be audited by independent auditors (individuals or legal entities) that are registered with the CVM and who meet the minimum requirements set forth by the Brazilian Central Bank, and that the financial statements must be presented together with an independent auditor’s report. Our financial statements are audited in accordance with International Standards on Auditing with regard to Brazilian GAAP and also with the standards of the Public Company Accounting Oversight Board with regard to IFRS as issued by the IASB, as required by the SEC. For purposes of the financial statements prepared according to Brazilian GAAP, as from January 2017 all financial institutions and other institutions authorized to operate by the Brazilian Central Bank are required to create provisions for all losses related to financial guarantees issued by them. As a result of the auditing work, the independent auditor must prepare the following reports: (i) an audit report, issuing an opinion regarding the accounting statements and the respective explanatory notes, including regarding the compliance with financial regulations issued by the CMN and the Brazilian Central Bank; (ii) an internal control system quality and adequacy evaluation report, including regarding electronic data processing and risk management systems, evidencing any identified deficiencies; (iii) a legal and regulatory provisions noncompliance report, regarding those which have, or may have, material impacts on the financial statements or on the audited financial institution’s operations; (iv) a limited assurance report, analyzing our Annual and Sustainability Report pursuant to the guidelines and requirements of the Global Reporting Initiative, or “GRI”; and (v) any other reports required by the Brazilian Central Bank, CVM and B3. The reports issued by independent auditors must be available for consultation upon request by the overseeing authorities.
Independent auditors and the audit committee, individually or jointly, must formally notify the Brazilian Central Bank of the existence or evidence of error or fraud, within three business days of the identification of the respective occurrence, including:
● noncompliance with legal rules and regulations that place the continuity of the audited entity at risk;
● frauds of any amount perpetrated by the management of the institution;
● material frauds perpetrated by the institution’s employees or third parties; and
● errors that result in major incorrectness in the financial statements of the audited entity.
The executive office of the financial institution must inform the independent auditor and the audit committee, if any of the above situations occur.
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CMN regulation also requires financial institutions and certain other entities holding Regulatory Capital equal to or greater than R$1 billion to create a corporate body designated as the “audit committee.” To obtain more information concerning the audit committee, see “Item 6. Directors, Senior Management and Employees—C. Board Practices—Board Advisory Committees—Audit Committee.”
Internal Auditing of Financial Institutions
Financial institutions are required to establish and maintain internal audit activities compatible with their operational specifications, so that such internal bodies are able to perform an independent, autonomous and impartial audit of the quality and effectiveness of the institution’s internal systems. Such unit shall be directly controlled by the institution’s board of directors. Internal and external independent auditors are also liable for failures of the financial institution’s internal control mechanisms.
Environmental, Social and Governance (ESG) requirements applicable to financial institutions
Financial institutions are currently required by CMN Resolution No. 4,327/14 to have a responsibility policy, which must guide the social and environmental actions in conducting their businesses, their relationship with their customers and other users of their products and services. The responsibility policy must also guide the financial institution’s relationship with its personnel and with any others affected by the financial institution’s activities. In addition, the responsibility policy must provide for the management of social and environmental risks (which, according to the Brazilian Central Bank, represent one of the several categories of risk to which financial institutions are exposed).
Following Public Consultations Nos. 82, 85 and 86, initiated by the Brazilian Central Bank in 2021 under the “Sustainability” pillar of the “Agenda BC#” (which consists of a list of goals to improve the Brazilian National Financial System), a new set of rules was published on September 15, 2021. These new rules aim to improve the disclosure of information, management and governance of social, environmental and climate risks by financial institutions, as well as to bring changes to the rural credit regulations in effect.
Resolution No. 140 establishes new conditions for the access to rural credit considering social, environmental and climatic aspects. Among them, it stands out the credit restriction for a producer who is not registered, or whose registration is canceled, in the Rural Environmental Registry (Cadastro Ambiental Rural – CAR). The new resolution also sets forth that rural credit shall not be granted to (i) an enterprise fully or partially inserted in a conservation unit, indigenous land already approved, an area of embargo in force resulting from the economic use of illegally deforested areas in the Amazon; nor (ii) an individual or legal entity registered in the official register of employers who have kept workers in conditions analogous to slavery.
CMN issued Resolution No. 4,943, which amended CMN Resolution No. 4,557/17 with the purpose of highlighting and distinguishing social, environmental and climate risks, as necessary for the identification, measurement, evaluation, monitoring, reporting, control and mitigation in connection with the risk management structure of financial institutions. The new rule provides for specific definitions to such risks, using new and modern concepts, such as the inclusion of the two main components of climate risks – physical and of transition – already recognized by international ESG standards. The amended rule also deals with the identification and monitoring of social, environmental and climate risks incurred by financial institutions, resulting not only from their products, services and activities, but also from the activities performed by their counterparties, controlled entities, suppliers and outsourced service providers.
Similar provisions were also included in the simplified structure of continuous risk management pertaining to the Simplified Reference Capital (Patrimônio de Referência Simplificado – PRS5) by the new CMN Resolution No. 4,944, which amends CMN Resolution No. 4,606.
The CMN issued Resolution No. 4,945, replacing CMN Resolution No. 4,327 of April 25, 2014 on the Social and Environmental Responsibility Policy (Política de Responsabilidade Socioambiental or PRSA). The new rule provides for the inclusion of a climate aspect to the PRSA, which will be henceforth named Social, Environmental and Climatic Responsibility Policy (Política de Responsabilidade Social, Ambiental e Climática – PRSAC). Such new policy to be implemented by financial institutions shall take into account the impacts, strategic goals and business opportunities for the financial institutions in connection with social, environmental and climate aspects. There was also a reduction in the period for reviewing the PRSA, from five to three years.
The Brazilian Central Bank issued Resolution No. 139, regulating the preparation of a Report on Social, Environmental and Climate Risks and Opportunities (Relatório de Riscos e Oportunidades Sociais, Ambientais e
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Climáticas, or the “GRSAC Report”) by financial institutions classified in segments S1 (such as Banco Santander), S2, S3 and S4. Following the propositions of the Public Consultation, this new rule seeks to contemplate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) at the national regulatory level. The GRSAC Report must be published annually with the base date of December 31, within a maximum period of 90 days from December 31, and must be made available on the financial institutions' websites for a period of five years.
Finally, on October 6, 2021, the Brazilian Central Bank published Resolution No. 151, which regulates the remittance information regarding social, environmental, and climate risks addressed in CMN Resolution No. 4,557 and CMN Resolution No. 4,945 to the Brazilian Central Bank by authorized institutions. The rule applies to institutions classified in segments S1 (such as Santander Brasil), S2, S3, or S4; and the information that must be sent to the Brazilian Central Bank is related to the assessment of social, environmental and climate risks related to their exposures in credit and securities transactions, as well as those of the respective debtors under these transactions. The information to be remitted includes identification, economic sector, risk aggravating and mitigating factors, appraisal of social, environmental and climactic risks, among others.
In order to allow financial institutions to adapt their practices and policies to this new set of rules, CMN Resolution No. 4,943/21 and article 16 of CMN Resolution No. 4,945/21 (which revokes CMN Resolution No. 4,327/14) will enter into effect on July 1, 2022, while CMN Resolution No. 4,944/21, the other provisions of CMN Resolution No. 4,945/21 and Central Bank Resolution No. 139/21 will enter into effect on December 1, 2022. Brazilian Central Bank Resolution No. 151 will enter into effect on July 1, 2022 and Central Bank Resolution No. 140, which specifically provides for rural credit, came into effect on October 1, 2021.
Policy for Succession of Financial Institutions Managers
Brazilian financial institutions and other institutions authorized to operate by the Brazilian Central Bank shall implement and maintain internal policies for succession of managers, applicable to higher levels of the institution’s management. The internal policy shall encompass the procedures related to recruitment, promotion, appointment and retention of managers in accordance with the institution’s rules for identification, evaluation, training and selection of the candidates to management offices.
Corporate Governance of Financial Institutions
Financial institutions must (i) remit to the Brazilian Central Bank information on the financial institution’s management, controlling group and relevant shareholders, including the obligation to communicate to the regulator any information that may affect the reputation of any such persons; (ii) make available a communication channel allowing employees, contributors, customers, users, associates, or services providers to report anonymously situations indicating illegalities of any nature related to the institution; and (iii) have an internal body responsible for receiving the information and complying with the reporting obligations.
Compliance Policy
Financial institutions must implement and maintain a compliance policy compatible with the nature, size, complexity, structure, risk profile and business model of the institution, which is intended to ensure an effective compliance risk management by the institution and may be established at the consolidated enterprise level (conglomerado prudencial). The compliance policy must establish the scope and purpose of the compliance function in the institution, set forth the organizational structure of the compliance function, specify which personnel is allocated to the compliance function, and establish a segregation of roles among personnel in order to avoid conflicts of interest.
The compliance policy must be approved by the board of directors and the regulation also assigns to the board the responsibility to ensure the following: adequate management of the compliance policy throughout the institution, its effectiveness and continued application, its communication to all employees and services providers, as well as the dissemination of the integrity and ethical standards as part of the institution’s culture. The board of directors is also responsible for ensuring the application of measures in case of noncompliance, and for providing the necessary means for the activities related to the compliance functions to be adequately conducted.
Consumer Protection
Relationships between consumers and financial institutions are governed by Law 8,078, dated September 11, 1990, or the “Brazilian Consumer Protection Code,” which grants consumers certain rights and sets forth measures to be observed by suppliers, which must be complied with by financial institutions. The Brazilian Consumer Protection Code sets forth as consumer rights, among others, the assistance/facilitation in the defense of consumers’ rights, including through reverse burden of proof in their favor, and possibility of judicial review of contractual provisions deemed abusive.
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● to timely provide the necessary information including rights, duties, responsibilities, costs or advantages, penalties and possible risks when carrying out a transaction or rendering a service to allow customers and users free choice and decision-making;
● to timely provide, to the customer or user, agreements, receipts, statements, advice and other documents related to the transactions and services, as well as the possibility of timely cancellation of the agreements;
● formalization of an adequate instrument setting forth the rights and obligations for opening, using and maintaining a postpaid payment account;
● to forward a payment instrument to the customers’ or users’ residence or to enable the respective instrument only upon express request or authorization; and
● identification of end users’ beneficiaries for payments or transfer in statements and bills of the payer, including in situations in which the payment service involves institutions participating in different payment arrangements.
Financial institutions operating exclusively via digital means are excluded from the scope of certain aspects of the regulation.
Law No. 14,181, which amends the Brazilian Consumer Protection Code and Senior Citizens' Statute (Law No. 10,741 of October 1, 2003) to improve provisions related to the offering of consumer credit and provide for the prevention and treatment of over-indebtedness, came into effect on July 2, 2021.
Regarding the prevention of over-indebtedness, such rule created a chapter in the Brazilian Consumer Protection Code dedicated to responsible credit and financial education. The amendments determine the presentation of specific information to the consumer in the granting of credit or installment sales, such as the effective monthly interest rate, late payment interest and the total charges foreseen in the event of late payment.
The new law also regulates informational conduct to be observed by the credit supplier regarding the nature and modality of the credit offered, considering the age of the consumer.
The law also included a new chapter in the Brazilian Consumer Protection Code dedicated to the conciliation between debtor and creditor with respect to over-indebtedness. According to the new law, the over-indebted consumer may request the initiation of a debt renegotiation process, with the consumer being responsible for submitting a payment plan proposal, preserving the existential minimum. The unjustified non-attendance of the creditor or his attorney at the conciliation hearing may suspend the payment of the credit, with the interruption of the late payment charges. In the case of a successful conciliation, the court decision that ratifies the agreement will describe the debt payment plan and will be enforceable. A new debt renegotiation request may only be submitted after two years, counting from the settlement of the obligations provided for in the payment plan. In the case of unsuccessful conciliation, the judge, at the consumer's request, will institute proceedings for over-indebtedness to review and integrate the contracts and renegotiate the remaining debts, through a compulsory judicial plan.
Further, on September 30, 2021, the CMN published Resolution No. 4,949. The rule provides the principles and procedures to be adopted in the relationship with clients and users of products and services of financial institutions and other institutions authorized to operate by the Brazilian Central Bank. On October 13, 2021, the Brazilian Central Bank published Resolution No. 155, which establishes almost identical principles and procedures to be adopted by payment institutions and consortium administrators, which are regulated and supervised solely by the Brazilian Central Bank.
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CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 set forth new rules mainly with the goal of ensuring fair and equitable treatment at all stages of the relationship with institutions providing financial and payments services, as well as a convergence of the interests of such institutions with those of their consumers.
Under CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021, institutions authorized to operate by the Brazilian Central Bank shall prepare and implement an institutional policy for the relation with consumers and users. Such new policy should consolidate guidelines, strategic objectives and organizational values, so that the conduct of the institution’s activities is guided by the principles of ethics, responsibility, transparency and diligence.
CMN Resolution No. 4,949/2021 and Central Bank Resolution No. 155/2021 also provide that institutions authorized to operate by the Brazilian Central Bank and must indicate to such regulatory agency the officer responsible for complying with the obligations provided under the new rules.
The rules also impose other obligations to the regulated entities within their scope, such as the compliance with transparency and suitability rules. CMN Resolution No. 4,949 will enter into effect on March 1, 2022, and Central Bank Resolution No. 155 will enter into effect on October 10, 2022.
Policy for Relationship with Customers and Users of Financial Products and Services
Financial institutions and other institutions authorized to operate by the Brazilian Central Bank must have a policy governing the relationship with customers and users of financial products and services. In addition, such entities shall comply with the principles of ethics, liability, transparency and diligence promoting the convergence of interests and the consolidation of the institutional image of credibility, security and expertise.
Ombudsman
Financial institutions and other entities that are authorized to operate by the Brazilian Central Bank must have an ombudsman office. An ombudsman office has the following attributes according to the current regulation:
● to provide last resort assistance in connection with customer claims that have not been resolved through the conventional customer service channels (including the banking correspondents and the customer service assistance channel (Serviço de Atendimento ao Consumidor), or SAC); and
● to act as a communication channel between the financial institutions and their customers, including for dispute resolution.
Institutions that are part of a financial group are allowed to establish one ombudsman department to service the whole group. The officer in charge of the ombudsman office must prepare a report every six months, which must be provided to the management and auditing bodies. The reports and recordings of interactions of the ombudsman unit with consumers must be available to the Brazilian Central Bank for a period of at least five years.
Investment Funds Industry Regulation
Investment funds are subject to the regulation and supervision of the CMN and the CVM and, in certain specific matters, the Brazilian Central Bank. Investment funds may be managed by full-service banks, commercial banks, savings banks, investment banks, credit, financing and investment companies and brokerage and dealer companies within certain operational limits.
Investment funds may invest in any type of financial instrument available in the financial and capital markets, including, for example, fixed income instruments, stocks, debentures and derivative products, provided that, in addition to the denomination of the fund, a reference to the relevant type of fund is included.
Broker-Dealer Regulation
Broker and dealer firms are part of the national financial system and are subject to CMN, Brazilian Central Bank and CVM regulation and supervision. Brokerage firms must be chartered by the Brazilian Central Bank and are the only institutions in Brazil authorized to trade on stock exchanges. Both brokers and dealers may act as underwriters in the public placement of securities and engage in the brokerage of foreign currency in any exchange market.
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Since August 29, 2019, securities brokers and dealers may loan their own securities to their customers as long as they use the funds as collateral for operations in which the institution itself intermediates. The loan transaction consists of the transfer of assets from the institution: (i) to the customer, in conjunction with the transfer of that asset to the clearinghouse or clearing and settlement service provider; or (ii) to the clearinghouse or clearing and settlement service provider on behalf of the customer through powers established in a formal written power of attorney. In either case, the assets or set of assets in question shall return to the positions originally held at the end of the period stipulated in the contract. To offer this new service, securities brokers and dealers must appoint a director responsible for the loan operations under consideration.
Since November 27, 2020, securities brokers and dealers may issue electronic currency and maintain payment accounts.
Foreign Exchange Market
Transactions involving the sale and purchase of foreign currency in Brazil may be conducted only by institutions duly authorized by the Brazilian Central Bank to operate in the foreign exchange market. There is no current limit to long or short positions in foreign currency for banks authorized to carry out transactions on the foreign exchange market. Other institutions within the national financial system are not allowed to have short positions in foreign currency, although there are no limits with respect to foreign exchange long positions.
The Brazilian Central Bank imposes a limit on the total exposure in foreign currency transactions and transactions subject to foreign exchange fluctuation undertaken by Brazilian financial institutions, including branches abroad, and their direct and indirect affiliates. The limit is currently equivalent to 30.0% of the financial institution’s Regulatory Capital (Patrimônio de Referência), on a consolidated basis. The CMN, the Brazilian Central Bank and the Brazilian government may change the regulation applicable to foreign currency and foreign exchange transactions undertaken by Brazilian financial institutions in accordance with Brazil’s economic policy (including its foreign exchange policy).
On December 20, 2021, the President of Brazil sanctioned Law No. 14,286, approved by the Brazilian Senate on December 8, 2021, or the “New Foreign Exchange Law.” The New Foreign Exchange Law, an initiative of the Brazilian Central Bank, overhauls the rules applicable to the Brazilian foreign exchange market and contains provisions regarding Brazilian capital abroad and foreign capital within Brazil. The initiative aims to modernize, simplify and reduce legal doubts associated with current Brazilian foreign exchange legislation.
The main aspects of the New Foreign Exchange Law are: (i) ratification, at the legal level, that foreign exchange transactions may be carried out freely (provided such transactions are carried out by entities authorized to operate in this market and subject to applicable rules); (ii) granting of broad powers to the CMN and the Brazilian Central Bank to regulate the foreign exchange market and foreign exchange operations; (iii) expansion of international correspondence activities by Brazilian banks; (iv) possibility of Brazilian financial institutions investing and lending abroad funds that have been raised in Brazil or abroad; (v) the exclusion from its scope of foreign currency purchase and sale operations of up to U.S.$500 carried out between individuals on an occasional and non-professional basis; and (vi) the granting of powers to the monetary authorities to establish situations in which the prohibition of the private offset of credits between residents and nonresidents, as well as payments in foreign currency in Brazil, would not apply.
Law No. 14,286 will enter into effect in one year from the date of its publication (which occurred on December 30, 2021).
Foreign Investment in Brazilian Financial Institutions
According to the Brazilian federal constitution, the acquisition of equity interests by foreign individuals or legal entities in the capital stock of Brazilian financial institutions is forbidden, unless permitted by bilateral international treaties or by the Brazilian government by means of a presidential decree. A presidential decree issued on November 13, 1997, issued in respect of Banco Meridional do Brasil S.A. (our legal predecessor) allows 100% foreign participation in our capital stock. Foreign investors may acquire the shares issued by Santander Brasil as a result of this decree. In addition, foreign investors may acquire publicly traded nonvoting shares of Brazilian financial institutions traded on a stock exchange or securities depositary receipts offered abroad representing shares without specific authorization.
Following the enactment of Decree No. 10,029, the Brazilian Central Bank published, on January 22, 2020, Circular No. 3,977 recognizing as an interest of the Brazilian government the foreign holding of equity or increase in equity interest of financial institutions headquartered in Brazil (which is still subject to the same requirements and procedures applicable to the acquisition of equity in any Brazilian financial institution), as well as the opening of local branches of foreign financial institutions. However, since Santander Brasil had already been granted a specific presidential decree authorizing the foreign interest in its share capital, prior to Decree 10,029/19 being issued it does not affect its operations in Brazil.
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A foreign financial institution duly authorized to operate in Brazil through a branch or a subsidiary is subject to the same rules, regulations and requirements that are applicable to any Brazilian financial institution.
Bank Correspondents
Financial institutions are allowed to provide specific services to customers, including customer services, through other entities. These entities are called “bank correspondents” and the relationship between the financial institution and the bank correspondent is ruled by a specific regulation published by CMN and is subject to the supervision of the Brazilian Central Bank.
On July 29, 2021, the CMN published Resolution No. 4,935, which will revoke CMN Resolution No. 3,954, of February 24, 2011, changing the regulation of banking correspondents in Brazil. Banking correspondents are companies contracted by financial institutions and other institutions authorized to operate by the Brazilian Central Bank to provide services to their contracting institutions.
The new rule determines that these institutions set forth a policy for the operation and hiring of their correspondents, and it should formalized by a specific document and approved by the institution’s board of officers or board of directors. This operation and contracting policy should provide for the criteria required for contracting correspondents, internal controls related to the correspondent and remuneration rules for the provision of services.
The contracting institutions will continue to be required to maintain adequate internal control systems in order to monitor the public service activities carried out by the contracted correspondents and the contracting institution’s internal audit must annually assess the effectiveness of these quality control mechanisms.
In addition, with the inclusion of the express possibility of the correspondents acting in a digital setting, some provisions were improved, highlighting the need for the correspondent’s digital platform itself to have a minimum technical qualification that allows the offering of products and services suited to the needs, interests and goals of the contracting institution’s clients.
CMN Resolution 4,935 came into effect on February 1, 2022.
Regulation of Branches
Authorization by the Brazilian Central Bank is required for operations of branches or subsidiaries of Brazilian financial institutions, upon the compliance with certain term, capital and equity requirements, as well as the submission of an economic and financial feasibility analysis.
The Brazilian Central Bank’s prior authorization is also required in order to: (i) allocate new funds to branches or subsidiaries abroad; (ii) subscribe capital increases, directly or indirectly, in subsidiaries abroad; (iii) increase equity participation, directly or indirectly, in subsidiaries abroad; and/or (iv) merge or spin off, directly or indirectly, subsidiaries abroad.
The Brazilian Central Bank determines that financial institutions can install the following establishments in Brazil: (i) branches, (ii) teller booths, (iii) automatic teller machines, and (iv) segregated administrative units, provided that, for items (i) to (iii), conformity with requirements of minimum capital and operating limits are necessary.
Cayman Islands Banking Regulation
We have a branch in the Cayman Islands with its own staff and representative officers, Banco Santander (Brasil) S.A. – Grand Cayman Branch is licensed under The Banks and Trust Companies Law (2013 Revision) of the Cayman Islands, or the “Banks and Trust Companies Law,” as a Category “B” Bank and it is duly registered as a Foreign Company with the Registrar of Companies in the Cayman Islands. The branch, therefore, is duly authorized to carry on banking business in the Cayman Islands. The branch was authorized by the local authorities to act as its own registered office and it is located at the Waterfront Centre Building, 28, North Church Street – 2nd floor, George Town, Grand Cayman, Cayman Islands, P.O. Box 10444 – KYI-1004, Phone: 1-345-769-4401 and Fax: 1-345-769-4601.
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Our Grand Cayman Branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions with Brazil. The results of the operations of the Grand Cayman Branch are consolidated in our consolidated financial statements.
Banks and trust companies wishing to conduct business from within the Cayman Islands must be licensed by the Cayman Islands Monetary Authority under the Banks and Trust Companies Law, irrespective of whether the business is to be actually conducted in the Cayman Islands.
Under the Banks and Trust Companies Law, there are two main categories of banking license: a category “A” license, which permits unrestricted domestic and offshore banking business, and a category “B” license, which permits principally offshore banking business. The holder of a category “B” license may have an office in the Cayman Islands and conduct business with other licensees and offshore companies but, except in limited circumstances, may not do banking business locally with the public or residents of the Cayman Islands. We have an unrestricted category “B” license.
There are no specific ratio or liquidity requirements under the Banks and Trust Companies Law, but the Cayman Islands Monetary Authority will expect observance of prudent banking practices, and the Banks and Trust Companies Law imposes a minimum net worth requirement of an amount equal to CI$400,000 (or, in the case of licensees holding a restricted category “B” or a restricted trust license, CI$20,000). As of December 31, 2020, CI$1 was equivalent to R$6.68, according to the Brazilian Central Bank.
Luxembourg Banking Regulation
Branches of credit institutions from outside the European Union (“non-EU credit institutions”) must be licensed by the Luxembourg Minister of Finance under the law of 5 April 1993 on the financial sector, as amended, in order to operate in Luxembourg.
We have a branch in Luxembourg with its own staff and representative officers. Our Luxembourg branch is licensed as a Luxembourg branch of a non-EU credit institution and is duly registered with the Luxembourg Trade and Companies’ Registry. The branch, therefore, is duly authorized to carry on banking business in Luxembourg. Its registered offices are at 35F, avenue J. F. Kennedy, 2nd floor, L-1855 Luxembourg, Grand Duchy of Luxembourg.
Our Luxembourg branch is currently engaged in the business of sourcing funds in the international banking and capital markets to provide credit lines for us, which are then extended to our customers for working capital and trade-related financings. It also takes deposits in foreign currency from corporate and individual customers and extends credit to Brazilian and non-Brazilian customers, mainly to support trade transactions involving Brazil. The results of the operations of the Luxembourg branch are consolidated in our consolidated financial statements.
Luxembourg law requires the Luxembourg branch to have a minimum endowment capital of €8,700,000 and the solvency, and liquidity requirements deriving, among others, from EU Regulation No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms apply to it.
Foreign Subsidiary
We had established an independent subsidiary in Spain, Santander EFC, in order to complement our foreign trade strategy for corporate customers, which are composed of large Brazilian companies and their operations abroad. This has allowed us to provide financial products and services by means of an offshore entity, which is not established in a “tax haven,” such as our Cayman Islands branch, in accordance with Law No. 12,249, of June 11, 2010, and Brazilian Federal Revenue Normative Ruling No. 1,037, of June 4, 2010.
The establishment of our foreign subsidiary was approved by the Brazilian Central Bank on September 26, 2011, by the Spanish Ministerio de Economia y Hacienda on February 6, 2012 and by the Bank of Spain on March 28, 2012. The remittance of resources to pay up the share capital of the subsidiary was carried out on March 5, 2012, totaling €748 million, Santander EFC was operational from 2012 to November 12, 2020, when we approved its liquidation. As a consequence of the liquidation, we, as sole shareholder of Santander EFC, have participated in the net assets of the corporation, in the net amount of €741 million.
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U.S. Banking Regulation
Financial Regulatory Reform
Banking statutes and regulations are continually under review by the United States Congress. In addition to laws and regulations, the U.S. bank regulatory agencies may issue policy statements, interpretive letters and similar written guidance. Many changes have occurred as a result of the 2010 Dodd-Frank Act and its implementing regulations, most of which are now in place. The Board of Governors of the Federal Reserve System, or the “Federal Reserve Board,” retains the right to apply enhanced prudential standards to foreign banking organizations, or “FBOs,” with greater than $100 billion in global total consolidated assets, such as Santander Spain.
In October 2019, the federal banking agencies issued final rules, or the “Tailoring Rules,” that adjust the thresholds at which certain enhanced prudential standards and capital and liquidity requirements apply to certain banking organizations, including large FBOs such as Santander Spain. As a result, Santander Spain is now generally subject to less restrictive enhanced prudential standards and capital and liquidity requirements than under previously applicable regulations.
Under the current administration, however, banking organizations, including large FBOs, may become subject to increased scrutiny and more extensive legal and regulatory requirements than under the prior presidential and congressional regime. In addition, changes in key personnel at the agencies that regulate such banking organizations, including the federal banking regulators, may result in differing interpretations of existing rules and guidelines and potentially more stringent enforcement and more severe penalties than previously.
Volcker Rule
Section 13 of the U.S. Bank Holding Company Act of 1956, as amended, and its implementing rules (collectively, the “Volcker Rule”) prohibits “banking entities” from engaging in certain forms of proprietary trading or from sponsoring or investing in “covered funds,” in each case subject to certain exceptions. The Volcker Rule also limits the ability of banking entities and their affiliates to enter into certain transactions with covered funds with which they or their affiliates have certain relationships, Banking entities such as Santander Brasil and Santander Spain were required to bring their activities and investments into compliance with the requirements of the Volcker Rule by the end of the conformance period applicable to each requirement. Santander Spain has assessed how the Volcker Rule affects its businesses and subsidiaries, including Santander Brasil, and has brought its activities into compliance. Santander Brasil has adopted processes to establish, maintain, enforce, review and test the compliance program designed to achieve and maintain compliance with the Volcker Rule. The Volcker Rule contains exclusions and certain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations, as well as certain foreign government obligations, and trading solely outside the United States, and also permits certain ownership interests in certain types of funds to be retained. Santander Spain’s non-U.S. banking organization subsidiaries, including Santander Brasil, are largely able to continue their activities outside the United States in reliance on the “solely outside the U.S.” exemptions from the Volcker Rule. Those exemptions generally exempt proprietary trading, and sponsoring or investing in covered funds if, among other restrictions, the essential actions take place outside the United States and any transactions are not with U.S. persons.
On July 21, 2017, the five regulatory agencies charged with implementing the Volcker Rule announced the coordination of reviews of the treatment of certain foreign funds that are investment funds organized and offered outside the United States and that are excluded from the definition of covered fund under the agencies’ implementing regulations. Also in July 2017, the Federal Reserve issued guidelines for banking entities seeking an extension to conform certain “seeding” investments in covered funds to the requirements of the Volcker Rule.
In June 2019, the five regulatory agencies charged with implementing the Volcker Rule finalized amendments to the Volcker Rule. These amendments tailor the Volcker Rule’s compliance requirements to the amount of a firm’s trading activity, revise the definition of trading account, clarify certain key provisions in the Volcker Rule, and modify the information companies are required to provide the federal agencies. Santander Brasil will still largely rely on the “solely outside the U.S. exemption” to conduct its trading activities.
In June 2020, the five federal agencies finalized additional amendments to the Volcker Rule related to the restrictions on ownership interests, in sponsorship of and relationships with covered funds. These amendments became effective on October 1, 2020. Santander Spain will continue to monitor these Volcker Rule-related developments and assess their impact on its operations, including those of Santander Brasil, as necessary.
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U.S. Anti-Money Laundering, Anti-Terrorist Financing, and Foreign Corrupt Practices Act Regulations
Santander Brasil, as a foreign private issuer whose securities are registered under the Exchange Act, is subject to the U.S. Foreign Corrupt Practices Act, or the “FCPA.” The FCPA generally prohibits such issuers and their directors, officers, employees and agents from using any means or instrumentality of U.S. interstate commerce in furtherance of any offer or payment of money to any foreign official or political party for the purpose of influencing a decision of such person in order to obtain or retain business. It also requires that the issuer maintain books and records and a system of internal accounting controls sufficient to provide reasonable assurance that accountability of assets is maintained and accurate financial statements can be prepared. Penalties, fines and imprisonment of Santander Brasil’s officers and/or directors can be imposed for violations of the FCPA.
Furthermore, Santander Brasil is subject to a variety of U.S. anti-money laundering and anti-terrorist financing laws and regulations, such as the Bank Secrecy Act of 1970, as amended, and the USA Patriot Act of 2001, as amended, and a violation of such laws and regulations may result in substantial penalties, fines and imprisonment of Santander Brasil’s officers and/or directors.
The Anti-Money Laundering Act of 2020, or “AML Act,” enacted on January 1, 2021 as part of the National Defense Authorization Act, does not directly impose new requirements on banks, but requires the U.S. Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, and conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that the Bank Secrecy Act and Patriot Act impose on banks. The AML Act also contains provisions that promote increased information-sharing and use of technology and increases penalties for violations of the Bank Secrecy Act and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.
U.S. Sanctions
“Sanction(s)” means any international economic sanction administered or enforced by the United States government (including without limitation, OFAC), the United Nations Security Council, the European Union or Her Majesty’s Treasury. The Office of Foreign Assets Control, or “OFAC,” is responsible for administering economic sanctions imposed against designated foreign countries, governments, individuals and entities pursuant to various Executive Orders, statutes and regulations.
OFAC-administered sanctions take many different forms. For example, sanctions may include: (1) restrictions on U.S. persons’ trade with or investment in a sanctioned country, including prohibitions against direct or indirect imports from and exports to a sanctioned country and prohibitions on U.S. persons engaging in financial transactions relating to, making investments in, or providing investment-related advice or assistance to, a sanctioned country; and (2) blocking of assets of targeted governments or “specially designated nationals,” by prohibiting transfers of property subject to U.S. jurisdiction, including property in the possession or control of U.S. persons. Blocked assets, such as property and bank deposits, cannot be paid out, withdrawn, set off or transferred in any manner without a license from OFAC. In addition, non-U.S. persons can be liable for “causing” a sanctions violation by a U.S. person or can violate U.S. sanctions by exporting services from the United States to a sanctions target, for example by engaging in transactions with targets of U.S. sanctions denominated in U.S. dollars that clear through U.S. financial institutions (including through U.S. branches or subsidiaries of non-U.S. banks).
Failure to comply with applicable U.S. sanctions could have serious legal and reputational consequences, including significant civil monetary penalties and, in the most severe cases, criminal penalties.
In addition, the U.S. government has implemented various sanctions that target non-U.S. persons, including non-U.S. financial institutions that engage in certain activities undertaken outside the United States and without the involvement of any U.S. persons (“secondary sanctions”) that involve Iran, North Korea, Russia, or Hezbollah or other persons designated by the United States under the Specially Designated Global Terrorist, or “SDGT,” sanctions program. If a non-U.S. financial institution were determined to have engaged in activities targeted by certain secondary U.S. sanctions or used proceeds produced by such activities targeted, it could lose its ability to open or maintain correspondent or payable-through accounts with U.S. financial institutions, among other potential consequences.
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Antitrust Regulation
According to the Brazilian antitrust law, actions that concentrate market share must be previously submitted to CADE for approval if the following criteria are met: (i) at least one of the groups involved in the deal has posted annual gross revenues or volume of business equal to or over R$750 million, in Brazil, in the year prior to the transaction; and (ii) at least another group has posted annual gross revenues or volume of business equal to or over R$75 million, in Brazil, in the year prior to the transaction. Closing of a transaction without CADE’s approval will subject the parties to fines ranging from R$60,000 to R$60 million.
The Brazilian Central Bank will also examine certain corporate reorganizations and other acts involving two or more financial institutions not only considering their potential effects on the financial system and its stability but also any potential impacts regarding market concentration and competition. Upon approval of the transaction, the Brazilian Central Bank may establish certain restrictions and require that the financial institutions execute an agreement of market concentration control, pursuant to which the terms and conditions of the sharing of the efficiency gain resulting from the act shall be set forth.
In December 2018, the Brazilian Central Bank and CADE approved a joint normative act establishing procedures with the purpose of increasing efficiency for their respective actions regarding antitrust matters. Pursuant to the joint normative act, the authorities are authorized to share information for the purposes of their respective activities and carry out meetings with each other to discuss matters requiring the regulatory cooperation between both authorities.
Insolvency Laws Concerning Financial Institutions
Financial institutions are subject to the proceedings established by Law 6,024 of March 13, 1974, or “Law 6024,” which establishes the applicable provisions in the event of intervention or extrajudicial liquidation by the Brazilian Central Bank, as well as to bankruptcy proceedings.
Intervention and extrajudicial liquidation occur when the Brazilian Central Bank has determined that the financial institution is in bad financial condition or upon the occurrence of events that may impact the creditors’ situation. Such measures are imposed by the Brazilian Central Bank in order to avoid the bankruptcy of the entity.
Intervention
An intervention can be carried out at the discretion of the Brazilian Central Bank in the following cases:
● risk to the creditors due to mismanagement;
● consistent violation of Brazilian banking laws or regulations; or
● if the intervention is a feasible alternative to the liquidation of the financial institution.
As of the date on which it is ordered, the intervention will automatically suspend the enforceability of the payable obligations; prevent early termination or maturity of any previously contracted obligations; and freeze deposits existing on the date on which the intervention is decreed.
The intervention will cease if interested parties undertake to continue the economic activities of the financial institution, by presenting the necessary guarantees, as determined by the Brazilian Central Bank, when the situation of the entity is regularized as determined by the Brazilian Central Bank; or when extrajudicial liquidation or bankruptcy of the entity is ordered.
Intervention may also be ordered upon the request of a financial institution’s management.
Extrajudicial Liquidation
Extrajudicial liquidation is an administrative proceeding decreed by the Brazilian Central Bank (except that it is not applicable to financial institutions controlled by the Brazilian federal government) and conducted by a liquidator appointed by the Brazilian Central Bank. This extraordinary measure aims at terminating the activities of the affected financial institution, liquidating its assets and paying its liabilities, as in a judicially decreed bankruptcy. The Brazilian Central Bank will place a financial institution in extrajudicial liquidation if:
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● the institution’s economic or financial situation is at risk, particularly when the institution ceases to meet its obligations as they become due, or upon the occurrence of an event that could indicate a state of insolvency under the rules of the Bankruptcy Law;
● management seriously violates Brazilian banking laws, regulations or rulings;
● the institution suffers a loss which subjects its unprivileged and unsecured creditors to severe risk; and/or
● upon revocation of the authorization to operate, the institution does not initiate ordinary liquidation proceedings within 90 days or, if initiated, the Brazilian Central Bank determines that the pace of the liquidation may harm the institution’s creditors.
A request for liquidation procedures can also be filed on reasonable grounds by the officers of the respective financial institution or by the receiver appointed by the Brazilian Central Bank in the receivership procedure.
The decree of extrajudicial liquidation will: (i) suspend the actions or foreclose on rights and interests relating to the estate of the entity being liquidated, while no other actions or executions may be brought during the liquidation; (ii) accelerate the obligations of the entity; and (iii) interrupt the statute of limitations with regard to the obligations assumed by the institution.
Extrajudicial liquidation procedures may be terminated:
● by discretionary decision of the Brazilian Central Bank if the parties involved undertake the administration of the financial institution after having provided the necessary guarantees; or
● when the final accounts of the receiver are delivered and approved and subsequently registered in the relevant public records;
● when converted into ordinary liquidation; or
● when a financial institution is declared bankrupt.
Temporary Special Administration Regime (Regime de Administração Especial Temporária or “RAET”)
In addition to the intervention procedures described above, the Brazilian Central Bank may also establish a RAET, under Law 9447, dated March 14, 1997 combined with Law 6,024/74, which is a less severe form of the Brazilian Central Bank intervention in private and nonfederal public financial institutions that allows institutions to continue to operate normally. The RAET may be ordered in the case of an institution that:
● continually enters into recurrent operations that are against economic or financial policies set forth in federal law;
● faces a shortage of assets;
● fails to comply with the compulsory reserves rules;
● reveals the existence of hidden liabilities;
● experiences the occurrence of situations that cause receivership pursuant to current legislation;
● has reckless or fraudulent management; or
● carries out activities which call for an intervention.
The main objective of a RAET is to assist the recovery of the financial condition of the institution under special administration and thereby avoid intervention and/or liquidation. Therefore, a RAET does not affect the day-to-day business, operations, liabilities or rights of the financial institution, which continues to operate in the ordinary course of business. Measures which may be adopted by the institution include the transfer of assets, rights and obligations to other entities, and corporate restructuring of these entities, with a view to the continuity of the institution’s business or activities.
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There is no minimum term for a RAET, which ceases upon the occurrence of any of the following events: (i) acquisition by the Brazilian federal government of control of the financial institution, (ii) corporate restructuring, merger, spinoff, amalgamation or transfer of the controlling interest of the financial institution, (iii) decision by the Brazilian Central Bank, or (iv) declaration of extrajudicial liquidation of the financial institution.
Bankruptcy Law
Law No. 11,101, of February 9, 2005, as amended, or the “Bankruptcy Law,” regulates judicial reorganizations, out-of-court reorganizations and the bankruptcy of individuals and corporations that have occurred since 2005 and applies to financial institutions only with respect to the matters not specifically regulated by the intervention and extrajudicial liquidation regimes described above.
On December 24, 2020, Law 14,112, or “Law 14,112/20,” was passed. Law 14,112/20 overhauls the current Bankruptcy Law in several material aspects. Law 14,112/20 came into effect on January 23, 2021. Certain changes arising from this new legislation may affect enforcement and priority matters, such as: (i) the possibility of creditors putting forward an alternative judicial reorganization plan; (ii) new rules on the approval of post-petition loans in judicial reorganization and on priority claims in case of conversion to bankruptcy liquidation; (iii) more flexible quorum and mechanics in the extrajudicial reorganization process; (iv) new rules to expedite the bankruptcy liquidation process; (v) new methods for restructuring of the debtor’s tax liabilities and installment payments, as well as new taxation schemes; and (vi) incorporation of rules on cross-border insolvency proceedings into the Brazilian framework.
Law 14,112/20 replicates, with some adjustments, the provisions of the UNCITRAL Model Law on Cross-Border Insolvency. As a result, Law 14,112/20 sets out some rules on access of foreign representatives to courts in Brazil, the method and requirements for recognition of foreign main and ancillary proceedings, authorization for the debtor and his representatives to act in other countries, methods of communication and cooperation between foreign authorities and representatives and the Brazilian jurisdiction, and the processing of concurrent proceedings.
Law 14,112/20 also sets forth, among other measures, (i) a protection for creditors that agree on the conversion of debt into equity against potential transfer of liability with regard to the debtor’s obligations; (ii) the stay period and constraints on the assets of the debtor under judicial reorganization; (iii) conciliation and mediation measures before and during judicial reorganization proceedings; and (iv) the rules on procedural and substantive consolidation. Law 14,112/20 also sets out that a bankruptcy decree does not reach beyond the bankrupt itself, save when the disregard doctrine is to apply.
Repayment of Creditors in a Liquidation or Bankruptcy
In the event of extrajudicial liquidation or bankruptcy of a financial institution, creditors are paid pursuant to their priorities and privileges. Prepetition claims are paid on a ratable basis in the following order: labor credits; secured credits; tax credits; credits with special privileges; credits with general privileges; unsecured credits; contractual fines and pecuniary penalties for breach of administrative or criminal laws, including those of a tax nature; and subordinated credits.
The current law confers immunity from attachment of compulsory deposits maintained by financial institutions with the Brazilian Central Bank. Such deposits may not be attached in actions by a bank’s general creditors for the repayment of debts and require that the assets of any insolvent bank funded by loans made by foreign banks under trade finance lines be used to repay amounts owing under such lines in preference to those amounts owing to the general creditors of such insolvent bank.
Recovery Plans for Systematically Important Financial Institutions
Systemically important Brazilian financial institutions must implement a recovery plan (plano de recuperação), with the aim of reestablishing adequate levels of capital and liquidity and to preserve the viability of such institutions. The recovery plans must identify their critical functions for the National Financial System, adopt stress-testing scenarios, define clear and transparent governance procedures, assess possible barriers to the entity’s recovery, as well as implement effective communication plans with key stakeholders.
Deposit Insurance – FGC
The purpose of the FGC is to guarantee the payment of funds deposited with financial institutions in case of intervention, liquidation, bankruptcy or insolvency. The FGC is funded by ordinary contributions made by the financial institutions in the amount of up to 0.0125% of the total amount of outstanding balances of the accounts corresponding to guaranteed obligations, and certain special contributions as determined. Delay in performing such contributions is subject to a penalty of 2% over the amount of the contribution.
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The total amount of credit in the form of demand deposits, savings deposits, time deposits, deposits maintained in accounts blocked for transactions with checks (for the registration and control of funds relating to the rendering of services of payment of salaries, earnings, pensions), bills of exchange, real estate bills, mortgage bills, real estate credit bills and repurchase and resale agreements whose objects are instruments issued after March 8, 2012 by a company of the same group due to each customer by a financial institution (or by financial institutions of the same financial group) will be guaranteed by the FGC for up to a maximum of R$250,000 per customer. When the assets of the FGC reach 2% of the total amounts they guarantee, the CMN may temporarily suspend or reduce the contribution of financial institutions to the FGC. As from February 2016, credits of financial institutions and other institutions authorized to operate by the Brazilian Central Bank, complementary welfare entities, insurance companies, capitalization companies, investment clubs and investment funds, as well as those representing any interest in or financial instrument held by such entities, are not protected by the ordinary guarantee of FGC. In December 2017, the CMN enacted a new rule amending certain provisions of the FGC regulation among which includes the establishment of a limit of R$1 million per four-year period for the coverage of the credits of a certain creditor against the group of associated financial institutions.
Administrative Proceedings in the Brazilian National Financial System, the Brazilian Payment System and Capital Markets
Law 13,506 of November 13, 2017 or “Law 13,506/17” applies to entities authorized or supervised by the Brazilian Central Bank or by the CVM, as well as to market participants. Some of the key aspects of Law 13,506 are that: (i) it increases the maximum fine applicable by the Brazilian Central Bank from R$250,000 to R$2 billion or 0.5% of the revenues of the company arising from services and financial products in the year prior to the violation; (ii) it increases the maximum fine applicable by the CVM from R$500,000 to R$50 million; (iii) it makes additional types of violations subject to penalties; (iv) it provides that the penalty of “public admonition” may be cumulative to other penalties applicable by the Brazilian Central Bank; (v) it provides that Brazilian Central Bank may enter into cease-and-desist commitments; and (vi) it provides that the Brazilian Central Bank and the CVM may enter into administrative agreements similar to leniency agreements.
Opening, Maintenance and Closing of Deposit Accounts
CMN Resolution No. 4,753/19 provides criteria for the opening, maintenance and closing of deposit accounts. The regulation determines that financial institutions must adopt procedures and controls that allow the verification and validation of the identity and qualification of the account holders and, if applicable, their representatives, as well as the authenticity of the information provided by the client. This information must be kept updated by the financial institution.
The rule also requires financial institutions to ensure, through the procedures and technology used for the opening, maintaining and closing of deposit accounts, the integrity authenticity and confidentiality, as well as the protection against unauthorized access, use, alteration, reproduction and destruction, of the information and the electronic documents used by them during the process.
Issuance of Credit Instruments Electronically
Provisional Measure No. 897, or “MP 897/2019,” among other provisions, (i) created a new credit instrument, the Rural Real Estate Note (Cédula Imobiliária Rural or “CIR”), with the purpose of advancing rural real estate financing by the creation of an instrument specifically designed to that end; (ii) changed the rules governing Bank Deposit Certificates (Certificado de Depósito Bancário or “CDB”), especially regarding their issuance and the transfer of their ownership, by providing among other changes that CDB issued in book-entry form should be transferred by electronic endorsement, exclusively by means of a specific notation in the issuing institution’s own electronic system or, when deposited in central depositary, by means of specific notation in the corresponding electronic system; and (iii) authorized that customary credit instruments such as the Agricultural Certificate of Deposit (Certificado de Depósito do Agronegócio - CDA), the Agricultural Warrant (Warrant Agropecuário - WA), the Real Estate Credit Certificate (Certificado de Crédito Imobiliário - CCI), the Bank Credit Note (Cédula de Crédito Bancário - CCB), the Rural Credit Note (Cédula de Crédito Rural - CCR), the Rural Promissory Note (Nota Promissória Rural - NPR), the Rural Trade Bill (Duplicata Rural - DR), may be issued in book-entry form through the electronic bookkeeping system held at a financial institution or other entity authorized by the Brazilian Central Bank to perform electronic bookkeeping activity.
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On July 15, 2020, the Brazilian Central Bank regulated, through Circular No. 4,036/20, the electronic issuance of book-entry CCBs and CCRs by financial institutions. A financial institution must render the following services in respect of the bookkeeping of CCBs and CCRs: (i) issue the instrument in book-entry form at the request of the borrower; (ii) include of all obligatory information related to CCBs and CCRs, as well as ancillary documents and/or information for the purposes of verifying the outstanding balance of the underlying credit transaction; (iii) verify the effective title or fiduciary title of the instruments; (iv) make the payment CCBs and CCRs for the settlement of obligations available to the debtor; (v) control the financial flow related to the CCBs and CCRs, including prepayments; (vi) record security interests in an entity authorized to perform centralized registration or deposit of financial assets; (vii) make information about the CCBs and CCRs available to debtors, holders, collateral beneficiaries or any other legally qualified interested party; and (viii) carry out the issuance of certificates regarding the instruments whenever required.
Limitation to the fees and interest rates on overdraft-secured checks
On November 27, 2019, the CMN issued Resolution No. 4,765 or “Resolution No. 4,765/2019,” providing for new rules on the overdraft granted by financial institutions in checking accounts held by individuals and individual microentrepreneurs. The new rule limits the charging of fees on overdraft-secured checks to: (i) 0% for the opening credit facilities of up to R$500.00; and (ii) 0.25% for the opening of credit facilities larger than R$500.00, calculated with the amount of the facility that exceeds R$500.00. It also limits interest rates over the overdraft-secured check to up to 8% per month, to which must be added a discount of the overdraft fees already charged monthly by the financial institution. If the interest is less than or equal to the overdraft fees, such interest rates must be equal to zero. In addition, Resolution No. 4,765/2019 establishes that the overdraft-secured check must be compatible with the customer’s risk profile.
Resolution No. 4,765/2019 came into force on January 6, 2020, for agreements executed after the referred date, came into force on June 1, 2020, for agreements executed prior to such date. Regarding the 8% limitation above, the rule applies to all contracts from January 6, 2020, regardless of the date the applicable contract was entered into.
On February 6, 2020, the Brazilian Central Bank issued Circular No. 3,981, which deals with the new information regarding overdraft facilities that must be highlighted in the statement of the checking accounts held by natural persons or MEIs. Circular No. 3,981 came into effect on June 1, 2020.
Automatic debit of banking accounts
On March 26, 2020, CMN issued Resolution No. 4,790, which sets forth new rules for the automatic debit payments from checking account and accounts designated for the payment of an individual’s wages. The new rule sets forth that financial institutions should only process automatic debit payments upon prior and express authorization of the client, and provides for the procedures for the authorization and cancellation of automatic debit payments. The new rule came into force on March 1, 2021, CMN Resolution No. 4,790 repealed CMN Resolution 4,771.
Taxation
Corporate Income Tax (IRPJ) and Social Contribution Tax (CSLL)
The IRPJ is calculated at a rate of 15.0%, plus a surtax of 10.0% which is levied on profits exceeding the amount of R$240,000 per year and the CSLL is calculated at a rate of 20.0% (25.0% exceptionally in 2021, as per Law No. 14,183/2021) for financial institutions and 9.0% for companies, after adjustments determined by the tax legislation.
Deferred tax assets and liabilities are measured based on temporary differences between the book basis and tax basis of assets and liabilities, tax losses, and adjustments to fair value of securities and derivatives.
According to the requirements in the current regulations, the expected realization of deferred tax assets is based on projections of future results and a technical study approved by the Directors of Santander Brasil.
Income tax (IRPJ) and Social Contribution Tax (CSLL) on Foreign Exchange Variation of Hedges for Investments Held Abroad (Law No. 14,031/2020)
Pursuant to Law No. 14,031/2020, which came in force in July 2020, exchange rate variations arising from hedges on investments held abroad are taxable starting in 2021. Accordingly, in 2021, 50% of the exchange rate variation shall be taxable under the IRPJ and CSLL, while, in 2022, 100% of the exchange rate variation will be considered as taxable.
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Tax on Services (ISS)
Each of the Municipalities of Brazil and the Federal District are responsible for establishing the applicable ISS rate, which is charged on the value of services provided by the company, to the municipality where the service renderer is located. The rates vary from 2% to 5% and depend on the nature of the service.
On December 30, 2016, Complementary Law No. 157/2016 was enacted. This legislation establishes a minimum rate of 2% for these types of taxes, no reductions or deductions being permitted. This legislation provides that the following services are subject to ISS in the municipality in which the service taker is located: (i) card management, including POS services, that may be paid to the municipality where the corresponding POS device has been registered; (ii) leasing; (iii) fund management; and (iv) consortium.
Before the aforementioned Law was enacted, the ISS was due in the municipality in which the service provider was located (irrespective of where the service taker was located). With this new legislation, ISS rates may vary depending on where the service taker is located.
There are several complications that may arise from this new legislation, including (i) as service takers are generally located in several municipalities, it is logistically difficult to comply and collect the taxes; and (ii) there are situations where the municipality of the service taker is not easily identifiable by the credit card company (as is the case for online transactions, for example).
Since the ISS is a municipal tax, the rule must be regulated by each municipality in order to be enforceable. This new rule is only applicable to triggering events occurring from 2018 onwards, when the municipal regulations applicable to Supplementary Law No. 157 come into force.
On March 23, 2018, the Brazilian Supreme Court suspended the application of the Complementary Law No. 157. It is still suspended as of the date of this annual report. This suspension may be circumvented by the enactment of Complementary Law No. 175/20.
Complementary Law No. 175, published on September 24, 2020, was enacted to create a unified ISS collection system, in which taxpayers would be able to collect ISS in every municipality in Brazil. It’s an effort to facilitate tax collection considering the complexity regarding the multiple rulings on ISS, since each municipality can pass its own laws on ISS.
The system is currently under development, and it is expected that it would enable Complementary Law No. 157 to be brought back into effect.
PIS and COFINS Tax Rates
PIS and COFINS (respectively, the profit participation contribution and the social security financing contribution, both of which are social contributions due on certain revenues net of certain expenses) payable by financial institutions and similar entities, as defined by law, are due at the rate of 0.65% and 4%, respectively. They are levied cumulatively on gross revenue billed, which is defined as the total revenues earned by the legal entity, net of certain expenses, such as funding costs.
Non-financial entities are taxed at the rates of 1.65% and 7.6% of PIS and COFINS, respectively, and are subject to non-cumulative incidence, which consists of deduction of certain expenses from the tax base as allowed by law.
Tax on Financial Transactions (IOF)
IOF is a tax levied on credit, currency exchange, insurance and securities transactions and it is imposed on the following transactions and at the following rates.
Decree No. 10,797/2021 temporarily increased IOF on credit transactions as follows:
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Transaction (1)
Maximum Legal Rate
Current Rate
Credit extended by financial institutions and non-financial entities 1.5% or 3% (between 2.04% and 4.08% in 2021) 0.0041% per day for loans contracted by legal entities and 0.0082% per day for individuals capped at 365 days. An additional 0.38% rate is applicable in both cases. (Exceptionally, in 2021, 0.00559% per day for legal entities and 0.01118% per day for individuals).
Transactions relating to securities (2) 1.5% per day 0.5% per day for certain investment funds.
0% on transactions with equity securities and certain debt securities, such as debentures and real estate receivables and agribusiness receivables (CRI/CRA).
1% per day on transactions with fixed income derived from federal, state, or municipal public and private bonds, and fixed income investment funds limited to certain percentages of the income raised from investment. This rate is reduced to zero from the 30th day following the acquisition date of the investment and on repurchase agreements carried out by financial institutions and other institutions authorized by the Brazilian Central Bank with debentures issued by institutions belonging to the same group (Decree 8,731/2016).
0% on the assignment of securities to permit the issuance of Depositary Receipts abroad.
Transactions relating to derivatives 25% Although the maximum rate is 25%, it has been reduced to zero at this moment.
Insurance transactions entered into by insurance companies 25% 2.38% for health insurance.
0.38% for life insurance.
7.38% for other types of insurance.
Foreign exchange transactions(2) 25% 0.38% (general rule).
6.38% on credit card transactions as from April 27, 2011.
6.38% on withdrawals abroad using credit or debit cards as from December 28, 2013.
6.38% on purchase of travelers checks or loading of international prepaid card as from December 28, 2013.
0% for outflow of funds related to the payment of principal and interest in connection with foreign loans and financings.
6% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is equal or less than 180 days.
0% for the inflow of funds into Brazil, related to foreign loans subject to registration before the Brazilian Central Bank whose average maturity term is higher than 180 days.
0% for interbank transactions.
0% for exchange transactions in connection with the outflow of proceeds from Brazil for the remittance of interest on net equity and dividends to be received by foreign investors.
0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors in the Brazilian financial and capital markets.
0% for exchange transactions, including by means of simultaneous foreign exchange transactions, for the inflow of funds by foreign investors for purposes of initial or additional margin requirements in connection with transactions in stock exchanges.
0% for exchange transactions for the outflow of funds invested by foreign investors in the Brazilian financial and capital markets.
0% for exchange transactions for the inflow and outflow of funds invested by foreign investors, including by means of simultaneous foreign exchange transactions, in certificates of deposit of securities, known as Brazilian Depositary Receipts (“BDRs”).
0% for simultaneous exchange transactions, for the inflow of funds by foreign investors derived from the conversion of direct investments in Brazil made pursuant to Law 4,131/62 into investments in stock tradable in stock exchanges, as from May 2, 2016.
0% for revenues related to the export of goods and services transactions.
The applicable rate is 1.10% for acquisitions of foreign currency (Decree 8,731/2016).
The applicable rate for credit on a foreign bank account belonging to a resident in Brazil is 1.10%, as from March 3, 2018.
(1) The transactions mentioned in the table are for illustration purposes and do not reflect an exhaustive list of transactions subject to the IOF.
(2) There are some exemptions or specific cases in which the applicable rate is zero.
FATCA
The Foreign Account Tax Compliance Act, or “FATCA,” became law in the United States on March 18, 2010. The legislation requires foreign financial institutions, or “FFIs,” (such as Santander Brasil) to enter into an FFI agreement under which they agree to identify and provide the U.S. Internal Revenue Service, or “IRS,” with information on accounts held by U.S. persons and certain U.S.-owned foreign entities, or otherwise face a 30% withholding tax on certain U.S. source withholdable payments. In addition, FFIs that have entered into an FFI agreement will be required to withhold on such payments made to FFIs that have not entered into an FFI agreement, account holders who fail to provide sufficient information to classify an account as a U.S. or non-U.S. account, and U.S. account holders who do not agree to the FFI reporting their accounts to the IRS.
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On September 23, 2014, Brazil and the United States announced that they entered into an intergovernmental agreement, or “IGA,” which became effective in Brazil by virtue of Decree No. 8506 as of August 24, 2015. The aim of the IGA is to improve international tax compliance and implement FATCA. The IGA establishes an automatic annual bilateral exchange of information with the U.S. tax authorities. Under this agreement, Brazilian financial institutions will generally be required to provide certain information about their U.S. account holders to the Brazilian tax authorities (Receita Federal do Brasil), which will share that information with the IRS.
Complying with the required identification, withholding, and reporting obligations requires significant investment in an FFI’s compliance and reporting framework. We are continuing to follow developments regarding FATCA closely and are coordinating with all relevant authorities.
Common Reporting Standard
On December 28, 2016, Normative Ruling No. 1680 was enacted, introducing the Common Reporting Standard in Brazil. The Common Reporting Standard provides for certain account reporting obligations similar to those existing under FATCA. It was created in the context of the Organization for Economic Co-operation and Development’s Base Erosion and Profit Shifting project, which is aimed at reducing tax avoidance. Normative Ruling No. 1,680 applies to legal entities required to present the e-Financeira pursuant to Normative Ruling No. 1571, dated July 2, 2016.
On the same date, the Normative Ruling No. 1681 was enacted providing for the obligation to annually deliver the “Country to Country Statement,” an ancillary obligation also arising from the discussions under the BEPS Project, before the Brazilian Federal Revenue Service, or “RFB,” as a measure to expand information exchange and improve the level of international tax transparency. This new regulation should not have any impact on Santander Brasil, since, as it is controlled by a legal entity resident in Spain, it is not required by the Brazilian regulation to present such statement.
Income Tax Levied on Capital Gains
Law No. 13,259, of March 16, 2016 or “Law 13,259/16” introduced the application of progressive tax rates for income taxation over capital gains recognized by Brazilian individuals and by holders that are not domiciled in Brazil for purposes of Brazilian taxation (“Non-Resident Holders”) on the disposition of assets in general, Under Law 13,259/16, the income tax rates applicable to capital gains realized by these investors would be: (i) 15% for the portion of the gains up to R$5 million, (ii) 17.5% for the portion of the gain that exceeds R$5 million but does not exceed R$10 million, (iii) 20% for the portion of the gain that exceeds R$10 million but does not exceed R$30 million, and (iv) 22.5% for the portion of the gain that exceeds R$30 million.
The provisions of Law 13,259/16 may apply to Non-Resident Holders pursuant to CMN Resolution 4,373, provided such Non Resident Holders are not located in a Tax Haven. However, Non Resident Holders (whether they are considered to be Non-Resident Holders as a result of CMN Resolution 4,373 or otherwise) located in a Tax Haven are subject to a specific tax regulation and will continue to be taxed at a rate of 25%.
Most transactions carried out by Non-Resident Holders pursuant to CMN Resolution 4,373 and that result in capital gains are subject to taxation at a fixed 15% rate, provided they are not located in a Tax Haven.
The tax must be withheld and paid by the buyer or, in cases where the buyer and seller are domiciled abroad, a legal representative of buyer shall be designated for the payment of the tax.
Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act
Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders. Disclosure is generally required even where the activities, transactions or dealings were conducted in compliance with applicable law.
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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 report:
(a) Santander UK holds seven blocked accounts for five customers that are currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. Revenues and profits generated by Santander UK on these accounts in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(b) Santander Consumer Finance, S.A. holds through its Belgian branch seven blocked correspondent accounts for an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The accounts have been blocked since 2008. No revenues or profits were generated by Santander Consumer Bank, S.A. on these accounts in the year ended December 31, 2021.
(c) Santander Brasil holds a blocked account for a customer with domicile in Brazil designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program. The relationship with the customer preceded its designation under the sanctions program. Revenues and profits generated by Santander Brasil on this account in the year ended December 31, 2021 were negligible relative to the overall profits of Banco Santander S.A.
(d) The Santander Group also has certain legacy performance guarantees for the benefit of an Iranian bank that is currently designated by the US under the Specially Designated Global Terrorist (SDGT) sanctions program (stand-by letters of credit to guarantee the obligations – either under tender documents or under contracting agreements – of contractors who participated in public bids in Iran) that were in place prior to April 27, 2007.
In the aggregate, all of the transactions described above resulted in gross revenues and net profits in the year ended December 31, 2021 which were negligible relative to the overall revenues and profits of Banco Santander, S.A. The Santander Group has undertaken significant steps to withdraw from the Iranian market such as closing its representative office in Iran and ceasing all banking activities therein, including correspondent relationships, deposit taking from Iranian entities and issuing export letters of credit, except for the legacy transactions described above. The Santander Group is not contractually permitted to cancel these arrangements without either (i) paying the guaranteed amount (in the case of the performance guarantees), or (ii) forfeiting the outstanding amounts due to it (in the case of the export credits). As such, the Santander Group intends to continue to provide the guarantees and hold these assets in accordance with company policy and applicable laws.
Regulatory Developments Related to COVID-19
The following section summarizes the measures implemented by the CMN and the Brazilian Central Bank to mitigate the consequences of the COVID-19 pandemic on the Brazilian financial system.
Temporary Suspension of Dividend Distributions and Other Payments
On May 29, 2020 the CMN enacted Resolution No. 4,820 in response to the COVID-19 pandemic. Resolution No. 4,820 prohibits financial institutions, such as us, to: (i) offset their capital, including by means of early payment, in excess of amounts equivalent to the minimum mandatory dividend required by the Brazilian Corporate Law, including as interest on capital (ii) repurchase their own shares, subject to certain exceptions as authorized by the Brazilian Central Bank; (iii) reduce their capital stock, except if such reduction is required by law or approved by the Brazilian Central Bank; and (iv) increase the compensation of their officers, directors and members of the board of directors and audit committee, including fixed and variable compensation, CMN Resolution No. 4,280 repealed CMN Resolution No. 4,797.
On December 23, 2020, the CMN enacted Resolution No. 4,885, which made the payment of dividends or interest on capital more flexible. As a result, financial institutions were not allowed to pay in excess of the greater of (x) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (y) the amount equivalent to the mandatory dividends as set forth in article 202 of the Brazilian Corporate Law. This is the only restriction still in force as a result of Resolution No. 4,820.
As a result, we only distributed R$3,837 million as dividends and interest on equity in 2020 compared to R$10,800 million in 2019. This measure was not applied by the Brazilian Central Bank in 2021.
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Reduction of Capital Conservation Buffer
On March 16, 2020, the CMN enacted Resolution No. 4,783, which temporarily reduces the Capital Conservation Buffer (where all rates relate to the total amount of risk weighted assets) required from financial institutions, from 2.5% to 1.25%. The rate of 1.25% will remain in effect through March 31, 2021. From April 1, 2021 through April 1, 2022 the Capital Conservation Buffer requirement will gradually be restored to 2.5%. The measure aims to increase the ability of banks to renegotiate credit transactions and maintain engagement in new transactions, considering the current scenario of increased demand for financial services. CMN Resolution No. 4,783 was replaced by CMN Resolution No. 4,958/2021, which maintains the same rates for the periods set forth in the previous rule.
Repos on Sovereign Bonds Denominated in U.S. Dollars
On March 18, 2020, the Brazilian Central Bank issued Circular No. 3,990, which allowed the repurchase transactions of U.S. Dollar denominated federal bonds between the Brazilian Central Bank and Brazilian financial institutions. The Brazilian Central Bank can purchase such bonds with a discount of 10% in comparison to market prices and the financial institution assumes the obligation to purchase the bonds in a future date. The rules also set out a margin transfer during the term of the transaction whenever the exposure is equal or greater than U.S.$500,000. The purpose of this measure is to provide liquidity to the Brazilian sovereign bonds market, by offering liquidity in U.S. Dollars to Brazilian banks and reducing trading volatility of such bonds. Circular No. 3,990 was revoked by Brazilian Central Bank Resolution No. 76, of February 23, 2021, which essentially maintains the same wording established in the previous rule.
Changes to Provision Requirements
On March 16, 2020 CMN enacted Resolution No. 4,782/20, which was amended by Resolution No. 4,856/20, exempting financial institutions from considering certain restructuring of contracts as an indicative that a counterparty may default. Therefore, the measure allows loans to be granted to solvent companies without requiring additional provisions through December 31, 2020. These measures were not applied in 2021.
New Time Deposits with Special Collateral
CMN Resolution No. 4,799/20 has regulated funding through new Time Deposits with Special Collateral (Novo Depósito a Prazo com Garantias Especiais or “DPGEs”), which are deposits taken by financial institutions and guaranteed by the Credit Guarantee Fund (Fundo Garantidor de Crédito or “FGC”). The resolution increased the cap from R$20 million to R$40 million and is intended to strengthen the liquidity strength of smaller financial institutions. The current limit, set forth 4,964/2021, is set at R$90 million.
Central Bank Loans Backed by Debentures and Financial Bills Held by Financial Institutions
On March 23, 2020, the CMN enacted Resolution No. 4,786, which authorized the Brazilian Central Bank to grant loans to multiservice banks, commercial banks, investment banks and saving banks, backed by debentures (corporate debt instruments) held by such institutions and acquired in the secondary market, provided that certain provisions set forth in the ruling are complied with. It is worth mentioning the ruling sets forth that said loans will also be secured by mandatory deposits in Bank Reserve Accounts, in amount equivalent to, at least, the total amount of the transactions, as well as by the debenture collateral.
This is considered a Temporary Special Liquidity Credit Facility, and was another measure to offer financial institutions more liquidity in their transactions. The loans established in Resolution No. 4,786/20 will be available to financial institutions until April 30, 2020 and could be engaged for a 125 business day term, which could be extended, at the Brazilian Central Bank’s discretion, for more 125 business days, provided the maximum term of 359 calendar days.
On April 2, 2020, the CMN enacted Resolution No. 4,795, which authorized the Brazilian Central Bank to grant loans to financial institutions under specific conditions, by means of a Temporary Special Liquidity Credit Facility, upon direct acquisition, in the primary market, of Financial Bills secured by financial assets or securities. The loan was available in tranches, and could reach 100% of the Reference Assets of such financial institutions. The facility became available to financial institutions through December 31, 2020 and the Financial Bills issued thereunder had a term between 30 and 359 calendar days. The first tranche was approved on May 12, 2020, in a total amount of R$~~492~~17.5 billion. Both rules were revoked on November 1, 2021.
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Flexibilization of Funding Requirements Through Agribusiness Credit Notes (Letras de Crédito do Agronegócio or “LCAs”)
On March 23, 2020, the CMN issued Resolution No. 4,787, which adjusted the assessment base of the mandatory reserve requirements of funds raised through LCAs, which are credit notes issued exclusively by financial institutions and related to credit rights originated from transactions conducted between rural producers and their cooperatives and agents of the agribusiness production chain, with the purpose of increasing their liquidity. As a result, the rules for applying funds originated from agribusiness activities were relaxed. The Brazilian Central Bank expects an increase in credit extension directed to agribusiness of R$6.3 billion as a result of the measure. The measure was revoked on April 29, 2021.
Employment Support Program providing emergency payroll financing for small and medium-sized businesses
The CMN enacted Resolution No. 4,846 on August 24, 2020, which regulates the granting of loans under the Emergency Employment Support Program (Programa Emergencial de Suporte a Empregos or “PESE”), established through Provisional Measure No. 944/2020. PESE sets forth the offering of an emergency credit line of R$40 billion to finance, for two months, the payroll of small and medium-sized companies that adhere to the program, with the purpose of preserving jobs. Regarding the funding of said credit line, 85% will derive from the National Treasury and the remaining 15% from participating financial institutions, including Santander Brasil. The adhering small and medium-sized businesses will not be able to dismiss workers during the period that the loan is taken out and up to the 60th day after the business receives its last installment. The maximum amount financed per worker will be up to two minimum wages. The funding will go directly to the worker’s account, as is done today through payrolls operated by financial institutions. PESE came into effect on April 6, 2020. CMN Resolution No. 4,846 repealed CMN Resolution No. 4,800.
FX overhedge of equity interests abroad
On March 18, 2020, the CMN enacted Resolution No. 4,784, which amended CMN Resolution No. 4,192, of March 1, 2013. The rule sets forth that the tax credits arising from losses on excess FX position aimed at hedging of investments held abroad by financial institutions will not be deducted from their regulatory capital (patrimônio de referência). The measure aims at providing further capital relief and hence additional comfort for financial institutions to maintain and extend credit.
The changes were incorporated into CMN Resolution No. 4,955, of 2021, which repealed and replaced Resolution No. 4,192.
Higher ceiling for repurchase of financial bills (letras financeiras) by financial institutions
Pursuant to CMN Resolution No. 4,788, issued on March 23, 2020, financial institutions classified as Segment 1 for the proportional application of the prudential regulation, as is our case, may, from March 23 to April 30, 2020, repurchase up to 20% of financial bills of their own issuance, a substantial increase from the previous ceiling of 5%.
Brazilian Central Bank authorized to buy and sell government bonds and private financial assets and securities in the secondary market
Constitutional Amendment No. 106, enacted on May 7, 2020, sets forth emergency economic and budget measures for the Brazilian government during the COVID-19 pandemic. Among them, the Amendment authorizes the Brazilian Central Bank, for the duration of the pandemic, to buy and sell (i) government bonds in local and foreign secondary markets; and (ii) other assets, in domestic secondary financial, capital and payments markets, provided that, at the time of purchase, they have a credit risk rating in the local market equivalent to BB- or higher, conferred by at least one of the three largest international rating agencies, as well as a reference price published by a financial market entity accredited by the Brazilian Central Bank.
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SELECTED STATISTICAL INFORMATION
The following information for Santander Brasil is included for analytical purposes and is derived from, and should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 5. Operating and Financial Review and Prospects.”
Average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: as of December 31, of the prior year and each of the month-end balances of the 12 subsequent months. Average income statement and balance sheet data and other related statistical information have been prepared on a consolidated annual basis.
The selected statistical information set forth below includes information as of and for the years ended December 31, 2021, 2020, and 2019 extracted from the audited financial statements prepared in conformity with IFRS as issued by the IASB. See “Presentation of Financial and Other Information” and “Item 3. Key Information— A. Selected Financial Data.”
Average Balance Sheet and Interest Rates
The following tables show our average balances and interest rates for each of the periods presented. With respect to the tables below and the tables under “—Changes in Net Interest Income – Volume and Rate Analysis” and “—Assets—Earning Assets – Yield Spread,” (i) we have stated average balances on a gross basis, before netting impairment losses, except for the total average asset figures, which include such netting, and (ii) all average data have been calculated using month-end balances, which is not significantly different from having used daily averages. We stop accruing interest on loans once they are more than 60 days past due. All our non-accrual loans are included in the table below under “Other assets.”
For the Year Ended December 31,
2021 2020 2019
Average Balance(1) Interest Average Rate Average Balance Interest Average Rate Average Balance Interest Average Rate
(in millions of R$, except percentages)
Assets and Interest
Income
Cash and balances with the Brazilian Central Bank 58,494 2,581 4.4 % 54,531 1,552 2.8 % 48,670 3,828 7.9 %
Loans and amounts due from credit institutions 95,513 5,191 5.4 % 104,759 1,519 1.4 % 101,981 3,844 3.8 %
Of which:
  Reverse repurchase
agreements 45,458 2,154 4.7 % -   -   -   -   -   -
Loans and advances to customers 461,141 49,538 10.7 % 384,389 44,104 11.5 % 323,180 50,406 15.6 %
Debt instruments 224,890 19,042 8.5 % 203,578 13,556 6.7 % 178,811 13,528 7.6 %
Other interest – earning assets -   1,636 -   -   2,044 -   -   1,235 -
Total interest – earning assets 840,038 77,988 9.3 % 747,257 62,775 8.4 % 652,642 72,841 11.2 %
Equity instruments 2,279 90 3.9 % 1,730 34 2.0 % 1,464 19 1.3 %
Investments in associates 952 -   -   1,098 -   -   1,060 -   -
Total earning assets 843,269 78,077 9.3 % 750,085 62,809 8.4 % 655,166 72,860 11.1 %
Cash and balances with the Brazilian Central Bank 4,633 -   -   4,800 -   -   4,538 -   -
Loans and amounts due from credit institutions 441 -   -   6,668 -   -   2,258 -   -
Impairment losses (26,908 ) -   -   (23,936 ) -   -   (22,528 ) -   -
Other assets 81,669 -   -   76,642 -   -   56,912 -   -

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Property, plant and equipment 8,823 -   -   9,587 -   -   9,091 -   -
Intangible assets 30,250 -   -   30,769 -   -   30,070 -   -
Total average assets 942,177 78,077 8.3 % 854,615 62,809 7.3 % 735,507 72,860 9.9 %
Liabilities and Interest Expense
Deposits from the Brazilian Central Bank and Deposits from credit institutions 149,111 4,712 3.2 % 111,684 4,327 3.9 % 100,473 4,866 4.8 %
Of which:
   Repurchase agreements 103,809 4,567 4.4 % -   -   -   -   -   -
Customer deposits 420,185 13,188 3.1 % 380,058 7,504 2.0 % 303,741 14,966 4.9 %
Of which:
   Repurchase agreements 58,264 -   -   -   -   -   -   -   -
Marketable debt securities 63,906 4,537 7.1 % 68,585 2,786 3.7 % 76,194 5,138 6.7 %
Subordinated debts 14,550 955 6.6 % 13,102 909 6.6 % 10,779 660 6.1 %
Other interest-bearing liabilities -   3,277 -   -   2,806 -   -   2,890 -
Total interest-bearing liabilities 647,752 26,669 4.2 % 573,429 18,332 3.2 % 491,187 28,520 5.8 %
Noninterest bearing demand deposits 33,893 -   -   28,581 -   -   14,612 -   -
Other liabilities 155,133 -   -   150,759 -   -   133,255 -   -
Non-controlling interests 329 -   -   315 -   -   617 -   -
Stockholders’ Equity 105,070 -   -   101,531 -   -   95,836 -   -
Total average liabilities and equity 942,177 26,669 2.8 % 854,615 18,332 2.1 % 735,507 28,520 3.9 %
(1)     In the year ended December 31, 2021, we revisited the accounting treatment of electric energy sales contracts, which no longer include the amount of the principal and, therefore, only the adjustments to fair value and interest determined in these transactions are recorded in equity accounts. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.
Changes in Net Interest Income – Volume and Rate Analysis
The following tables present the changes in our net interest income allocated between changes in average volume and changes in average rate for the year ended December 31, 2021, compared to the year ended December 31, 2020, and for the year ended December 31, 2020 compared to the year ended December 31, 2019. We have calculated volume variances based on movements in average balances over the period and rate variance based on changes in interest rates on average interest-earning assets and average interest-bearing liabilities. We have allocated variances caused by changes in both volume and rate to volume. You should read the following tables and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Years Ended 2021/2020 For the Years Ended 2020/2019
Increase (decrease) due to changes in
Volume Rate Net change Volume Rate Net change
(in millions of R$)
Interest and Similar Income
Interest-earning assets
Cash and balances with the Brazilian Central Bank 113 854 1,029 414 (2,690 ) (2,276 )
Loans and amounts due from credit institutions (134 ) 4,175 3,672 102 (2,427 ) (2,325 )
Loans and advances to customers 8,806 (2,809 ) 5,436 8,493 (14,797 ) (6,304 )
Debt instruments 1,419 3,681 5,486 1,753 (1,725 ) 28
Other interest-earning assets (408 ) —   (408 ) 809 —   809
Total interest-earning assets 9,796 5,901 15,215 11,571 (21,639 ) (10,068 )
Equity Instruments 11 34 56 4 11 15
Total earning assets 9,807 5,935 15,271 11,575 (21,628 ) (10,053 )
Interest Expense and Similar Charges
Interest-bearing liabilities
Deposits from the Brazilian Central Bank and Deposits from credit institutions 1,450 (798 ) 385 504 (1,043 ) (539 )
Customer deposits 792 4,431 5,690 3,095 (10,563 ) (7,468 )
Marketable debt securities (172 ) 2,355 2,023 (471 ) (2,153 ) (2,624 )
Subordinated liabilities 95 (51 ) 39 150 53 203
Other interest-bearing liabilities 2,421 —   2,421 235 —   235
Total interest-bearing liabilities 4,587 5,937 10,558 3,513 (13,706 ) (10,193 )
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Assets
Earning Assets – Yield Spread
The following table analyzes our average earning assets, interest income and dividends on equity securities and net interest income and shows gross yields, net yields and yield spread for each of the periods indicated. You should read this table and the footnotes thereto in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Year Ended December 31,
2021 2020 2019
(in millions of R$, except percentages)
Average earning assets 840,038 747,257 652,642
Interest and dividends on equity securities(1) 78,078 62,807 72,860
Net interest income 49,193 44,480 44,340
Gross yield(2)(*) 9.3 % 8.4 % 11.2 %
Net yield(3)(*) 5.9 % 6.0 % 6.8 %
Yield spread(4)(*) 4.8 % 5.2 % 5.3 %
(*) Yield information does not give effect to changes in fair value that are reflected as a component of stockholder’s equity.
(1) Total earning assets plus dividends from companies accounted for by the equity method (equity instruments).
(2) Gross yield is the amount of “Interest and dividends on equity securities” divided by “Average earning assets.”
(3) Net yield is the amount of “Net interest income” divided by “Average earning assets.”
(4) Yield spread is the difference between the average rate of “Total earning asset” and the average rate of “Total interest-bearing liabilities.”
Return on Equity and Assets
The following table presents our selected financial ratios for the periods indicated.
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For the Year Ended December 31,
2021 2020 2019
ROA: Return on average total assets 1.7 % 1.6 % 2.3 %
ROE: Return on average stockholders’ equity 14.8 % 13.3 % 17.4 %
ROE (adjusted) (1) 20.2 % 18.5 % 24.6 %
Average stockholders’ equity as a percentage of average total assets 11.2 % 11.9 % 13.0 %
Payout(2) 62.0 % 24.7 % 64.9 %

(1) “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” is a non-GAAP financial measure which adjusts “Return on average stockholders’ equity” to exclude the goodwill arising from the acquisition of Banco Real in 2008, Getnet and Super, both in 2014, and Banco Olé Bonsucesso Consignado S.A. in 2015, 60%, and the remaining 40% in 2020. See “Item 3. Key Information—A. Selected Financial Data—Selected Consolidated Ratios” for a reconciliation of “Average stockholders’ equity excluding goodwill as a percentage of average total assets excluding goodwill” to “Return on average stockholders’ equity.”
(2) Dividend payout ratio (dividends declared per preferred share divided by net income per preferred share).
Interest-Earning Assets (other than Loans)
The following table shows the percentage mix of our average interest-earning assets for the years indicated. You should read this table in light of our observations noted in “—Average Balance Sheet and Interest Rates.”
For the Year Ended December 31,
2021 2020 2019
Cash and balances with the Brazilian Central Bank 7.0 % 7.3 % 7.5 %
Loans and amounts due from credit institutions 11.4 % 14.1 % 15.6 %
Loans and advances to customers 54.9 % 51.4 % 49.5 %
Debt instruments 26.8 % 27.2 % 27.4 %
Total interest-earning assets 100 % 100 % 100 %

Loans and Amounts Due from Credit Institutions
For further information about Loans and Amounts Due from Credit Institutions, see note 5 to our audited consolidated financial statements included elsewhere in this annual report.
Investment Securities
As of December 31, 2021 and 2020, the book value of investment securities was R$228 billion and R$232 billion, respectively (representing 24.5% and 24.9%, respectively, of our total assets as of such dates). Brazilian government securities totaled R$171 billion, or 75.3% and R$192 billion, or 82.8% of our investment securities as of December 31, 2021 and 2020, respectively. For a discussion of how our investment securities are valued, see notes 7 and 8 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the carrying amounts of our investment securities by type and residence of the counterparty at each of the indicated dates:
As of December 31,
2021 2020 2019
(in millions of R$)
Debt securities
Government securities—Brazil 171,437 191,896 135,848
Debentures and promissory notes 19,882 17,072 13,875
Other debt securities 33,894 21,134 23,609
Total domestic/debt securities 225,212 230,102 173,332

Equity securities
Shares of Brazilian companies 1,870 1,953 665
Shares of foreign companies 49 14 —
Investment fund units and shares 609 363 1,693
Total equity securities 2,528 2,329 2,358
Total investment securities 227,740 232,432 175,690
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As of December 31, 2021 and 2020, we held no securities of single issuers or related groups of companies whose aggregate book or market value exceeded 1% of our stockholders’ equity, other than the Brazilian government securities, which represented 151.5% and 180.5%, respectively of our stockholders’ equity. As of December 31, 2021 and 2020, the total value of our debt securities was approximately 212.5% and 217.4%, respectively, of stockholders’ equity.
The following table analyzes the maturities and weighted average yields of our debt investment securities not carried at fair value (before impairment allowance) as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.
Maturing within 1 year Maturing between 1 and 5 years Maturing between 5 and 10 years Maturing after 10 years Total
(in R$ millions)
Debt securities
Government securities—Brazil (1) 107,450 41,694 22,293 -   171,437
Other debt securities (2) 34,295 3,045 16,435 -   53,776
Total debt investment securities 141,745 44,739 38,728 -   225,212
(1) Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) and National Treasury Notes (NTN-A, NTN-B, NTN-C and NTN-F).
(2) Includes balances of debentures and promissory notes.
The average rate for debt investment securities is 7.1%.
Investment Portfolio – Yields
The following table shows the balances and weighted-average yields for our debt securities not carried at fair value through earnings, for each range of maturities, as of December 31, 2021. We calculate weighted-average yield as the average yield of the open positions we have on balance as of December 31, 2021. Yields on tax-exempt obligations have not been calculated on a tax equivalent basis because the effect on such calculation is not significant.
Maturing within 1 year Yield within 1 year Maturing between 1 and 5 years Yield between 1 and 5 years Maturing between 5 and 10 years Yield between 5 and 10 years Maturing after 10 years Yield after 10 years
(in R$ millions, except percentages)
Weighted-average yields % % % %
Domestic:
Brazilian Government 16,969 9.8 61,237 8.4 19,282 6.8 5,297 6.8
Other fixed-income securities 25,793 8.4 27,239 9.0 207 7.8 369 9.2
Impaired financial assets 829 8.4 257 9.0 842 7.8 -   -
Impairment losses (13 ) 8.4 (267 ) 9.0 (784 ) 7.8 -   -
Total domestic 43,578 6.4 88,466 7.2 19,547 6.8 5,666 6.7
International:
Foreign government 1,588 5.0 7,756 5.0 1,917 4.7 -   -
Other fixed-income securities 720 4.3 5,122 2.7 -   2.7 -   -
Impaired financial assets 105 4.3 -   2.7 -   2.7 -   -
Impairment losses (32 ) 4.3 (31 ) 2.7 (64 ) 2.7 -   -
Total international 2,381 4.1 12,847 3.6 1,853 2.7 -   -
Total weighted-average yields 8.7 8.0 6.6 6.7

Domestic and Foreign Currency
The following table shows our assets and liabilities by domestic and foreign currency, as of the dates indicated.
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As of December 31,
2021 2020 2019
Domestic Currency Foreign Currency Domestic Currency Foreign Currency Domestic Currency Foreign Currency
(in millions of R$)
Assets
Cash and balances with the Brazilian Central Bank 21,543 10,851 4,531 15,617 4,878 15,250
Debt instruments 208,133 17,080 226,787 3,315 164,447 8,885
Loans and amounts due from credit institutions, gross 91,868 3,797 109,339 3,520 107,694 1,553
Loans and advances to customers, gross 398,335 66,509 396,950 20,822 326,421 20,835
Equity Instruments 2,078 45 1,675 -   2,358 -
Total assets 721,957 98,282 739,283 43,275 605,798 46,523
Liabilities
Financial Liabilities at Amortized cost:
Deposits from the Brazilian Central Bank and Deposits from credit institutions 62,332 58,674 86,564 45,093 58,283 40,988
Customer deposits 470,973 -   445,900 -   336,515 -
Marketable debt securities 66,027 13,009 47,476 9,399 64,987 8,715
Debt instruments eligible to compose capital -   12,781 -   13,120 -   10,176
Other financial liabilities 68,496 413 66,727 153 60,885 -
Total liabilities 667,828 84,877 646,667 67,766 520,670 59,879
Loan Portfolio
As of December 31, 2021, our loans and advances to customers totaled R$493 billion (53.0% of our total assets). Net impairment losses, loans and advances to customers totaled R$465 billion as of December 31, 2021 (49.9% of our total assets). In addition to loans, we had outstanding loan commitments drawable by third parties totaling R$146.0 billion, R$131.7 billion, R$125.9 billion as of December 31, 2021, 2020, 2019, respectively.
Types of Loans by Type of Customer
The majority of the loans we have outstanding are to borrowers domiciled in Brazil and are denominated in reais. For each loan category, we maintain specific risk management policies that are in line with the standards of the Santander Group, which in turn, are managed and monitored by our board of officers through the credit committee, The credit approval process for each loan category is structured primarily around our business segments. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk” for details on our credit approval policies for retail and wholesale lending.
We have a diversified loan portfolio, with no specific concentration exceeding 10% of our total loans, Currently, 1.2% of our loan portfolio is allocated to our largest debtor and 7.4% to the next 10 largest debtors.
For further information about the breakdown of our Loans and Maturity see sections “a - Breakdown” and “b – Detail” of note “9 – Loans and advances to customers” to our audited consolidated financial statements included in this annual report.
Maturity
The following table sets forth an analysis by maturity of our loans, by type and status, as of December 31, 2021.
As of December 31, 2021
Debt Sector by Maturity Less than 1 year % of
total Between 1 and 5 years % of
total Between 5 and 15 years % of
total More than 15 years % of
total Total % of
total
Commercial and industrial 165,729 61.37 % 73,723 45.81 % 8,222 20.16 % -   -   247,674 50.20 %
Real estate 3,986 1.48 % 10,138 6.30 % 19,337 47.41 % 21,278 98.58 % 54,739 11.10 %
Installment loans to
individuals 99,051 36.68 % 75,833 47.12 % 13,219 32.41 % 306 1.42 % 188,409 38.19 %
Lease financing 1,285 0.48 % 1,238 0.77 % 10 0.02 % -   -   2,533 0.51 %
Loans and advances to customers, gross 270,051 100.00 % 160,932 100.00 % 40,787 100.00 % 21,585 100.00 % 493,355 100.00 %
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Fixed and Variable Rate Loans
The following table sets forth a breakdown of our fixed and variable rate loans by type and status as of December 31, 2021.
Fixed and variable rate loans maturing in
Less than one year Between one and five years Between five and 15 years Over 15 years Sub-total more than one year Total
(in millions of R$, except percentages)
Fixed rate
Commercial and industrial 111,499 29,745 1,941 -   31,865 143,185
Real estate 24 73 62 18 153 177
Installment loans to individuals 105,045 74,689 12,965 306 87,961 193,005
Lease financing 522 694 -   -   695 1,217
Total Fixed rate 217,090 105,201 14,968 324 120,493 337,583
Variable rate
Commercial and industrial 37,149 33,524 2,109 -   35,633 72,782
Real estate 3,962 10,065 19,274 21,260 50,600 54,562
Installment loans to individuals 11,087 11,598 4,426 -   16,024 27,111
Lease financing 763 544 9 -   553 1,316
Total Variable rate 52,961 55,731 25,819 21,261 102,810 155,771
Total 270,051 160,932 40,787 21,585 223,304 493,355
Cross-Border Outstandings
The following table presents, at each balance sheet date indicated, the aggregate amount of our cross-border outstandings (which consist of loans, interest-bearing deposits with other banks, acceptances and other monetary assets denominated in a currency other than the home-country currency of the office where the item is booked). Cross-border outstandings do not include local currency loans made by subsidiary banks in other countries to the extent that such loans are funded in the local currency or hedged. As a result, they do not include the majority of the loans made by our Cayman Islands branch, which are fully hedged.
As of December 31,
2021 2020 2019
Balance % of Total Assets Balance % of Total Assets Balance % of Total Assets
(in millions of R$, except percentages)
OECD countries(1)
Spain 108 - 437 - 1,984 0.3
United States 835 0.1 12,674 1.4 3,721 0.5
Netherlands - - 80 - 1,531 0.2
United Kingdom 20 - 29 - 1,003 0.1
Luxembourg 13,058 1.4 - - - -
Other OECD countries(2) 1,958 0.2 3,534 0.4 16,264 2.4
Total OECD 15,979 1.7 16,754 1.8 24,503 3.6
Non-OECD countries
Latin American countries(2) 560 0.1 1,204 0.1 1,382 0.2
Cayman Islands 1,679 0.2 2,917 0.3 3,528 0.5
Other(2) 282 - 1,189 0.1 2,397 0.3
Total non-OECD 2,521 0.3 5,310 0.6 7,307 1.1
Total 18,500 2.0 22,064 2.4 31,810 4.6
(1) The Organization for Economic Cooperation and Development.
(2) Aggregate outstandings in any single country in this category do not exceed 1.5% of our total assets.
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The following table presents the amounts of our cross-border outstandings as of December 31, 2021, 2020 and 2019 by type of borrower where outstandings in the borrower’s country exceeded 1.2% of our total assets.
Government Banks and Other Financial Institutions Commercial and Industrial Other Loans Total
(in millions of R$)
2019
United States -   8,710 55 316 9,081
Netherlands -   -   2,355 -   2,355
Austria -   -   127 (2 ) 125
United Kingdom -   -   7 151 158
Cayman Islands 469 263 488 (752 ) 468
Total 469 8,973 3,032 (287 ) 12,187
2020
United States -   12,653 9 12 12,674
Netherlands -   -   80 -   80
Austria -   -   -   444 444
United Kingdom -   28 -   1 29
Cayman Islands -   1,341 (1 ) 1,577 2,917
Total -   14,022 86 2,034 16,144
2021
United States -   3,943 1 12 3,956
Netherlands -   -   3 -   3
Austria -   -   -   595 595
United Kingdom -   28 -   -   28
Cayman Islands -   2,815 -   1,290 4,105
Total -   6,786 4 1,897 8,687
Non-current assets held for sale
For further information, see note 10 to our audited consolidated financial statements included elsewhere in this annual report.
Liabilities
Deposits
The principal components of our deposits are customer demand, time and notice deposits, and international and domestic interbank deposits. Our retail customers are the principal source of our demand, time and notice deposits.
For further information, see notes 16 and 17 to our audited consolidated financial statements included elsewhere in this annual report.
The following table shows the maturity of time deposits (excluding inter-bank deposits) in denominations of U.S.$100,000 or more at the dates indicated. Large denomination customer deposits may be a less stable source of funds than demand and savings deposits.
As of December 31, 2021
Domestic International
(in millions of R$)
Under 3 months 255,120 -
3 to 6 months 25,742 -
6 to 12 months 51,483 -
Over 12 months 257,622 -
Total 589,967 -
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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, 2021.

As of
December 31, 2021
Maturing
Three Months or Less
Over Three Months Through Six Months
Over Six Months Through
12 Months
Over 12 months
(in millions of R$)
Total uninsured deposits 285,967 96,146 20,896 68,960 99,965
Short-Term Borrowings
The following table shows our short-term borrowings consisting of government securities that we sold under agreements to repurchase for purpose of funding our operations.
As of December 31,
2021 2020 2019
Amount Average Rate Amount Average Rate Amount Average Rate
(in millions of R$, except percentages)
Securities sold under agreements to repurchase
As of December 31 115,964 1.76 % 112,477 1.90 % 123,941 5.00 %
Average during the period (1) 114,484 2.58 % 112,096 2.71 % 100,473 4.84 %
Maximum month-end balance 155,484 155,174 123,941
Total short-term borrowings at year end 115,964 112,477 123,941
(1) The average annual balance sheet data has been calculated based upon the average of the monthly balances at 13 dates: at December 31 of the prior year and for each of the month-end balances of the 12 subsequent months.
Allowance for Loan Losses
Changes in Allowances for Impairment Losses on the Balances of “Loans and receivables”
The following tables analyze changes in our allowances for impairment losses for the periods indicated. For further information regarding these changes, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Impairment Losses on Financial Assets (Net).”
As of December 31,
2021 2020 2019 2018 2017
(in millions of R$)
Balance at beginning of year 25,640 22,626 22,969 18,262 18,191
Initial adoption of IFRS 9 -   -   -   2,461 -
Balance adjusted 25,640 22,626 22,969 20,723 18,191
Impairment losses charged to income for the year 16,987 18,311 14,361 13,540 13,493
Write-off of impaired balances against recorded impairment allowance (12,904 ) (15,297 ) (14,705 ) (11,294 ) (13,422 )
Balance at end of year 29,723 25,640 22,626 22,969 18,262
Of which:
Loans and advances to customers 28,511 24,053 20,557 20,242 15,409
Loans and amounts due from credit institutions 22 9 14 14 69
Debt Instruments 1,191 1,577 2,055 2,714 2,784
Recoveries of loans previously written off(1) 1,536 861 991 827 1,154
(1) Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off.
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Allowance by Type of Borrower
The table below shows a breakdown of recoveries, net provisions and write-offs against credit loss allowance by type of borrower for the periods indicated.
For the Year Ended December 31,
2021 2020 2019 2018 2017
(in millions of R$)
Recoveries of loans previously charged off(1) 1,536 861 991 827 1,154
Commercial and industrial 463 422 520 345 413
Real estate – construction 64 56 47 103 210
Installment loans to individuals 1,002 370 417 370 521
Lease finance 7 13 8 9 10
Impairment losses charged to income for the year(1) 16,987 18,312 14,361 13,540 13,491
Commercial and industrial 3,340 6,919 2,377 3,620 5,499
Real estate – construction 116 81 95 193 471
Installment loans to individuals 13,532 11,309 11,866 9,708 7,461
Lease finance (1 ) 3 23 19 61
Write-off of impaired balances against recorded impairment allowance (12,904 ) (15,297 ) (14,705 ) (11,294 ) (13,422 )
Commercial and industrial (5,153 ) (4,617 ) (5,713 ) (3,981 ) (5,716 )
Real estate – construction (167 ) (232 ) (108 ) (191 ) (342 )
Installment loans to individuals (7,576 ) (10,433 ) (8,834 ) (7,100 ) (7,312 )
Lease finance (8 ) (15 ) (49 ) (22 ) (52 )
(1) Impairment losses on financial assets, net, as reported in our consolidated financial statements, reflect net provisions for credit losses less recoveries of loans previously written off.
The table below shows a breakdown of allowances for credit losses by type of borrowers and the percentage of loans in each category as a share of total loans at the date indicated.
As of December 31,
2021 % of Total Loans 2020 % of Total Loans 2019 % of Total Loans
(in millions of R$, except percentages)
Borrowers
Commercial and industrial 8,325 28.0 9,757 38.1 7,455 33.0
Real estate 154 0.5 194 0.8 345 1.5
Installment loans to individuals 21,240 71.5 15,676 61.1 14,800 65.4
Lease financing 4 - 14 0.1 26 0.1
Total 29,723 100 25,640 100.0 22,626 100.0

Internal Risk Rating
The following table presents a breakdown of our portfolio by internal risk rating, at the dates indicated:
As of December 31,
2021 2020 2019
(in millions of R$)
Internal Risk Rating
Low 374,505 347,315 257,133
Medium-low 79,217 24,277 56,549
Medium 14,590 26,232 11,755
Medium-high 9,413 3,896 8,512
High 15,630 16,101 13,307
Loans and advances to customers, gross 493,355 417,822 347,257
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For further information on our internal risk rating levels and their corresponding probability of default, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk—Credit Monitoring.”
Renegotiation Portfolio
The renegotiation portfolio for the year ended on December 31, 2021 amounted to R$21.7 billion, compared to R$20.5 billion for the same period in 2020, an increase of R$1,193 million or 5.8%, This portfolio includes loans and advances to customers that were extended and/or modified to facilitate repayment under conditions agreed upon with customers.
The renegotiation portfolio was covered by allowances for impairment losses of 44.7% as of December 31, 2021 and 44.0% as of December 31, 2020. These levels are considered appropriate for the characteristics of these loans and advances to customers.
The following table presents a breakdown of our renegotiation portfolio by type of customer, allowances for impairment losses and our coverage ratio at the dates indicated:
2021 2020 2019
(in millions of R$, except percentages)
Renegotiation Portfolio by type of customer
Commercial and industrial 5,322 5,862 5,141
Installment loans to individuals 16,356 14,623 10,102
Financial leasing 5 5 239
Total 21,683 20,490 15,482
Allowances for impairment losses 9,698 9,019 7,501
Coverage ratio 44.7 % 44.0 % 48.4 %
Balances are deemed to be impaired when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts on the dates indicated in ~~January 2018 (taking~~the loan agreement, after taking into account the ~~reduction arising from~~collateral guarantees received to secure (fully or partially) collection of the related balances.
As established in our ~~participation~~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 ~~program)~~six months which follow the renegotiation date (note that these transactions will remain classified as renegotiated operations even after receiving such payments). ~~A payment~~Renegotiated loans that are more than 60 days overdue are also accounted for as impaired.
We increased our efforts regarding the collection of loans that are less than 60 days past due and also in relation to written off loans. We are also continuing with our strategy of granting loans to persons with low risk profile and higher levels of collaterals and guarantees.
Impaired Assets
The following table shows our impaired assets, excluding country risk.
As of December 31,
2021 2020 2019 2018 2017
(in millions of R$, except percentages)
Impaired assets
Past due and other impaired assets(1) 26,923 23,176 23,426 22,426 19,145
Impaired assets as a percentage of total loans 5.5 % 5.5 % 6.7 % 7.0 % 6.7 %
Net loan charge-offs as a percentage of total loans 2.6 % 3.7 % 4.2 % 3.5 % 4.7 %
Net loan charge-offs as a percentage of average total loans 2.8 % 3.8 % 4.6 % 3.8 % 4.8 %
(1) Includes as of December 31, 2021, R$2,528 million of doubtful loans (R$2,028 million in 2020, R$2,788 million in 2019, R$3,754 million in 2018 and R$5,439 million in 2017) that were not past-due.
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Evolution of Impaired Assets
Our impaired assets increased by 16.2%, or R$3,747 million, to R$26,923 million as of December 31, 2021, compared to R$23,176 million as of December 31, 2020. Provisions for impairment losses, including total recoveries of loans previously charged off, increased 15.9%, or R$4,083 million, to R$ 29,723 million as of December 31, 2021, compared to R$ 25,640 million as of December 31, 2020. Offsetting these effects were recoveries of R$~~191.9~~1,536 million on loans previously written off as of December 31, 2021 and R$ 861 million as of December 31, 2020.
We believe the provisions made were adequate to cover all known or reasonably probable losses or incurred losses in the credit portfolio of loans and other assets as of December 31, 2021.
The following table shows the changes in our impaired assets at the dates indicated:
As of December 31,
2021 2020 2019 2018 2017 2016
(in millions of R$)
Balance at beginning of year 23,176 23,426 22,426 19,145 18,887 18,599
Initial Adoption of IFRS9 ⁽¹⁾ -   -   -   703 -   -
Adjusted Balance 23,176 23,426 22,426 19,848 18,887 18,599
Net additions 18,429 14,758 16,001 13,872 13,679 11,893
Write-offs (14,681 ) (15,008 ) (15,000 ) (11,294 ) (13,422 ) (11,605 )
Balance at end of year 26,923 23,176 23,426 22,426 19,145 18,887
(1) Further information, see notes 1 and 9 to our audited consolidated financial statements included elsewhere in this annual report.
The amount of “net additions” for any period is assets that became impaired in that period less assets that were impaired but became performing in that period. In 2021, the debt restructuring options were improved to maintain consistent levels of “net additions” and “write-offs.”
Impaired Assets by Type of Customer
The following table shows the amount of our impaired assets by type of customers at the dates indicated:
As of December 31,
2021 2020
(in millions of R$)
Commercial and industrial 11,440 10,558
Real estate 470 456
Installment loans to individuals 14,996 12,144
Lease financing 17 17
Total 26,923 23,176

Commercial and Industrial
Impaired assets in the commercial and industrial loans portfolio amounted to R$11,440 million as of December 31, 2021, an increase of R$881 million, or 8.3%, compared to R$10,558 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.
Real Estate
Impaired assets in the real estate lending portfolio totaled R$470 million on December 31, 2021, an increase of R$14 million, or 3.1%, compared to R$456 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of the recurrent growth of the credit portfolio.
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Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$14,996 million as of December 31, 2021, with an increase of R$2,852 million, or 23.5%, compared to 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.
Financial Leasing
Impaired assets in the lease financing lending portfolio totaled R$17 million on December 31, 2021, remaining similar to December 31, 2020.
Methodology for Impairment Losses
We evaluate all loans regarding the provision for impairment losses from credit risk. Loans are either individually evaluated for impairment, or collectively evaluated by grouping similar risk characteristics. Loans that are individually evaluated for impairment losses are not evaluated collectively.
To measure the impairment loss on loans individually evaluated for impairment, we consider the conditions of the borrowers, such as their economic and financial situation, level of indebtedness, ability to generate income, cash flow, management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as the characteristics of assets, such as their nature and purpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the time of evaluation.
To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity of credit risk. In other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.
The expected loss measurement is made through the following factors:
● Exposure at Default (EAD): is the amount of a transaction exposed to credit risk including the ratio of current outstanding balance exposure that could be provided at default. Developed models incorporate hypotheses considering possible modifications to the payment schedule.
● Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay the principal and / or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - life time (Stage 2 and 3), which considers the probability that the transaction between in default between the balance sheet date and the residual maturity date of the transaction. The standard requires that future information relevant to the estimation of these parameters should be considered.
● Loss Given Default (LGD): is the loss produced in the event of default. In other words, this reflects the percentage of exposure that could not be recovered in the event of a default. It depends mainly on the collateral, which is considered as credit risk mitigants associated with each financial asset, and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation.
● Discount rate: the rate applied to the future cash flows estimated during the expected life of the asset, and which is equal to the net present value of the financial instrument at its carrying value.
In order to estimate the above parameters, the Bank has applied its experience in developing internal models for parameters calculation both for regulatory and management purposes.
Loans Past Due for Less Than 90 Days but Not Classified as Impaired
The following table shows the loans past due for less than 90 days but not classified as impaired at the dates indicated:
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As of December 31,
2021 % of total 2020 % of total
(in millions of R$, except percentages)
Commercial and industrial 4,892 20.7 5,132 25.8
Mortgage loans 3,606 15.2 3,085 15.5
Installment loans to individuals 15,150 64.0 11,661 58.6
Lease financing 11 0.1 13 0.1
Total (*) 23,659 100.0 19,891 100.0
(*) Refers only to loans past due between 1 and 90 days.
Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$74.8 billion to R$540.9 billion as of December 31, 2021, compared to R$466.1 billion as of December 31, 2020. Our impaired assets increased by approximately R$3,747 billion in ~~August~~the same period, from R$23.2 billion to R$26.9 billion. The default rate decreased by 30 basis points in 2021 in comparison to 2020, primarily due to the recurrent growth of the credit portfolio.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.
As of December 31,
2021 2020 2019 2018 2017
(in millions of R$ except percentages)
Loans and advances to customers, gross 493,355 417,822 347,257 321,933 287,829
Impaired assets 26,923 23,176 23,426 22,426 19,145
Provisions for impairment losses 29,723 25,640 22,626 22,969 18,262
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 540,873 466,104 391,569 364,194 330,474
Ratios
Impaired assets to credit risk exposure 5.0 % 5.0 % 6.0 % 6.2 % 5.8 %
Coverage ratio ⁽²⁾ 110.4 % 110.6 % 96.6 % 102.4 % 95.4 %
Impairment losses (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )
Losses on other financial instruments not
  measured at fair value ⁽³⁾ -   -   -   -   -
Impairment losses on financial assets (net) ⁽⁴⁾ (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )

(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$540,873 million as of December 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
(2) Provisions for impairment losses as a percentage of impaired assets.
(3) Corresponds to the registration of losses of a permanent character in the realization value of bonds and securities classified as “securities available for sale” currently accounted for in “earnings on financial assets (net).”
(4) As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial instruments included R$1,191 million, R$1,577 million and R$2,055 million, respectively, relating to debt instruments.
The following chart shows our impaired assets to credit risk ratio from 2017 through 2021:
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Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2021, 2020 and 2019.
The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”

As of December 31,
2019 2020 2021
(in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding
Allowance for credit losses 22,626 25,640 29,723
Total loans outstanding 347,257 417,822 493,355
Credit ratio 6.52 % 6.14 % 6.02 %
Nonaccrual loans to total loans outstanding
Total nonaccrual loans outstanding 23,426 23,176 26,923
Total loans outstanding 347,257 417,822 493,355
Credit ratio 6.75 % 5.55 % 5.46 %
Allowance for credit losses to nonaccrual loans
Allowance for credit losses 22,626 25,640 29,723
Total nonaccrual loans outstanding 23,426 23,176 26,923
Credit ratio 96.6 % 110.6 % 110.4 %
Net charge-offs during the period to average loans outstanding
Net charge-offs during the period (14,705 ) (15,297 ) (12,904 )
Average amount outstanding 324,190 394,542 471,068
Credit ratio 4.5 % 3.9 % 2.7 %
Commercial and industrial:
Net charge-offs during the period (5,713 ) (4,617 ) (5,153 )
Average amount outstanding 132,372 176,750 214,286
Credit ratio 4.3 % 2.6 % 2.4 %
Real estate:
Net charge-offs during the period (108 ) (232 ) (167 )
Average amount outstanding 38,107 42,368 51,883
Credit ratio 0.3 % 0.5 % 0.3 %
Installment loans to individuals:

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Net charge-offs during the period (8,834 ) (10,433 ) (7,576 )
Average amount outstanding 151,735 173,336 202,578
Credit ratio 5.8 % 6.0 % 3.7 %
Lease financing:
Net charge-offs during the period (49 ) (15 ) (8 )
Average amount outstanding 1,975 2,089 2,321
Credit ratio 2.5 % 0.7 % 0.3 %
Allowance for credit losses to total loans outstanding
In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.
In 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.
Nonaccrual loans to total loans outstanding
In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of December 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the growth in total loans outstanding over nonaccrual loans.
In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a ~~further payment~~decrease of 1.1% in the nonaccrual loans outstanding.
Allowance for credit losses to nonaccrual loans
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.
In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$~~299.7~~3,200 million for potential loan losses in connection with the COVID-19 pandemic.
Net charge-offs during the period to average loans outstanding
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by ~~January 2018,~~66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.
Commercial and Industrial Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.
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Real Estate Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in average loans outstanding and a decrease of 28.0% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of December 31, 2019 to 0.5% as of December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.
Installment Loans to Individuals
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of December 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.
Lease Financing Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.
4C. Organizational Structure
Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V., or “Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, 2021, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
The following table presents the name, country of incorporation or residence and proportion of ownership interest of our main subsidiaries in accordance with the criteria for consolidation pursuant to IFRS:
Activity Country of Incorporation Ownership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. (1)
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. Credit Recovery Services Brazil 100.00%
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 100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A. Holding Brazil 100.00%
Sancap Investimentos e Participações S.A. Holding Brazil 100.00%
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Santander Holding Imobiliária S.A. (current name of Webcasas S.A.) Holding Brazil 100.00%
F1RST Tecnologia e Inovação Ltda. Technology 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 S.A. Other Activities 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%
Paytec Tecnologia em Pagamentos Ltda. Other Activities Brazil 100.00%
SX Negócios Ltda. Other Activities Brazil 100.00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.)
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) Credit Recovery Services Brazil 100.00%
Liderança Serviços Especializados em Cobranças Ltda. Credit Recovery Services Brazil 100.00%
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)
Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.) Asset Management Brazil 100.00%
Controlled by Sancap Investimentos e Participações S.A.
Santander Capitalização S.A. Savings and annuities Brazil 100.00%
Evidence Previdência S.A. Social Securities Brazil 100.00%
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A. 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. Other Activities Brazil 80.00%
Controlled by Santander Leasing S.A. Arrendamento Mercantil
Banco Bandepe S.A. Bank Brazil 100.00%
PI Distribuidora de Títulos e Valores Mobiliários S.A. Leasing Brazil 100.00%
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A.
Toro Corretora de Títulos de Valores Mobiliários Ltda. Broker Brazil 60.00%
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda.
Toro Investimentos S.A. Broker Brazil 100.00%
Controlled by Sancap
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Santander Auto S.A. Other Activities 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 (2) Investment Fund Brazil (a)
Santander FI Hedge Strategies Fund (2) 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) This table reflects the Spin-Off of Getnet. For additional information on the Spin-Off, see “—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
(2) Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund.
4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 385 properties for the activities of our banking network and rent 1,719 properties for the same purpose. Furthermore, in 2014, we transferred our operation to a new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at Avenida Presidente Juscelino Kubitschek, 2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5A. Operating Results
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 and the related notes thereto, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected Financial Data” included elsewhere in this annual report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated because of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors,” and other factors discussed elsewhere in this annual report. Our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019, prepared in accordance with IFRS as issued by the IASB and the report of our independent registered public accounting firm are included in “Item 18. Financial Statements.”
Financial Presentation
We have ~~made within~~prepared our consolidated financial statements for the ~~prescribed time limits.~~years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.
The Getnet Spin-Off
We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of ~~our participation, we recorded expenses in an~~the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$~~364 million (after tax)~~2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.
Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.
For additional information on the Spin-Off, see “Item 4. Information on the Company–A. History and Development of the Company–The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.”
Brazilian Macroeconomic Environment
Overview
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil, which has been severely affected by the COVID-19 pandemic. While Brazilian GDP grew in 2021, due in part to Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:
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As of and For the Year Ended December 31,
2021 2020 2019
GDP growth(1) 4.6 % (4.1 %) 1.2 %
CDI Rate 4.4 % 2.1 % 6.0 %
TJLP 5.3 % 4.6 % 5.6 %
SELIC rate 9.25 % 2.0 % 4.5 %
Selling exchange rate (at period end) R$ per U.S.$1.00 5.58 5.20 4.03
Decrease (increase) in real rate against the U.S. dollar 7.4 % 28.9 % 4.0 %
Average exchange rate R$ per U.S.$1.00(2) 5.40 5.16 3.94
Inflation (IGP-M) 17.8 % 23.1 % 7.3 %
Inflation (IPCA) 10.06 % 4.5 % 4.3 %
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) GDP growth for 2021 is based on Santander Brasil’s internal estimates. For 2020 the source is the IBGE’s revised series.
(2) Average of the selling exchange rate for the business days during the period.
General economic stability in Brazil following the onset of the global financial crisis in 2009 allowed the Brazilian Central Bank to continue its policy of reducing interest rates. Due to inflation and other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a benchmark interest rate, reaching 10.00% at the end of December 31, 2013, 11.75% at the end of December 31, 2014 and 14.25% at the end of December 31, 2015. The Brazilian Central Bank reduced interest rates between 2015 and early 2021, with the SELIC reaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, 4.50% as of December 31, 2019 and 2.0% as of December 31, 2020. In 2021, in response to the widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the monetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and it has increased the SELIC rate to 10.75% p.a. as of the date of this annual report.^.
The lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s already high public. This has resulted in a significant risk premium, a depreciation of the real and volatility in financial asset prices. Brazil’s economy has been severely affected by the COVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a result of Brazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as set out under “—Impact of COVID-19” below, but considerable uncertainty remains as to the duration and severity of the COVID-19 pandemic and its economic effects. Combined with the emergence of new variants and the continuing limitations to the normal working of activities has led to a slow recovery cycle.
Any deterioration in Brazil’s rate of economic growth, changes in interest rates, the unemployment rate or price levels generally may adversely affect our business, financial conditions and results of operations. Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment.
Impact of COVID-19 on the Brazilian Economy
The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to mitigate the effects of the pandemic in the economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of ~~2017.~~2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal support has led to a sharp increase in the fiscal deficit and public debt. Progress on structural reforms of the Brazilian economy has also been slow. As a result, financial markets have become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December
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31, 2021 from 145 basis points as of December 31, 2020 and the depreciation of the real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.
Interest Rates
An increase in the SELIC rate may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have a positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.
The following table presents the low, high, average and period-end SELIC rate since 2016, as reported by the Brazilian Central Bank:

Low
High(1)
Average(2)
Period-End
Year
2016 13.75 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 2.00 4.50 2.81 2.00
2021 2.00 9.25 4.81 9.25
2022 (through February 22, 2022) 9.25 10.75 9.86 10.75
(1) Highest month-end rate.
(2) Average of month-end rates during the period.
Our assets are predominantly fixed rate and our liabilities are predominantly floating. The resulting exposure to increases in market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. As of December 31, 2021, a 100-basis point increase in the yield curve would have resulted in R$ 553 million decline in the net interest income over a one-year period.
Credit Volume and Quality in Brazil

In ~~October 2017, we joined~~2019, the ~~Incentive Payment Programs~~ratio of nonperforming loans to individuals reached 3.5% 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.~~household debt burden reached 23.9% of household income. In ~~connection with our participation in these programs, we are repaying in installments certain amounts due~~2020, outstanding credit increased 15.6% as a result of ~~lawsuits~~credit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which resulted in a ratio of nonperforming loans of 2.8% in 2021, while further increasing the household debt burden to 24.4% of household income. In 2021, given the extension of some government support programs and ~~administrative proceedings relating~~the relaxation in certain mobility restrictions which enabled certain businesses to ~~ISS~~resume their activities, the volume of outstanding credit continued to expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of nonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 27.9% of household income).

2021
2020
2019
(in billions of R$)
Total Credit Outstanding (*) 4,684 3,261 3,471
Earmarked credit 1,881 1,500 1,465
Non-earmarked based credit 2,803 1,761 2,006
of which:
Corporate 1,291 814 905
Individuals (retail) 1,513 948 1,101
(*) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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Foreign Exchange Rates
Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. In 2021, we recorded foreign exchange exposure of R$117,400 million, foreign exchange exposure of R$ (124,437) million in 2020 and foreign exchange exposure of R$11,208 million in 2019. These results are due to the variation of the U.S. dollar against the real on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the ~~periods from 2005~~Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”
The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. During 2016, the real appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December 31, 2016, the exchange rate was R$3.26 per U.S.$1.00. In 2017 the real remained relatively stable against the U.S. dollar, with a ~~total amount~~small depreciation of 1.5% to R$~~293 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, it was at R$4.03 per U.S.$1.00. In 2020, the real continued to depreciate, and as of December 31, 2020 it was at R$5.20 per U.S.$1.00. In 2021, the real has continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As weof December 31, 2021, the exchange rate was R$5.58 per U.S.$1.00. In 2022 through the date of this annual report, the real appreciated against the U.S. dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of February 22, 2022, the exchange rate was R$5.06 per U.S.$1.00.
Depreciation of the real relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government, Depreciation of the real may also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of the real could make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.
Inflation
In recent years, inflation had ~~made provisions~~been oscillating around the target, which is set by the CMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target the last couple of years. From 2005 to 2018, the targeted level was 4.5%, with a tolerance interval of 2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for ~~these losses, we registered income~~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 ~~R$435 million~~the fluctuation range in the Brazilian Central Bank’s inflation targeting range. In 2015, as a result of the ~~reversal of certain provisions, net of tax effects, in an amount of R$96 million.~~
~~Establishment of Credit Intelligence Bureau~~
~~On January 20, 2016, we entered into a non-binding memorandum of understanding with Banco Bradesco S.A., Banco do Brasil S.A., Caixa Econômica Federal and Itaú Unibanco S.A., for the creation~~indexation of a ~~credit intelligence bureau,~~significant portion of contracts for services to the CIB. The CIB was structured as a corporation and each of Santander Brasil, Banco Bradesco S.A., Banco do Brasil S.A., Caixa Econômica Federal and Itaú Unibanco S.A. will have a 20% ownership stake in the corporation.
~~The purpose~~inflation levels of the ~~CIB is to develop~~previous years, the impact of adjustment of tariffs and the impact of the depreciation of the real on prices, inflation rate reached a ~~database that, in conformity with applicable laws, will collect, reconcile~~level of 10.7%, the highest on record since May 2005 and handle the credit information of individuals and legal entities that register with the CIB and expressly authorize the inclusion of their credit information on the CIB’s database. We believe this initiative will lead to an increased degree of efficiency and improvement of our credit management activities, and will also facilitate the disbursement of long and medium-term lines of credit to participants inwell above the Brazilian ~~Financial System and to other corporate entities.~~
~~On April 14,~~Central Bank’s inflation target of 4.5%. In 2017, ~~the definitive documents were signed by the shareholders. At the extraordinary shareholders’ meeting held on October 5, 2017, a capital increase in an amount of R$285,205 thousand was approved~~inflation fell substantially as a result of ~~which CIB’s capital stock increased from R$65,823 thousand to R$351,028 thousand. The CIB became fully operational in 2019.~~
~~Formation~~the consistent efforts of ~~Banco Hyundai Capital Brasil S.A.~~
On April 28, 2016, our wholly owned subsidiary Aymoré CFI entered into a joint venture with Hyundai Capital, for the purposes of incorporating (i) Banco Hyundai Capital Brasil S.A. and (ii) an insurance brokerage company. These entities were incorporated to provide, respectively, auto financing and insurance brokerage services, and products to consumers through the Hyundai dealerships in Brazil.
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~~Aymoré CFI owns a 50% equity interest in Banco Hyundai Capital Brasil S.A., and Hyundai Capital owns the remaining 50% equity interest.~~
~~On February 21, 2019,~~ the Brazilian Central Bank ~~granted Banco Hyundai Capital Brasil S.A.~~to reduce the ~~authorization to operate as~~inflation rate, ending the year at 2.95%. As a ~~banking entity. Banco Hyundai Capital Brasil S.A. began operating in the first half of 2019.~~
~~On April 30, 2019,~~result, 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.~~
~~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,required to send 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 million before taxes recorded in the “Other non-financial gains/losses” line.
~~Plans to Optimize our Capital Structure~~
On September 26, 2013, we announced that, in order to optimize our capital structure, our board of directors submitted a proposal to optimize the composition of our regulatory capital to our shareholders for their approval (“PR Optimization Plan”). The aim was to establish a more efficient capital structure, consistent with recent capital rules and aligned with our business strategy and asset growth plan. The PR Optimization Plan was composed of the following items: (i) an equity distributionletter to the ~~shareholders of Santander Brasil~~CMN explaining the reasons for not meeting the target in the total amount of R$6 billion, with no reduction in the number of shares; (ii) the issuance abroad of capital instruments to compose Tier I and Tier II of our regulatory capital; and (iii) a bonus share program and an adjustment in the composition of the Units, followed by a reverse share split, with the purpose of eliminating trading in cents of ~~reais~~.
On November 5, 2018, our board of directors approved the Notes Offering In addition, our board of directors also approved the redemption of debt instruments issued to form part of our Tier 1 and Tier 2 regulatory capital, as set out in the board’s resolution of January 14, 2014. The proceeds from the Notes Offering were used to fund this redemption. On December 18, 2018,which the Brazilian Central Bank ~~authorized~~explained that it expected that the ~~transactions contemplated~~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
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increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the ~~Notes Offering~~beginning of 2018, the Brazilian monetary authority sent a letter to the CMN explaining why it failed to meet the inflation target and what are the actions to be implemented in order to ensure that inflation will converge to the targeted levels in the coming years.
The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.
Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the IPCA and IGPM. For example, considering the amounts in 2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$90 million and R$83 million, respectively.
Reserve and Lending Requirements
The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our results of operations by limiting or expanding the amounts available for commercial credit transactions.
The table below shows the requirements for reserves and credit to which we are subject for each financing category:
Product As of December 31, 2021 As of December 31, 2020 Form of Required Reserve Yield
Demand deposits
Rural credit loans(1) 25.00 % 27.50 % Loans Cap rate: 7.5% p.a.
Microcredit loans(2) 2.00 % 2.00 % Loans Cap rate: 4.0% p.m.
Reserve requirements(3) 21.00 % 21.00 % Cash Zero
Additional reserve requirements 0.00 % 0.00 % Cash n/a
Free funding(4) 52.00 % 49.50 %

Savings Accounts
Mortgage loans 65.00 % 65.00 % Loans Cap rate (SFH): TR + 12.0% p.a.
Reserve requirements(2) 20.00 % 20.00 % Cash TR + 6.17% or TR + 70.00% of the target SELIC
Additional reserve requirements 0.00 % 0.00 Cash n/a
Free funding(4) 15.00 % 15.00 %

Time deposits
Reserve requirements(3) 20.00 % 17.00 % Cash SELIC
In cash or other instruments 0.00 % 0.00 % Cash or other instruments n/a
In cash 0.00 % 0.00 % Cash n/a
Additional reserve requirements 0.00 % 0.00 % Cash n/a
Free funding(4) 80.00 % 83.00 %
(1) Rural credits are credits granted to farmers in the amount R$13.6 billion on December 31, 2021 and December 31, 2020, respectively.
(2) Microcredit is a credit granted to very small businesses, with an open position of R$1.3 billion on December 31, 2021 and December 31, 2020, respectively.
(3) Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular Nos, 3,917, 3,975 and 145.
(4) Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category.
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Taxes
See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulation—Taxation.”
Hedging in Foreign Investments
We operate two foreign branches, one in the Cayman Islands, and another one in Luxembourg. We previously operated an independent wholly-owned subsidiary in Spain, named Santander Brasil Estabelecimiento Financiero de Credito, EFC, which we used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our customers for working capital and trade-related financings. Under Brazilian income tax rules, Law No. 14,031, dated July 28, 2020, set that, from January 2021 until December 2021 50% of the foreign exchange variation of the portion of investments abroad that are subject to hedge must be computed in the determination of real profits and in the calculation of the taxable base of the social contribution over net income (Contribuição Social Sobre o Lucro Líquido), or “CSLL,” of an investing legal entity domiciled in Brazil. From January 2022, the foreign exchange variation of investments abroad is fully computed in the basis of the IRPJ and the ~~redemption,~~CSLL. The reconciliation of our effective tax rate to the statutory tax rate is set forth in note 23b to our audited consolidated financial statements included elsewhere in this annual report. Santander EFC was operational from 2012 until 2020, when we approved its liquidation. For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Foreign Subsidiary.”
Goodwill of Banco Real
We generated goodwill of R$27 billion as a result of our acquisition of Banco Real in 2008. Under IFRS, we are required to analyze goodwill for impairment at least annually or whenever there are indications of impairment. In 2021, 2020 and 2019, the recoverable goodwill amounts are determined from “value in use” calculations. For this purpose, we estimate cash flow for a period of five years. We prepare cash flow estimates considering several factors, including: (i) macroeconomic projections, such as interest rates, inflation and exchange rates, among others, (ii) the performance and growth estimates of the Brazilian financial system, (iii) increased costs, returns, synergies and investment plans, (iv) the behavior of customers, and (v) the growth rate of, and long-term adjustments to, cash flows. These estimates rely on assumptions regarding the likelihood of future events, and changing certain factors could result in different outcomes. The estimate of cash flows is based on valuations prepared by an independent research company, which ~~were completed on January 29, 2019.~~is reviewed and approved by the board of directors. Therefore, amortization of goodwill for tax purposes generates a permanent difference and, as a result, no record of the deferred tax liability.
The following table shows the main assumptions for the basis of valuation as of the dates indicated.
2021 2020 2019
(Value in use: cash flows)
Main Assumptions(*)
Basis of valuation
Period of the projections of cash flows(1) 5 years 5 years 5 years
Growth rate(2) 4.0 % 4.3 % 4.8 %
Discount rate(3) 12.3 % 12.4 % 12.5 %
(1) The projections of cash flow are prepared using internal budget and growth plans of management, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.
(2) The growth rate is calculated based on a real growth rate of 1% p.a. plus annual long-term inflation in 2021.
(3) The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 18.77% in 2021, 19.56% in 2020 and 17.88% in 2019.
(*) The recoverability test was performed during the second half of 2021. Goodwill is tested for impairment on an annual basis or whenever there is any indication of a potential impairment. At the end of each year, a qualitative assessment is carried out in order to check the existence of signs of impairment. For the years 2021, 2020 and 2019, no indication of impairment was identified.

We performed a sensitivity test in the goodwill impairment analysis considering the main assumptions that could reasonably be expected to possibly change, as required by the IFRS. Accordingly, we applied such a test considering the discount rate and perpetuity growth rate as the main assumption subject to reasonably possible change and we did not identify any impairment to goodwill.
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Other Factors Affecting the Comparability of Our Results of Operations
In addition, our results of operations have been influenced and will continue to be influenced by:
● The Spin-Off of Getnet, as described under “Item 5. Operating And Financial Review And Prospects—A. Operating Results—Financial Presentation—The Getnet Spin-Off”; and
● the other transactions and developments discussed under “Item 4. Information on the Company—A. History and Development of the Company—Important Events” and note 3, to our audited consolidated financial statements included elsewhere in this annual report.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
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General
Our ~~principal~~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 ~~operational results.~~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 ~~operational~~ 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, ~~which are~~ included elsewhere in this annual report.
~~Fair Value of Financial Instruments~~
Methodology for Impairment Losses
We ~~record a financial asset as measured at (i) fair value through profit~~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 (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—3A. Selected Financial Data—Balance Sheet Data.
~~The fair value of a financial instrument is the price that would be received to sell an asset, or the amount paid to transfer a liability 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,~~loans individually evaluated for impairment, we ~~take into account relevant characteristics if market participants would also~~ consider the ~~same when pricing~~conditions of the ~~asset~~borrowers, such as their economic and ~~liability~~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 ~~fair value is measured. An assumed transaction like this establishes an asset sale price or transfer cost~~of evaluation.
To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the ~~liability.~~characteristics and similarity of credit risk. In other words, according to segment, the ~~absence thereof, price is established using valuation techniques commonly used by financial markets.~~
~~We use derivative financial instruments for both trading~~type of assets, guarantees and non-trading activities. The principal 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 calculatedother factors associated such as the ~~sum~~historical experience of ~~expected future cash flows arising from the instrument, discounted to the (“present value” or “theoretical close”)~~impairment and other circumstances known at the ~~date fair value~~time of assessment.
The expected loss measurement is ~~measured using techniques commonly applied by financial markets as follows:~~
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 ~~present value method~~standard requires that future information relevant to the estimation of these parameters should be considered.
● Loss Given Default (LGD): is ~~used for~~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 ~~instruments permitting static hedging (principally, forwards~~asset, and ~~swaps), loans and advances. This method uses expected~~the future cash flows that are ~~discounted through interest~~expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation.
● Discount rate: the rate ~~curves~~applied to the future cash flows estimated during the expected life of the ~~applicable currencies. These interest rate curves are generally observable market data.~~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:
· 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. 142
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· 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.
As of December 31,
2021 % of total 2020 % of total
(in millions of R$, except percentages)
Commercial and industrial 4,892 20.7 5,132 25.8
Mortgage loans 3,606 15.2 3,085 15.5
Installment loans to individuals 15,150 64.0 11,661 58.6
Lease financing 11 0.1 13 0.1
Total (*) 23,659 100.0 19,891 100.0
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·(*) ~~Dynamic models similar~~Refers only to ~~those used in measuring of interest rate risk for measuring credit risk of linear instruments (such as bonds~~loans past due between 1 and fixed-income derivatives). In the case of non-linear instruments, if the portfolio is exposed to credit risk (such as credit derivatives), the joint probability of default is determined using the Standard Gaussian Copula model. The main inputs used to determine the underlying cost of credit for credit derivatives are quoted credit risk spreads, and the correlation between quoted credit derivatives of various issuers.
· The determination of fair value requires us to make certain estimates and assumptions. If quoted market prices are unavailable, fair value is then calculated using widely accepted pricing models that consider contractual terms and prices of the underlying financial instruments, yield curves, observable market data and other relevant factors. The use of different estimates or assumptions in these pricing models could lead to a different valuation being recorded in our consolidated financial statements.90 days.

~~See note 2e (i)~~Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$74.8 billion to R$540.9 billion as of December 31, 2021, compared to R$466.1 billion as of December 31, 2020. Our impaired assets increased by approximately R$3,747 billion in the same period, from R$23.2 billion to R$26.9 billion. The default rate decreased by 30 basis points in 2021 in comparison to 2020, primarily due to the recurrent growth of the credit portfolio.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.
As of December 31,
2021 2020 2019 2018 2017
(in millions of R$ except percentages)
Loans and advances to customers, gross 493,355 417,822 347,257 321,933 287,829
Impaired assets 26,923 23,176 23,426 22,426 19,145
Provisions for impairment losses 29,723 25,640 22,626 22,969 18,262
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 540,873 466,104 391,569 364,194 330,474
Ratios
Impaired assets to credit risk exposure 5.0 % 5.0 % 6.0 % 6.2 % 5.8 %
Coverage ratio ⁽²⁾ 110.4 % 110.6 % 96.6 % 102.4 % 95.4 %
Impairment losses (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )
Losses on other financial instruments not
  measured at fair value ⁽³⁾ -   -   -   -   -
Impairment losses on financial assets (net) ⁽⁴⁾ (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )

(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$540,873 million as of December 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
(2) Provisions for impairment losses as a percentage of impaired assets.
(3) Corresponds to the registration of losses of a permanent character in the realization value of bonds and securities classified as “securities available for sale” currently accounted for in “earnings on financial assets (net).”
(4) As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial instruments included R$1,191 million, R$1,577 million and R$2,055 million, respectively, relating to debt instruments.
The following chart shows our impaired assets to credit risk ratio from 2017 through 2021:
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Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2021, 2020 and 2019.
The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”

As of December 31,
2019 2020 2021
(in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding
Allowance for credit losses 22,626 25,640 29,723
Total loans outstanding 347,257 417,822 493,355
Credit ratio 6.52 % 6.14 % 6.02 %
Nonaccrual loans to total loans outstanding
Total nonaccrual loans outstanding 23,426 23,176 26,923
Total loans outstanding 347,257 417,822 493,355
Credit ratio 6.75 % 5.55 % 5.46 %
Allowance for credit losses to nonaccrual loans
Allowance for credit losses 22,626 25,640 29,723
Total nonaccrual loans outstanding 23,426 23,176 26,923
Credit ratio 96.6 % 110.6 % 110.4 %
Net charge-offs during the period to average loans outstanding
Net charge-offs during the period (14,705 ) (15,297 ) (12,904 )
Average amount outstanding 324,190 394,542 471,068
Credit ratio 4.5 % 3.9 % 2.7 %
Commercial and industrial:
Net charge-offs during the period (5,713 ) (4,617 ) (5,153 )
Average amount outstanding 132,372 176,750 214,286
Credit ratio 4.3 % 2.6 % 2.4 %
Real estate:
Net charge-offs during the period (108 ) (232 ) (167 )
Average amount outstanding 38,107 42,368 51,883
Credit ratio 0.3 % 0.5 % 0.3 %
Installment loans to individuals:

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Net charge-offs during the period (8,834 ) (10,433 ) (7,576 )
Average amount outstanding 151,735 173,336 202,578
Credit ratio 5.8 % 6.0 % 3.7 %
Lease financing:
Net charge-offs during the period (49 ) (15 ) (8 )
Average amount outstanding 1,975 2,089 2,321
Credit ratio 2.5 % 0.7 % 0.3 %
Allowance for credit losses to total loans outstanding
In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.
In 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.
Nonaccrual loans to total loans outstanding
In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of December 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the growth in total loans outstanding over nonaccrual loans.
In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a decrease of 1.1% in the nonaccrual loans outstanding.
Allowance for credit losses to nonaccrual loans
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.
In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$3,200 million for potential loan losses in connection with the COVID-19 pandemic.
Net charge-offs during the period to average loans outstanding
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by 66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.
Commercial and Industrial Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.
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Real Estate Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in average loans outstanding and a decrease of 28.0% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of December 31, 2019 to 0.5% as of December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.
Installment Loans to Individuals
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of December 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.
Lease Financing Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.
4C. Organizational Structure
Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V., or “Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, 2021, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
The following table presents the name, country of incorporation or residence and proportion of ownership interest of our main subsidiaries in accordance with the criteria for consolidation pursuant to IFRS:
Activity Country of Incorporation Ownership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. (1)
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. Credit Recovery Services Brazil 100.00%
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 100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A. Holding Brazil 100.00%
Sancap Investimentos e Participações S.A. Holding Brazil 100.00%
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Santander Holding Imobiliária S.A. (current name of Webcasas S.A.) Holding Brazil 100.00%
F1RST Tecnologia e Inovação Ltda. Technology 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 S.A. Other Activities 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%
Paytec Tecnologia em Pagamentos Ltda. Other Activities Brazil 100.00%
SX Negócios Ltda. Other Activities Brazil 100.00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.)
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) Credit Recovery Services Brazil 100.00%
Liderança Serviços Especializados em Cobranças Ltda. Credit Recovery Services Brazil 100.00%
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)
Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.) Asset Management Brazil 100.00%
Controlled by Sancap Investimentos e Participações S.A.
Santander Capitalização S.A. Savings and annuities Brazil 100.00%
Evidence Previdência S.A. Social Securities Brazil 100.00%
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A. 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. Other Activities Brazil 80.00%
Controlled by Santander Leasing S.A. Arrendamento Mercantil
Banco Bandepe S.A. Bank Brazil 100.00%
PI Distribuidora de Títulos e Valores Mobiliários S.A. Leasing Brazil 100.00%
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A.
Toro Corretora de Títulos de Valores Mobiliários Ltda. Broker Brazil 60.00%
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda.
Toro Investimentos S.A. Broker Brazil 100.00%
Controlled by Sancap
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Santander Auto S.A. Other Activities 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 (2) Investment Fund Brazil (a)
Santander FI Hedge Strategies Fund (2) 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) This table reflects the Spin-Off of Getnet. For additional information on the Spin-Off, see “—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
(2) Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund.
4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 385 properties for the activities of our banking network and rent 1,719 properties for the same purpose. Furthermore, in 2014, we transferred our operation to a new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at Avenida Presidente Juscelino Kubitschek, 2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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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 ~~additional~~the years ended December 31, 2021, 2020 and 2019 and the related notes thereto, and with the financial information ~~on valuation techniques, details on our modeled principal~~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 ~~a sensitivity analysis~~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 ~~valuation~~years ended December 31, 2021, 2020 and 2019, prepared in accordance with IFRS as issued by the IASB and the report of ~~financial instruments to those changes~~our independent registered public accounting firm are included in ~~principal assumptions and estimates and note 46.c.8 of~~“Item 18. Financial Statements.”
Financial Presentation
We have prepared our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.
The Getnet Spin-Off
We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a ~~sensitivity analysis relating~~result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.
Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.
For additional information on the Spin-Off, see “Item 4. Information on the Company–A. History and Development of the Company–The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the ~~valuation~~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 ~~instruments~~condition, liquidity and results of operations.”
Brazilian Macroeconomic Environment
Overview
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil, which has been severely affected by the COVID-19 pandemic. While Brazilian GDP grew in 2021, due in part to ~~those~~Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:
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As of and For the Year Ended December 31,
2021 2020 2019
GDP growth(1) 4.6 % (4.1 %) 1.2 %
CDI Rate 4.4 % 2.1 % 6.0 %
TJLP 5.3 % 4.6 % 5.6 %
SELIC rate 9.25 % 2.0 % 4.5 %
Selling exchange rate (at period end) R$ per U.S.$1.00 5.58 5.20 4.03
Decrease (increase) in real rate against the U.S. dollar 7.4 % 28.9 % 4.0 %
Average exchange rate R$ per U.S.$1.00(2) 5.40 5.16 3.94
Inflation (IGP-M) 17.8 % 23.1 % 7.3 %
Inflation (IPCA) 10.06 % 4.5 % 4.3 %
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) GDP growth for 2021 is based on Santander Brasil’s internal estimates. For 2020 the source is the IBGE’s revised series.
(2) Average of the selling exchange rate for the business days during the period.
General economic stability in Brazil following the onset of the global financial crisis in 2009 allowed the Brazilian Central Bank to continue its policy of reducing interest rates. Due to inflation and other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a benchmark interest rate, reaching 10.00% at the end of December 31, 2013, 11.75% at the end of December 31, 2014 and 14.25% at the end of December 31, 2015. The Brazilian Central Bank reduced interest rates between 2015 and early 2021, with the SELIC reaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, 4.50% as of December 31, 2019 and 2.0% as of December 31, 2020. In 2021, in response to the widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the monetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and it has increased the SELIC rate to 10.75% p.a. as of the date of this annual report.^.
The lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s already high public. This has resulted in a significant risk premium, a depreciation of the real and volatility in financial asset prices. Brazil’s economy has been severely affected by the COVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a result of Brazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as set out under “—Impact of COVID-19” below, but considerable uncertainty remains as to the duration and severity of the COVID-19 pandemic and its economic effects. Combined with the emergence of new variants and the continuing limitations to the normal working of activities has led to a slow recovery cycle.
Any deterioration in Brazil’s rate of economic growth, changes in ~~principal assumptions.~~interest rates, the unemployment rate or price levels generally may adversely affect our business, financial conditions and results of operations. Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment.
Impact of COVID-19 on the Brazilian Economy
The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to mitigate the effects of the pandemic in the economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of 2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal support has led to a sharp increase in the fiscal deficit and public debt. Progress on structural reforms of the Brazilian economy has also been slow. As a result, financial markets have become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December
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31, 2021 from 145 basis points as of December 31, 2020 and the depreciation of the real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.

~~Impairment Losses~~Interest Rates
An increase in the SELIC rate may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have a positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.
The following table presents the low, high, average and period-end SELIC rate since 2016, as reported by the Brazilian Central Bank:

Low
High(1)
Average(2)
Period-End
Year
2016 13.75 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 2.00 4.50 2.81 2.00
2021 2.00 9.25 4.81 9.25
2022 (through February 22, 2022) 9.25 10.75 9.86 10.75
(1) Highest month-end rate.
(2) Average of month-end rates during the period.
Our assets are predominantly fixed rate and our liabilities are predominantly floating. The resulting exposure to increases in market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. As of December 31, 2021, a 100-basis point increase in the yield curve would have resulted in R$ 553 million decline in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
In 2019, the ratio of nonperforming loans to individuals reached 3.5% and the household debt burden reached 23.9% of household income. In 2020, outstanding credit increased 15.6% as a result of credit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which resulted in a ratio of nonperforming loans of 2.8% in 2021, while further increasing the household debt burden to 24.4% of household income. In 2021, given the extension of some government support programs and the relaxation in certain mobility restrictions which enabled certain businesses to resume their activities, the volume of outstanding credit continued to expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of nonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 27.9% of household income).

2021
2020
2019
(in billions of R$)
Total Credit Outstanding (*) 4,684 3,261 3,471
Earmarked credit 1,881 1,500 1,465
Non-earmarked based credit 2,803 1,761 2,006
of which:
Corporate 1,291 814 905
Individuals (retail) 1,513 948 1,101
(*) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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Foreign Exchange Rates
Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. In 2021, we recorded foreign exchange exposure of R$117,400 million, foreign exchange exposure of R$ (124,437) million in 2020 and foreign exchange exposure of R$11,208 million in 2019. These results are due to the variation of the U.S. dollar against the real on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”
The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. During 2016, the real appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December 31, 2016, the exchange rate was R$3.26 per U.S.$1.00. In 2017 the real remained relatively stable against the U.S. dollar, with a small depreciation of 1.5% to R$3.31 per U.S.$1.00 as of December 31, 2017. The real depreciated further against the U.S. dollar throughout 2018, with a depreciation of 17%, On December 31, 2018, the exchange rate was R$3.87 per U.S.$1.00. In 2019, the real continued to depreciate against the U.S. dollar and as of December 31, 2019, it was at R$4.03 per U.S.$1.00. In 2020, the real continued to depreciate, and as of December 31, 2020 it was at R$5.20 per U.S.$1.00. In 2021, the real has continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As of December 31, 2021, the exchange rate was R$5.58 per U.S.$1.00. In 2022 through the date of this annual report, the real appreciated against the U.S. dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of February 22, 2022, the exchange rate was R$5.06 per U.S.$1.00.
~~Definition~~Depreciation of the real relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government, Depreciation of the real may also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of the real could make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.
Inflation
AIn recent years, inflation had been oscillating around the target, which is set by the CMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target the last couple of years. From 2005 to 2018, the targeted level was 4.5%, with a tolerance interval of 2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for 2019 by the CMN was lowered to 4.25% and additional 0.25 percentage point decreases were defined for the targets until 2024, when the goal will be 3.00%.
Between 2012 and 2014, inflation ranged from 5.8% to 6.4%, i.e., it was close to the top of the fluctuation range in the Brazilian Central Bank’s inflation targeting range. In 2015, as a result of the indexation of a significant portion of contracts for services to the inflation levels of the previous years, the impact of adjustment of tariffs and the impact of the depreciation of the real on prices, inflation rate reached a level of 10.7%, the highest on record since May 2005 and well above the Brazilian Central Bank’s inflation target of 4.5%. In 2017, inflation fell substantially as a result of the consistent efforts of the Brazilian Central Bank to reduce the inflation rate, ending the year at 2.95%. As a result, the Brazilian Central Bank was required to send a letter to the CMN explaining the reasons for not meeting the target in which the Brazilian Central Bank explained that it expected that the monetary easing undertaken in 2018 would make the actual inflation rate converge toward the target. In 2018 the inflation increased to 3.75%, thus reinforcing the efficiency of the monetary policy in Brazil. In 2019, as a result of temporary price shocks affecting edible items, inflation ended the year slightly above the targeted level, at 4.31%. In 2020, inflation increased to 4.5%. In 2021, inflation continued to accelerate and reached 10.06% at the end of the year, as a result of several shocks that ranged from problems in global supply chains – which
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increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the beginning of 2018, the Brazilian monetary authority sent a letter to the CMN explaining why it failed to meet the inflation target and what are the actions to be implemented in order to ensure that inflation will converge to the targeted levels in the coming years.
The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial ~~asset is considered impaired when there is objective evidence~~condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.
Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the IPCA and IGPM. For example, considering the amounts in 2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$90 million and R$83 million, respectively.
Reserve and Lending Requirements
The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our results of operations by limiting or expanding the amounts available for commercial credit transactions.
The table below shows ~~events have occurred which:~~the requirements for reserves and credit to which we are subject for each financing category:
Product As of December 31, 2021 As of December 31, 2020 Form of Required Reserve Yield
Demand deposits
Rural credit loans(1) 25.00 % 27.50 % Loans Cap rate: 7.5% p.a.
Microcredit loans(2) 2.00 % 2.00 % Loans Cap rate: 4.0% p.m.
Reserve requirements(3) 21.00 % 21.00 % Cash Zero
Additional reserve requirements 0.00 % 0.00 % Cash n/a
Free funding(4) 52.00 % 49.50 %

Savings Accounts
Mortgage loans 65.00 % 65.00 % Loans Cap rate (SFH): TR + 12.0% p.a.
Reserve requirements(2) 20.00 % 20.00 % Cash TR + 6.17% or TR + 70.00% of the target SELIC
Additional reserve requirements 0.00 % 0.00 Cash n/a
Free funding(4) 15.00 % 15.00 %

Time deposits
Reserve requirements(3) 20.00 % 17.00 % Cash SELIC
In cash or other instruments 0.00 % 0.00 % Cash or other instruments n/a
In cash 0.00 % 0.00 % Cash n/a
Additional reserve requirements 0.00 % 0.00 % Cash n/a
Free funding(4) 80.00 % 83.00 %

·(1) ~~give rise~~Rural credits are credits granted to ~~an adverse impact on future cash flows estimated at the transaction date,~~farmers in the ~~case~~amount R$13.6 billion on December 31, 2021 and December 31, 2020, respectively.
(2) Microcredit is a credit granted to very small businesses, with an open position of ~~debt instruments (loans~~R$1.3 billion on December 31, 2021 and ~~debt securities);~~December 31, 2020, respectively.
(3) Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular Nos, 3,917, 3,975 and 145.
(4) Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category.

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Taxes
See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulation—Taxation.”
Hedging in Foreign Investments
We operate two foreign branches, one in the Cayman Islands, and another one in Luxembourg. We previously operated an independent wholly-owned subsidiary in Spain, named Santander Brasil Estabelecimiento Financiero de Credito, EFC, which we used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our customers for working capital and trade-related financings. Under Brazilian income tax rules, Law No. 14,031, dated July 28, 2020, set that, from January 2021 until December 2021 50% of the foreign exchange variation of the portion of investments abroad that are subject to hedge must be computed in the determination of real profits and in the calculation of the taxable base of the social contribution over net income (Contribuição Social Sobre o Lucro Líquido), or “CSLL,” of an investing legal entity domiciled in Brazil. From January 2022, the foreign exchange variation of investments abroad is fully computed in the basis of the IRPJ and the CSLL. The reconciliation of our effective tax rate to the statutory tax rate is set forth in note 23b to our audited consolidated financial statements included elsewhere in this annual report. Santander EFC was operational from 2012 until 2020, when we approved its liquidation. For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Foreign Subsidiary.”
Goodwill of Banco Real
We generated goodwill of R$27 billion as a result of our acquisition of Banco Real in 2008. Under IFRS, we are required to analyze goodwill for impairment at least annually or whenever there are indications of impairment. In 2021, 2020 and 2019, the recoverable goodwill amounts are determined from “value in use” calculations. For this purpose, we estimate cash flow for a period of five years. We prepare cash flow estimates considering several factors, including: (i) macroeconomic projections, such as interest rates, inflation and exchange rates, among others, (ii) the performance and growth estimates of the Brazilian financial system, (iii) increased costs, returns, synergies and investment plans, (iv) the behavior of customers, and (v) the growth rate of, and long-term adjustments to, cash flows. These estimates rely on assumptions regarding the likelihood of future events, and changing certain factors could result in different outcomes. The estimate of cash flows is based on valuations prepared by an independent research company, which is reviewed and approved by the board of directors. Therefore, amortization of goodwill for tax purposes generates a permanent difference and, as a result, no record of the deferred tax liability.
The following table shows the main assumptions for the basis of valuation as of the dates indicated.
2021 2020 2019
(Value in use: cash flows)
Main Assumptions(*)
Basis of valuation
Period of the projections of cash flows(1) 5 years 5 years 5 years
Growth rate(2) 4.0 % 4.3 % 4.8 %
Discount rate(3) 12.3 % 12.4 % 12.5 %
·(1) ~~for equity instruments, their carrying amount may not be fully recovered;~~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) ~~arise from the violation~~The growth rate is calculated based on a real growth rate of ~~terms of loans; and~~1% p.a. plus annual long-term inflation in 2021.
·(3) The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 18.77% in 2021, 19.56% in 2020 and 17.88% in 2019.
(*) The recoverability test was performed during the ~~Bankruptcy process.~~second half of 2021. Goodwill is tested for impairment on an annual basis or whenever there is any indication of a potential impairment. At the end of each year, a qualitative assessment is carried out in order to check the existence of signs of impairment. For the years 2021, 2020 and 2019, no indication of impairment was identified.

AsWe performed a ~~general rule, the value adjustment of impaired financial instruments is recognized~~sensitivity test in the ~~consolidated income statement for~~goodwill impairment analysis considering the ~~period in which~~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 ~~becomes evident. The reversal, if any, is recognized in~~to goodwill.
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Other Factors Affecting the ~~same manner for previous statements for which the impairment is reversed or reduced. Financial assets are deemed~~Comparability of Our Results of Operations
In addition, our results of operations have been influenced and will continue to be impaired, and the accrued interest suspended, when there are reasonable doubts as to their full recovery and/or the collection of the related interest for the amounts and on the dates indicated in the loan agreement after taking into account collateral guarantees received to secure (fully or partially) the collection of related balances.
For all non-performing past due assets, any collections relating to impaired loans and advances are used to recognize the accrued interest. The remainder, if any, is applied to reduce the principal amount outstanding Debt Instruments Carried at Amortized Cost.
~~Debt Instruments Carried at Amortized Cost~~
The impairment loss amount incurred for determining a recoverable amount on a debt instrument measured at amortized cost is equal to the difference between its carrying amount and the present value of its estimated future cash flows (excluding future credit losses not incurred). This cash flow is discounted to the financial asset’s 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.
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~~In estimating the future cash flows of debt instruments, the following factors are taken into account:~~
influenced by:
·● ~~all amounts that are expected to be obtained over~~ The Spin-Off of Getnet, as described under “Item 5. Operating And Financial Review And Prospects—A. Operating Results—Financial Presentation—The Getnet Spin-Off”; and
● the ~~remaining life~~other transactions and developments discussed under “Item 4. Information on the Company—A. History and Development of the ~~instrument, (such as provided guarantees);~~Company—Important Events” and note 3, to our audited consolidated financial statements included elsewhere in this annual report.
· ~~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.~~
Critical Accounting Policies
~~A debt instrument is impaired due~~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 ~~insolvency when there is evidence~~our audited consolidated financial statements. The following discussion describes areas that require use of ~~deterioration~~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 ~~obligor’s ability~~related notes to ~~pay, either because such obligor is~~our audited consolidated financial statements, included elsewhere in ~~arrears or for other reasons. An example is recoverable losses resulting from a materialization of the insolvency risk of obligors (credit risk).~~this annual report.
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.
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 regarding the provision for impairment losses from credit risk. Loans are either individually evaluated for impairment, or collectively evaluated by grouping similar risk characteristics. Loans that are individually evaluated for impairment losses are not evaluated collectively.
To measure the impairment loss on loans individually evaluated for impairment, we consider the conditions of the borrowers, such as their economic and financial situation, level of indebtedness, ability to generate income, cash flow, management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as the characteristics of assets, such as their nature and purpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the time of evaluation.
To measure the impairment loss on loans collectively evaluated for impairment, we segregate financial assets into groups considering the characteristics and similarity of credit risk. In other words, according to segment, the type of assets, guarantees and other factors associated such as the historical experience of impairment and other circumstances known at the time of assessment.
The expected loss measurement is made through the following factors:
● Exposure at Default (EAD): is the amount of a transaction exposed to credit risk including the ratio of current outstanding balance exposure that could be provided at default. Developed models incorporate hypotheses considering possible modifications to the payment schedule.
● Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay the principal and / or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - life time (Stage 2 and 3), which considers the probability that the transaction between in default between the balance sheet date and the residual maturity date of the transaction. The standard requires that future information relevant to the estimation of these parameters should be considered.
● Loss Given Default (LGD): is the loss produced in the event of default. In other words, this reflects the percentage of exposure that could not be recovered in the event of a default. It depends mainly on the collateral, which is considered as credit risk mitigants associated with each financial asset, and the future cash flows that are expected to be recovered. According to the standard, forward-looking information must be taken into account in the estimation.
● Discount rate: the rate applied to the future cash flows estimated during the expected life of the asset, and which is equal to the net present value of the financial instrument at its carrying value.
In order to estimate the above parameters, the Bank has applied its experience in developing internal models for parameters calculation both for regulatory and management purposes.
Loans Past Due for Less Than 90 Days but Not Classified as Impaired
The following table shows the loans past due for less than 90 days but not classified as impaired at the dates indicated:
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As of December 31,
2021 % of total 2020 % of total
(in millions of R$, except percentages)
Commercial and industrial 4,892 20.7 5,132 25.8
Mortgage loans 3,606 15.2 3,085 15.5
Installment loans to individuals 15,150 64.0 11,661 58.6
Lease financing 11 0.1 13 0.1
Total (*) 23,659 100.0 19,891 100.0
(*) Refers only to loans past due between 1 and 90 days.
Impaired Asset Ratios
Our credit risk exposure portfolio increased by R$74.8 billion to R$540.9 billion as of December 31, 2021, compared to R$466.1 billion as of December 31, 2020. Our impaired assets increased by approximately R$3,747 billion in the same period, from R$23.2 billion to R$26.9 billion. The default rate decreased by 30 basis points in 2021 in comparison to 2020, primarily due to the recurrent growth of the credit portfolio.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio at the dates indicated.
As of December 31,
2021 2020 2019 2018 2017
(in millions of R$ except percentages)
Loans and advances to customers, gross 493,355 417,822 347,257 321,933 287,829
Impaired assets 26,923 23,176 23,426 22,426 19,145
Provisions for impairment losses 29,723 25,640 22,626 22,969 18,262
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 540,873 466,104 391,569 364,194 330,474
Ratios
Impaired assets to credit risk exposure 5.0 % 5.0 % 6.0 % 6.2 % 5.8 %
Coverage ratio ⁽²⁾ 110.4 % 110.6 % 96.6 % 102.4 % 95.4 %
Impairment losses (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )
Losses on other financial instruments not
  measured at fair value ⁽³⁾ -   -   -   -   -
Impairment losses on financial assets (net) ⁽⁴⁾ (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )

(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$540,873 million as of December 31, 2021 and guarantees and documentary credits amounting to R$47,518 million as of December 31, 2021. We include off-balance sheet information in this measure to better demonstrate our total managed credit risk. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
(2) Provisions for impairment losses as a percentage of impaired assets.
(3) Corresponds to the registration of losses of a permanent character in the realization value of bonds and securities classified as “securities available for sale” currently accounted for in “earnings on financial assets (net).”
(4) As of December 31, 2021, 2020 and 2019, our total of impairment losses on financial instruments included R$1,191 million, R$1,577 million and R$2,055 million, respectively, relating to debt instruments.
The following chart shows our impaired assets to credit risk ratio from 2017 through 2021:
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Selected Credit Ratios
The following table presents our selected credit ratios, along with each component of the ratio’s calculation, as of December 31, 2021, 2020 and 2019.
The following information for Santander Brasil should be read in conjunction with, the consolidated financial statements and related notes contained elsewhere herein, as well as “Item 3. Key Information—A. Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects.”

As of December 31,
2019 2020 2021
(in millions of R$, except percentages)
Allowance for credit losses to total loans outstanding
Allowance for credit losses 22,626 25,640 29,723
Total loans outstanding 347,257 417,822 493,355
Credit ratio 6.52 % 6.14 % 6.02 %
Nonaccrual loans to total loans outstanding
Total nonaccrual loans outstanding 23,426 23,176 26,923
Total loans outstanding 347,257 417,822 493,355
Credit ratio 6.75 % 5.55 % 5.46 %
Allowance for credit losses to nonaccrual loans
Allowance for credit losses 22,626 25,640 29,723
Total nonaccrual loans outstanding 23,426 23,176 26,923
Credit ratio 96.6 % 110.6 % 110.4 %
Net charge-offs during the period to average loans outstanding
Net charge-offs during the period (14,705 ) (15,297 ) (12,904 )
Average amount outstanding 324,190 394,542 471,068
Credit ratio 4.5 % 3.9 % 2.7 %
Commercial and industrial:
Net charge-offs during the period (5,713 ) (4,617 ) (5,153 )
Average amount outstanding 132,372 176,750 214,286
Credit ratio 4.3 % 2.6 % 2.4 %
Real estate:
Net charge-offs during the period (108 ) (232 ) (167 )
Average amount outstanding 38,107 42,368 51,883
Credit ratio 0.3 % 0.5 % 0.3 %
Installment loans to individuals:

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Net charge-offs during the period (8,834 ) (10,433 ) (7,576 )
Average amount outstanding 151,735 173,336 202,578
Credit ratio 5.8 % 6.0 % 3.7 %
Lease financing:
Net charge-offs during the period (49 ) (15 ) (8 )
Average amount outstanding 1,975 2,089 2,321
Credit ratio 2.5 % 0.7 % 0.3 %
Allowance for credit losses to total loans outstanding
In 2021, our allowance for credit losses to total loans outstanding credit ratio decreased by 12 basis points, from 6.14% as of December 31, 2020 to 6.02% as of December 31, 2021. This was primarily due to the growth in total loans outstanding, in particular the growth in installment loans to individuals.
In 2020, our allowance for credit losses to total loans outstanding credit ratio decreased by 38 basis points, from 6.52% as of December 31, 2019 to 6.14% as of December 31, 2020. This was primarily due to an increase in total loans outstanding.
Nonaccrual loans to total loans outstanding
In 2021, our nonaccrual loans to total loans outstanding credit ratio decreased by 9 basis points, from 5.55%% as of December 31, 2020 to 5.46% as of December 31, 2021. This was primarily due to the growth in total loans outstanding over nonaccrual loans.
In 2020, our nonaccrual loans to total loans outstanding credit ratio decreased by 120 basis points, from 6.75% as of December 31, 2019 to 5.55% as of December 31, 2020. This was primarily due to an increase of 20.3% in total loans outstanding and a decrease of 1.1% in the nonaccrual loans outstanding.
Allowance for credit losses to nonaccrual loans
In 2021, our allowance for credit losses to nonaccrual loans credit ratio decreased by 23 basis points, from 110.6% as of December 31, 2020 to 110.4% as of December 31, 2021. This was primarily due to growth in nonaccrual loans outstanding, which was greater than the increase in the allowance for credit losses.
In 2020, our allowance for credit losses to nonaccrual loans credit ratio increased by 1,405 basis points, from 96.6% as of December 31, 2019 to 110.6% as of December 31, 2020. This was primarily due to the creation of an additional provision (overlay) of R$3,200 million for potential loan losses in connection with the COVID-19 pandemic.
Net charge-offs during the period to average loans outstanding
In 2021, our net charge-offs during the period to average loans outstanding credit ratio decreased by 114 basis points, from 3.9% as of December 31, 2020 to 2.7% as of December 31, 2021. This was primarily due to an increase of 19.4% in average loans outstanding and a decrease of 15.6% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio decreased by 66 basis points, from 4.5% as of December 31, 2019 to 3.9% as of December 31, 2020. This was primarily due to an increase of 21.7% in average loans outstanding, which was greater than the growth in net charge-offs.
Commercial and Industrial Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 19 basis points, from 2.6% as of December 31, 2020 to 2.4% as of December 31, 2021. This was primarily due to an increase of 21.5% in average loans outstanding, which was greater than the growth in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for commercial and industrial loans decreased by 170 basis points, from 4.3% as of December 31, 2019 to 2.6% as of December 31, 2020. This was primarily due to an increase of 33.5% in average loans outstanding and a decrease of 19.2% in net charge-offs.
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Real Estate Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans decreased by 23 basis points, from 0.5% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 22.5% in average loans outstanding and a decrease of 28.0% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for real estate loans increased by 26 basis points, from 0.3% as of December 31, 2019 to 0.5% as of December 31, 2020. This was primarily due to the growth in net charge-offs, which was greater than the average loans outstanding in the period.
Installment Loans to Individuals
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individual loans decreased by 229 basis points, from 6.0% as of December 31, 2020 to 3.7% as of December 31, 2021. This was primarily due to an increase of 16.9% in average loans outstanding and a decrease of 27.4% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for installment loans to individuals increased by 197 basis points, from 5.8% as of December 31, 2019 to 6.0% as of December 31, 2020. This was primarily due to growth in net charge-offs over average loans outstanding.
Lease Financing Loans
In 2021, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 36 basis points, from 0.7% as of December 31, 2020 to 0.3% as of December 31, 2021. This was primarily due to an increase of 11.1% in average loans outstanding and a decrease of 46.7% in net charge-offs.
In 2020, our net charge-offs during the period to average loans outstanding credit ratio for lease financing loans decreased by 178 basis points, from 2.5% as of December 31, 2019 to 0.7% as of December 31, 2020. This was primarily due to an increase of 5.8% in average loans outstanding and a decrease of 69.4% in net charge-offs.
4C. Organizational Structure
Santander Group controls Santander Brasil directly and indirectly through Santander Spain, Sterrebeeck B.V., or “Sterrebeeck,” and Grupo Empresarial Santander, S.L. which are controlled subsidiaries of the Santander Group. As of December 31, 2021, Santander Spain held, directly and indirectly, 89.53% of our voting stock.
The following table presents the name, country of incorporation or residence and proportion of ownership interest of our main subsidiaries in accordance with the criteria for consolidation pursuant to IFRS:
Activity Country of Incorporation Ownership Interest
Direct and Indirect subsidiaries of Banco Santander (Brasil) S.A. (1)
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. Credit Recovery Services Brazil 100.00%
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 100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A. Holding Brazil 100.00%
Sancap Investimentos e Participações S.A. Holding Brazil 100.00%
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Santander Holding Imobiliária S.A. (current name of Webcasas S.A.) Holding Brazil 100.00%
F1RST Tecnologia e Inovação Ltda. Technology 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 S.A. Other Activities 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%
Paytec Tecnologia em Pagamentos Ltda. Other Activities Brazil 100.00%
SX Negócios Ltda. Other Activities Brazil 100.00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. (current name of Atual Companhia Securitizadora de Créditos S.A.)
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) Credit Recovery Services Brazil 100.00%
Liderança Serviços Especializados em Cobranças Ltda. Credit Recovery Services Brazil 100.00%
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)
Return Gestão de Recursos S.A. (current name of Gestora de Investimentos Ipanema S.A.) Asset Management Brazil 100.00%
Controlled by Sancap Investimentos e Participações S.A.
Santander Capitalização S.A. Savings and annuities Brazil 100.00%
Evidence Previdência S.A. Social Securities Brazil 100.00%
Controlled by Aymoré Crédito, Financiamento e Investimento S.A.
Banco PSA Finance Brasil S.A. 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. Other Activities Brazil 80.00%
Controlled by Santander Leasing S.A. Arrendamento Mercantil
Banco Bandepe S.A. Bank Brazil 100.00%
PI Distribuidora de Títulos e Valores Mobiliários S.A. Leasing Brazil 100.00%
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A.
Toro Corretora de Títulos de Valores Mobiliários Ltda. Broker Brazil 60.00%
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda.
Toro Investimentos S.A. Broker Brazil 100.00%
Controlled by Sancap
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Santander Auto S.A. Other Activities 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 (2) Investment Fund Brazil (a)
Santander FI Hedge Strategies Fund (2) 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) This table reflects the Spin-Off of Getnet. For additional information on the Spin-Off, see “—A. History and Development of the Company—The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
(2) Santander Brasil, through its subsidiaries, holds the risks and benefits of Santander Paraty QIF PLC and the sub-fund Santander FI Hedge Strategies Fund, both of which are based in Ireland and since August 2016 are fully consolidated into Santander Brasil’s financial statements. Santander Paraty QIF PLC does not hold any investments itself, acting instead through Santander FI Hedge Strategies Fund.
4D. Property, Plant and Equipment
We operate four major administrative operational centers, all of which are owned properties. Additionally, we own 385 properties for the activities of our banking network and rent 1,719 properties for the same purpose. Furthermore, in 2014, we transferred our operation to a new data center located in Campinas, which also is an owned property. For further information about the location of our branches, see “—B. Business Overview—Service Channels—Physical Distribution Network.” Our headquarters are located at Avenida Presidente Juscelino Kubitschek, 2041, Suite 281, Block A, Condomínio WTORRE JK, Vila Nova Conceição, 04543-011, in the city of São Paulo, state of São Paulo, Federative Republic of Brazil.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5A. Operating Results
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 and the related notes thereto, and with the financial information presented under the section entitled “Item 3. Key Information—A. Selected Financial Data” included elsewhere in this annual report. The preparation of the consolidated financial statements referred to in this section required the adoption of assumptions and estimates that affect the amounts recorded as assets, liabilities, revenue and expenses in the years and periods presented and are subject to certain risks and uncertainties. Our future results may vary substantially from those indicated because of various factors that affect our business, including, among others, those mentioned in the sections “Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors,” and other factors discussed elsewhere in this annual report. Our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019, prepared in accordance with IFRS as issued by the IASB and the report of our independent registered public accounting firm are included in “Item 18. Financial Statements.”
Financial Presentation
We have prepared our consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 in accordance with IFRS, as issued by the IASB and interpretations issued by the IFRS Interpretation Committee. See “Presentation of Financial and Other Information” for additional information.
The Getnet Spin-Off
We completed the Spin-Off of our merchant acquiring business, conducted through Getnet and its consolidated subsidiaries, on October 26, 2021. As a result of the Spin-Off, Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and we stopped consolidating Getnet within our results of operations on March 31, 2021.
Furthermore, on April 15, 2021, we entered into a partnership agreement with Getnet, or the “Getnet Partnership Agreement,” which provides a framework for our relationship with Getnet following the Spin-Off.
For additional information on the Spin-Off, see “Item 4. Information on the Company–A. History and Development of the Company–The Getnet Spin-Off” and notes 3, 13 and 27 to our audited consolidated financial statements included elsewhere in this annual report.
Principal Factors Affecting Our Financial Condition and Results of Operations
Impact of COVID-19
We are closely monitoring the evolution of the COVID-19 pandemic in Brazil and globally, in order to take preventive measures to minimize the spread of the virus, ensure the continuity of operations and safeguard the health and safety of our personnel. See “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” for information on the impact of the COVID-19 pandemic on our business and also “Item 3. Key Information—3D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations.”
Brazilian Macroeconomic Environment
Overview
As a Brazilian bank, we are significantly affected by the general economic environment in Brazil, which has been severely affected by the COVID-19 pandemic. While Brazilian GDP grew in 2021, due in part to Brazil’s ongoing vaccination program and the lifting of certain restrictions, as set out under “—Impact of COVID-19” below, we cannot assure you that this trend will continue. The Brazilian economic environment has historically been characterized by significant variations in economic growth, inflation and currency exchange rates. Our results of operations and financial condition are influenced by these factors and the effect that these factors have on employment rates, the availability of credit and average wages in Brazil. The following table presents key data of the Brazilian economy for the periods indicated:
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As of and For the Year Ended December 31,
2021 2020 2019
GDP growth(1) 4.6 % (4.1 %) 1.2 %
CDI Rate 4.4 % 2.1 % 6.0 %
TJLP 5.3 % 4.6 % 5.6 %
SELIC rate 9.25 % 2.0 % 4.5 %
Selling exchange rate (at period end) R$ per U.S.$1.00 5.58 5.20 4.03
Decrease (increase) in real rate against the U.S. dollar 7.4 % 28.9 % 4.0 %
Average exchange rate R$ per U.S.$1.00(2) 5.40 5.16 3.94
Inflation (IGP-M) 17.8 % 23.1 % 7.3 %
Inflation (IPCA) 10.06 % 4.5 % 4.3 %
Sources: BNDES, Brazilian Central Bank, FGV and IBGE.
(1) GDP growth for 2021 is based on Santander Brasil’s internal estimates. For 2020 the source is the IBGE’s revised series.
(2) Average of the selling exchange rate for the business days during the period.
General economic stability in Brazil following the onset of the global financial crisis in 2009 allowed the Brazilian Central Bank to continue its policy of reducing interest rates. Due to inflation and other general macroeconomic concerns, the Brazilian Central Bank began increasing interest rates, with the SELIC, a benchmark interest rate, reaching 10.00% at the end of December 31, 2013, 11.75% at the end of December 31, 2014 and 14.25% at the end of December 31, 2015. The Brazilian Central Bank reduced interest rates between 2015 and early 2021, with the SELIC reaching 13.75% as of December 31, 2016, 7.00% as of December 31, 2017, 6.50% as of December 31, 2018, 4.50% as of December 31, 2019 and 2.0% as of December 31, 2020. In 2021, in response to the widespread inflationary pressures derived from supply shocks, the Brazilian Central Bank started to withdraw most of the monetary stimulus it had put in place to deal with the adverse macroeconomic effects of the COVID-19 pandemic and it has increased the SELIC rate to 10.75% p.a. as of the date of this annual report.^.
The lack of progress on structural reforms and a continued lax fiscal policy have increased uncertainty regarding the future level of Brazil’s already high public. This has resulted in a significant risk premium, a depreciation of the real and volatility in financial asset prices. Brazil’s economy has been severely affected by the COVID-19 pandemic starting in 2020. Brazilian GDP recovered to an extent in 2021, in part as a result of Brazil’s ongoing vaccination program and the relaxation of certain restrictions allowing a progressive resumption of economic activities, as set out under “—Impact of COVID-19” below, but considerable uncertainty remains as to the duration and severity of the COVID-19 pandemic and its economic effects. Combined with the emergence of new variants and the continuing limitations to the normal working of activities has led to a slow recovery cycle.
Any deterioration in Brazil’s rate of economic growth, changes in interest rates, the unemployment rate or price levels generally may adversely affect our business, financial conditions and results of operations. Any aggravation in the COVID-19 pandemic increases the chance of a deterioration in the outlook for the Brazilian macroeconomic environment.
Impact of COVID-19 on the Brazilian Economy
The Brazilian economy was severely affected by the COVID-19 pandemic and ensuring economic crisis in 2020. The social distancing measures adopted during the first months of the COVID-19 outbreak reduced consumption and resulted in a sharp decrease in gross domestic product in the first half of 2020. In order to mitigate the effects of the pandemic in the economy, the Brazilian government adopted monetary and fiscal measures. On the monetary front, the Brazilian Central Bank reduced the basic interest rates and announced measures to provide liquidity to the system. On the fiscal front, the Brazilian government provided a fiscal package that included financial aid for households, companies and regional governments, and expenditure on public healthcare. The economic measures along with the reopening of the economy in the third quarter of 2020 allowed the Brazilian economy to recover to an extent, although it remained 4% below the pre-crisis level. The recovery trend continued in 2021, with a relatively positive performance of the Brazilian GDP in the first quarter of 2021. In order to support private consumption, the Brazilian federal government has continued to grant allowances to more economically vulnerable citizens, although the emergency program has become more restricted, with reductions in the amount of money spent. Despite these adjustments, this fiscal support has led to a sharp increase in the fiscal deficit and public debt. Progress on structural reforms of the Brazilian economy has also been slow. As a result, financial markets have become increasingly concerned by Brazil’s high and increasing government indebtedness, as evidenced by the fact that the Brazilian five year credit default swaps to climb to 208 basis points as of December
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31, 2021 from 145 basis points as of December 31, 2020 and the depreciation of the real from R$5.20 per U.S.$1.00 as of December 31, 2020 to R$5.58 per U.S.$1.00 in as of December 31, 2021.
Interest Rates
An increase in the SELIC rate may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers. Conversely, a decrease in the SELIC rate may have a positive impact on our operations by promoting volume growth, even though it may also create pressure on asset-side spreads, while liability spreads should remain stable or even improve.
The following table presents the low, high, average and period-end SELIC rate since 2016, as reported by the Brazilian Central Bank:

Low
High(1)
Average(2)
Period-End
Year
2016 13.75 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 2.00 4.50 2.81 2.00
2021 2.00 9.25 4.81 9.25
2022 (through February 22, 2022) 9.25 10.75 9.86 10.75
(1) Highest month-end rate.
(2) Average of month-end rates during the period.
Our assets are predominantly fixed rate and our liabilities are predominantly floating. The resulting exposure to increases in market rates of interest is modified by our use of cash flow hedges to convert floating rates to fixed, but we maintain an exposure to interest rate movements. As of December 31, 2021, a 100-basis point increase in the yield curve would have resulted in R$ 553 million decline in the net interest income over a one-year period.
Credit Volume and Quality in Brazil
In 2019, the ratio of nonperforming loans to individuals reached 3.5% and the household debt burden reached 23.9% of household income. In 2020, outstanding credit increased 15.6% as a result of credit support programs put in place by the Brazilian government to mitigate the impact of the COVID-19 pandemic, which resulted in a ratio of nonperforming loans of 2.8% in 2021, while further increasing the household debt burden to 24.4% of household income. In 2021, given the extension of some government support programs and the relaxation in certain mobility restrictions which enabled certain businesses to resume their activities, the volume of outstanding credit continued to expand and grew 16.5% in the period. Nevertheless, given the high unemployment rate and increasing inflation, household’ income did not improve substantially, which kept both the ratio of nonperforming loans to individuals and the household debt burden on an upward trend (from January to October 2021, the former climbed to 3.0% and the latter reached 27.9% of household income).

2021
2020
2019
(in billions of R$)
Total Credit Outstanding (*) 4,684 3,261 3,471
Earmarked credit 1,881 1,500 1,465
Non-earmarked based credit 2,803 1,761 2,006
of which:
Corporate 1,291 814 905
Individuals (retail) 1,513 948 1,101
(*) Some figures may be subject to revision by the Brazilian Central Bank.
Source: Brazilian Central Bank.
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Foreign Exchange Rates
Our policy is to maintain limited foreign exchange rate exposure by seeking to match foreign currency denominated assets and liabilities as closely as possible, including through the use of derivative instruments. In 2021, we recorded foreign exchange exposure of R$117,400 million, foreign exchange exposure of R$ (124,437) million in 2020 and foreign exchange exposure of R$11,208 million in 2019. These results are due to the variation of the U.S. dollar against the real on our assets and liabilities positions in U.S. dollar denominated instruments during these years. These foreign exchange gains and losses were offset in large part in each year by a corresponding loss or gain on derivatives entered into to hedge this exposure. Such losses and gains are recorded under “Exchange differences (net).”, for further information see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Results of Operations for the Years Ended December 31, 2021, 2020 and 2019—Results of Operations—Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net).”
The Brazilian currency has, during the last decades, experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. During 2016, the real appreciated 17% against the U.S. dollar as a result of improved macroeconomic conditions in Brazil. On December 31, 2016, the exchange rate was R$3.26 per U.S.$1.00. In 2017 the real remained relatively stable against the U.S. dollar, with a small depreciation of 1.5% to R$3.31 per U.S.$1.00 as of December 31, 2017. The real depreciated further against the U.S. dollar throughout 2018, with a depreciation of 17%, On December 31, 2018, the exchange rate was R$3.87 per U.S.$1.00. In 2019, the real continued to depreciate against the U.S. dollar and as of December 31, 2019, it was at R$4.03 per U.S.$1.00. In 2020, the real continued to depreciate, and as of December 31, 2020 it was at R$5.20 per U.S.$1.00. In 2021, the real has continued to weaken against the U.S. dollar due to the COVID-19 pandemic. As of December 31, 2021, the exchange rate was R$5.58 per U.S.$1.00. In 2022 through the date of this annual report, the real appreciated against the U.S. dollar as a result of changes in asset allocation globally as well as increases in Brazilian interest rates. As of February 22, 2022, the exchange rate was R$5.06 per U.S.$1.00.
Depreciation of the real relative to the U.S. dollar has created additional inflationary pressures in Brazil, which has led to increases in interest rates and limited Brazilian companies’ access to foreign financial markets, and prompted the adoption of recessionary policies by the Brazilian government, Depreciation of the real may also, in the context of an economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the Brazilian economy as a whole, and thereby harm our asset base, financial condition and results of operations. Additionally, depreciation of the real could make our foreign-currency-linked obligations and funding more expensive, negatively affect the market price of our securities portfolios, and have similar consequences for our borrowers. Conversely, appreciation of the real relative to the U.S. dollar and other foreign currencies could lead to a deterioration of the Brazilian foreign exchange currency balance of payments, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of the real could materially and adversely affect the growth of the Brazilian economy and our business, financial condition and results of operations.
Inflation
In recent years, inflation had been oscillating around the target, which is set by the CMN, but recent inflationary pressures shocks have pushed Brazil’s inflation rate above the CMN’s target the last couple of years. From 2005 to 2018, the targeted level was 4.5%, with a tolerance interval of 2.0 percentage points that prevailed until 2016 – since then the tolerance band has been narrowed to 1.5 percentage point. In addition, the targeted set for 2019 by the CMN was lowered to 4.25% and additional 0.25 percentage point decreases were defined for the targets until 2024, when the goal will be 3.00%.
Between 2012 and 2014, inflation ranged from 5.8% to 6.4%, i.e., it was close to the top of the fluctuation range in the Brazilian Central Bank’s inflation targeting range. In 2015, as a result of the indexation of a significant portion of contracts for services to the inflation levels of the previous years, the impact of adjustment of tariffs and the impact of the depreciation of the real on prices, inflation rate reached a level of 10.7%, the highest on record since May 2005 and well above the Brazilian Central Bank’s inflation target of 4.5%. In 2017, inflation fell substantially as a result of the consistent efforts of the Brazilian Central Bank to reduce the inflation rate, ending the year at 2.95%. As a result, the Brazilian Central Bank was required to send a letter to the CMN explaining the reasons for not meeting the target in which the Brazilian Central Bank explained that it expected that the monetary easing undertaken in 2018 would make the actual inflation rate converge toward the target. In 2018 the inflation increased to 3.75%, thus reinforcing the efficiency of the monetary policy in Brazil. In 2019, as a result of temporary price shocks affecting edible items, inflation ended the year slightly above the targeted level, at 4.31%. In 2020, inflation increased to 4.5%. In 2021, inflation continued to accelerate and reached 10.06% at the end of the year, as a result of several shocks that ranged from problems in global supply chains – which
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increased prices at the wholesale level – to climate setbacks – which hit energy and foodstuff prices –, as well as continued depreciation of the Brazilian real. Hence, as happened in the beginning of 2018, the Brazilian monetary authority sent a letter to the CMN explaining why it failed to meet the inflation target and what are the actions to be implemented in order to ensure that inflation will converge to the targeted levels in the coming years.
The majority of our income, expenses, assets and liabilities are directly tied to interest rates. Therefore, our results of operations and financial condition are affected by inflation, interest rate fluctuations and related government monetary policies, all of which may materially and adversely affect the growth of the Brazilian economy, our loan portfolios, our cost of funding and our income from credit operations. We estimate that, in 2021, a 1.0% increase or decrease in the base interest rate would have resulted in a decrease or increase, respectively, in our net interest income of R$553 million. Any changes in interest rates may negatively impact our business, financial condition and results of operations. In addition, increases in base interest rates may adversely affect us by reducing the demand for our credit and investment products, increasing funding costs, and increasing in the short run the risk of default by our customers.
Inflation adversely affects our personnel and other administrative expenses that are directly or indirectly tied to inflation indexes, such as the IPCA and IGPM. For example, considering the amounts in 2021, each additional percentage point change in inflation would impact our personnel and other administrative expenses by approximately R$90 million and R$83 million, respectively.
Reserve and Lending Requirements
The requirements set by the Brazilian Central Bank for reserves and credit has a significant impact on the results of operations of the financial institutions in Brazil. Increases or decreases in such requirements may have an impact on our results of operations by limiting or expanding the amounts available for commercial credit transactions.
The table below shows the requirements for reserves and credit to which we are subject for each financing category:
Product As of December 31, 2021 As of December 31, 2020 Form of Required Reserve Yield
Demand deposits
Rural credit loans(1) 25.00 % 27.50 % Loans Cap rate: 7.5% p.a.
Microcredit loans(2) 2.00 % 2.00 % Loans Cap rate: 4.0% p.m.
Reserve requirements(3) 21.00 % 21.00 % Cash Zero
Additional reserve requirements 0.00 % 0.00 % Cash n/a
Free funding(4) 52.00 % 49.50 %

Savings Accounts
Mortgage loans 65.00 % 65.00 % Loans Cap rate (SFH): TR + 12.0% p.a.
Reserve requirements(2) 20.00 % 20.00 % Cash TR + 6.17% or TR + 70.00% of the target SELIC
Additional reserve requirements 0.00 % 0.00 Cash n/a
Free funding(4) 15.00 % 15.00 %

Time deposits
Reserve requirements(3) 20.00 % 17.00 % Cash SELIC
In cash or other instruments 0.00 % 0.00 % Cash or other instruments n/a
In cash 0.00 % 0.00 % Cash n/a
Additional reserve requirements 0.00 % 0.00 % Cash n/a
Free funding(4) 80.00 % 83.00 %
(1) Rural credits are credits granted to farmers in the amount R$13.6 billion on December 31, 2021 and December 31, 2020, respectively.
(2) Microcredit is a credit granted to very small businesses, with an open position of R$1.3 billion on December 31, 2021 and December 31, 2020, respectively.
(3) Deductions can be applied on reserve requirements. The Brazilian Central Bank details the rules to apply any deduction in Circular Nos, 3,917, 3,975 and 145.
(4) Interest-free financing is the amount to be used on a free of interest basis for other purposes in each financing category.
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Taxes
See “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulation—Taxation.”
Hedging in Foreign Investments
We operate two foreign branches, one in the Cayman Islands, and another one in Luxembourg. We previously operated an independent wholly-owned subsidiary in Spain, named Santander Brasil Estabelecimiento Financiero de Credito, EFC, which we used primarily for sourcing funds in the international banking and capital markets to provide credit lines for us that are extended to our customers for working capital and trade-related financings. Under Brazilian income tax rules, Law No. 14,031, dated July 28, 2020, set that, from January 2021 until December 2021 50% of the foreign exchange variation of the portion of investments abroad that are subject to hedge must be computed in the determination of real profits and in the calculation of the taxable base of the social contribution over net income (Contribuição Social Sobre o Lucro Líquido), or “CSLL,” of an investing legal entity domiciled in Brazil. From January 2022, the foreign exchange variation of investments abroad is fully computed in the basis of the IRPJ and the CSLL. The reconciliation of our effective tax rate to the statutory tax rate is set forth in note 23b to our audited consolidated financial statements included elsewhere in this annual report. Santander EFC was operational from 2012 until 2020, when we approved its liquidation. For further information, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Foreign Subsidiary.”
Goodwill of Banco Real
We generated goodwill of R$27 billion as a result of our acquisition of Banco Real in 2008. Under IFRS, we are required to analyze goodwill for impairment at least annually or whenever there are indications of impairment. In 2021, 2020 and 2019, the recoverable goodwill amounts are determined from “value in use” calculations. For this purpose, we estimate cash flow for a period of five years. We prepare cash flow estimates considering several factors, including: (i) macroeconomic projections, such as interest rates, inflation and exchange rates, among others, (ii) the performance and growth estimates of the Brazilian financial system, (iii) increased costs, returns, synergies and investment plans, (iv) the behavior of customers, and (v) the growth rate of, and long-term adjustments to, cash flows. These estimates rely on assumptions regarding the likelihood of future events, and changing certain factors could result in different outcomes. The estimate of cash flows is based on valuations prepared by an independent research company, which is reviewed and approved by the board of directors. Therefore, amortization of goodwill for tax purposes generates a permanent difference and, as a result, no record of the deferred tax liability.
The following table shows the main assumptions for the basis of valuation as of the dates indicated.
2021 2020 2019
(Value in use: cash flows)
Main Assumptions(*)
Basis of valuation
Period of the projections of cash flows(1) 5 years 5 years 5 years
Growth rate(2) 4.0 % 4.3 % 4.8 %
Discount rate(3) 12.3 % 12.4 % 12.5 %
(1) The projections of cash flow are prepared using internal budget and growth plans of management, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.
(2) The growth rate is calculated based on a real growth rate of 1% p.a. plus annual long-term inflation in 2021.
(3) The discount rate is calculated based on the capital asset pricing model. The discount rate before tax is 18.77% in 2021, 19.56% in 2020 and 17.88% in 2019.
(*) The recoverability test was performed during the second half of 2021. Goodwill is tested for impairment on an annual basis or whenever there is any indication of a potential impairment. At the end of each year, a qualitative assessment is carried out in order to check the existence of signs of impairment. For the years 2021, 2020 and 2019, no indication of impairment was identified.
We performed a sensitivity test in the goodwill impairment analysis considering the main assumptions that could reasonably be expected to possibly change, as required by the IFRS. Accordingly, we applied such a test considering the discount rate and perpetuity growth rate as the main assumption subject to reasonably possible change and we did not identify any impairment to goodwill.
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Other Factors Affecting the Comparability of Our Results of Operations
In addition, our results of operations have been influenced and will continue to be influenced by:
● The Spin-Off of Getnet, as described under “Item 5. Operating And Financial Review And Prospects—A. Operating Results—Financial Presentation—The Getnet Spin-Off”; and
● the other transactions and developments discussed under “Item 4. Information on the Company—A. History and Development of the Company—Important Events” and note 3, to our audited consolidated financial statements included elsewhere in this annual report.
Critical Accounting Policies
Our consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB.
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.”
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 non-trading 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.
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● The Black-Scholes model is used to value financial instruments requiring dynamic hedging (principally structured options and other structured instruments). Certain observable market inputs are used in the model to generate variables such as the bid-offer spread, exchange rates, volatility, correlation between indexes and market liquidity, as appropriate.
● The present value method and the Black-Scholes model are used for valuing financial instruments exposed to interest rate risk, such as interest rate futures, caps and floors. Main inputs used in these models are principally observable market data, including appropriate interest rate curves, volatilities, correlations and exchange rates.
● Dynamic models similar to those used in measuring of interest rate risk for measuring credit risk of linear instruments (such as bonds and fixed-income derivatives). In the case of non-linear instruments, if the portfolio is exposed to credit risk (such as credit derivatives), the joint probability of default is determined using the Standard Gaussian Copula model. The main inputs used to determine the underlying cost of credit for credit derivatives are quoted credit risk spreads, and the correlation between quoted credit derivatives of various issuers.
● The determination of fair value requires us to make certain estimates and assumptions. If quoted market prices are unavailable, fair value is then calculated using widely accepted pricing models that consider contractual terms and prices of the underlying financial instruments, yield curves, observable market data and other relevant factors. The use of different estimates or assumptions in these pricing models could lead to a different valuation being recorded in our consolidated financial statements.
See note 2e (i) to our audited consolidated financial statements included elsewhere in this annual report for additional information on valuation techniques, details on our modeled main assumptions and 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.
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 non-performing past due assets, any collections relating to impaired loans and advances are used to recognize the accrued interest. The remainder, if any, is applied to reduce the principal amount outstanding Debt Instruments Carried at Amortized Cost.
Debt Instruments Carried at Amortized Cost
The impairment loss amount incurred for determining a recoverable amount on a debt instrument measured at amortized cost is equal to the difference between its carrying amount and the present value of its estimated future cash flows (excluding future credit losses not incurred). This cash flow is discounted to the financial asset’s
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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.
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:
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·● 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.
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·● Probability of Default or (“PD”) is the probability of the borrower failing to meet its principal and/or interest payment ~~obligations.~~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.~~default, LGD calculation is based on the net charge offs on defaulted loans, taking into account the guarantees/collateral associated with the loans, the income and expenses associated with the recovery process and the timing of default.
·● Loss Identification Period, or (“LIP,”) is the time period between the occurrence of a loss event and the identification of an objective evidence of this loss. In other words, it represents the time horizon from the credit loss occurrence until the effective confirmation of such loss.
Moreover, prior to loans be written-off (which is only done after the Bank has completed all recovery efforts and after about 360 days late), a fully registered provision (allowance for loan losses) of the loan’s remaining balance applies. As a result, this provision fully covers the losses. Thus, the Bank understands that its loan loss allowance methodology has been developed to meet its risk metrics and capture loans that could potentially become impaired.
Impairment
Certain assets, such as intangible assets, including goodwill, equity method investments, financial assets not carried at fair value through profit or loss and other assets are subject to impairment review. We record impairment charges when we believe there is objective evidence of impairment, or that the cost of the assets may not be recoverable.
The assessment of what constitutes an impairment is based on the following models:
We test goodwill for impairment on an annual basis, or more frequently if events or changes in economic circumstances, such as an adverse change in Santander Brasil’s business condition or observable market data, indicate that these assets may be impaired. The recoverable amount determination used in the impairment assessment requires prices of comparable businesses, present value or other valuation techniques, or a combination thereof, requiring management to make subjective judgments and assumptions. Events and factors that may significantly affect estimates include, among other things, competitive forces, customer behaviors and attrition, changes in revenue growth trends, cost structures and technology, and changes in discount rates and specific industry or market sector conditions. If an impairment loss is recognized for goodwill, it may not be reversed in a subsequent period. The recognition of impairment is applicable when significant changes occur in the main estimates used to evaluate the recoverable amounts of the cash-generating unit recoverable amount below the carrying amount. Based on the assumptions described above, no impairment of goodwill in 2021, 2020 ~~2019~~ and ~~2018~~2019 was identified.
Given the level of uncertainty related to these assumptions, our officers carry out a sensitivity analysis using reasonably possible changes in the key assumptions on which the recoverable amount of the cash-generating units are based in order to confirm that the recoverable amounts still exceed the carrying amounts.
All debt and equity securities (other than those carried at fair value through profit or loss) are subject to impairment testing every reporting period. The carrying value is reviewed in order to determine whether an impairment loss has been incurred.
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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.~~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 ~~tangible assets~~property, plant and equipment in 2021, 2020 ~~2019~~ and ~~2018~~2019 (see notes 14, 13 and 12, respectively, to our audited consolidated financial ~~statements)~~statements included elsewhere in this annual report).
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Post-employment Benefit Plan
The ~~Post-employment~~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.
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.
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·● 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.
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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 and R$1,624.8 million as of December 31, 2020 and 2019, respectively. These deductions had a corresponding impact on our total assets and liabilities as of December 31, 2020 and 2019 as well as on "Financial assets measured at fair value in profit or loss held for trading" and "Financial liabilities measured at fair value in Income Held for Trading" in the statement of cash flows for the years ended December 31, 2020 and 2019. There was no change in the balance of stockholders' equity or income. The financial information as of and for the years ended December 31, 2020 and 2019 presented in this annual report already reflects the aforementioned adjustments. See note 8 to our audited consolidated financial statements included elsewhere in this annual report.
New Accounting Standards
The new IFRS standards effective after January 1, ~~2021~~2022 are mentioned in our audited consolidated financial statements included in this annual report. For further information, see note ~~“1 - Introduction, basis of presentation of the consolidated financial statements and other information”~~1 to our audited consolidated financial ~~statements.~~
statements included elsewhere in this annual report.
All accounting policies and measurement bases with a material effect on the consolidated financial statements for ~~2020~~2021 were applied in the preparation of such financial statements.
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Results of Operations for the Years Ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~
2019
Executive Summary – Santander Brasil Results at a glance
Total Incomeamounted to R$~~48,242~~63,926 million in ~~2020, a decrease~~2021, an increase of ~~17.9%~~32.5% in comparison with the year ended December 31, ~~2019,~~2020, primarily due to ~~the impact of the COVID-19 pandemic on the Brazilian economy. Excluding~~ the effects of the hedge for investment abroad, which had a ~~high~~significant impact in 2020 due to the exchange rate variation and the growth of the net interest income due to the increase in the volume of the credit portfolio, as a result of greater commercial activity supported by the growth of loyal customers and new acquisitions. Excluding the effects of the hedge for investment abroad, our growth in total income would ~~have amounted to~~be R$~~61,825~~2,102 million ~~in the year,~~ an increase of ~~3.0% compared to~~3.4% over the ~~same period~~year ended December 31, 2020. Total income excluding the effects of the ~~previous year.~~hedge for investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of ~~Non- GAAP~~Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial ~~Measures”.~~Measures.”
Consolidated ~~Profit~~Net Income for ~~2020~~2021 totaled R$~~13,451~~15,559 million, in the year ended December 31, ~~2020, a decrease~~2021, an increase of ~~19.1%~~15.7% over the year ended December 31, ~~2019,~~2020, mainly ~~impacted by~~due to the increase in net interest income, due to higher transactionality, and the performance of gains/losses on financial assets and liabilities (net) and ~~exchange differences (net) line.~~
net interest income.
Loan Portfolio to customers amounted R$~~418~~493 billion as of December ~~2020,~~2021, an increase of ~~20.3%~~18.1% compared to December 31, ~~2019,~~2020, mainly due to the increase in loans to commercial and industrial, and individual portfolios.
Credit Quality remains at reasonable levels and supports our ~~growth.~~growth, Impaired assets to credit risk ratio was 5.0% for the year ended December 31, ~~2020,~~2021, a ~~1.0~~0.3 p.p. decrease as compared the previous year. Coverage ratio was ~~110.6%~~110.4% in the year ended December 31, ~~2020,~~2021, a ~~14.0~~0.2 p.p. increase from ~~96.6%~~110.6% the year ended December 31, ~~2019.~~2020. Our Basel Capital adequacy ratio was ~~15.3%~~14.9% in the year ended December 31, ~~2020, an increase~~2021, a decrease of 0.3% compared to the year ended December 31, ~~2019.~~ 2020.

Deposits from Brazilian Central Bank and deposits from credit institutions plus customer deposits increased by ~~32.5%~~2.2% reaching R$ ~~578~~590 billion in ~~2020.~~
2021.
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Results of Operations

The following table presents our consolidated results of operations for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018:~~2019:
For the Year Ended December 31,

2021

2020

2019

% Change
2021/2020

% Change
2020/2019
(in millions of R$, except percentages)
Net interest income 51,318 44,443 44,321 15.5 0.3
Income from equity instruments 90 34 19 166.8 78.9
Income from companies accounted for by the equity method 144 112 149 28.4 (24.8 )
Net fee and commission income (expense) 15,273 16,228 15,713 (5.9 ) 3.3
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) (1,781 ) (11,703 ) (326 ) (84.8 ) 3,489.9
Other operating income (expenses) (net) (1,119 ) (873 ) (1,108 ) 28.2 (21.2 )
Total income 63,926 48,242 58,769 32.5 (17.9 )
Administrative expenses (17,316 ) (17,115 ) (16,942 ) 1.2 1.0
Depreciation and amortization (2,434 ) (2,579 ) (2,392 ) (5.6 ) 7.8
Provisions (net) (2,179 ) (1,657 ) (3,682 ) 31.6 (55.0 )
Impairment losses on financial assets (net) (17,113 ) (17,450 ) (13,370 ) (1.9 ) 30.5
Impairment losses on other assets (net) (166 ) (85 ) (131 ) 95.3 (35.4 )
Other non-financial gains (losses) 33 308 20 (89.5 ) 1,404.1
Operating income before tax   24,750 9,664 22,273 156.1 (56.6 )
Income taxes (9,191 ) 3,787 (5,642 ) (342.7 ) (167.1 )
Consolidated net income for the year 15,559 13,451 16,631 15.7 (19.1 )

For the Year Ended December 31,
2020 2019 2018
% Change
2020/2019

%Change
2019/2018
(in millions of R$, except percentages)
Net interest income 44,443 44,321 41,921 0.3 5.7
Income from equity instruments 34 19 33 78.9 (42.4 )
Income from companies accounted for by the equity method 112 149 66 (24.8 ) 125.8
Net fee and commission income 16,229 15,713 14,132 3.3 11.2
Gains/losses on financial assets and liabilities (net) and exchange differences (net) (11,703 ) (326 ) (5,589 ) 3,489.9 (94.2 )
Other operating income (expenses) (873 ) (1,108 ) (1,056 ) (21.3 ) 4.9
Total income 48,242 58,769 49,507 (17.9 ) 18.7
Administrative expenses (17,115 ) (16,942 ) (16,792 ) 1.0 0.9
Depreciation and amortization (2,579 ) (2,392 ) (1,740 ) 7.8 37.5
Provisions (net) (1,657 ) (3,682 ) (2,000 ) (55.0 ) 84.1
Impairment losses on financial assets (net) (17,450 ) (13,370 ) (12,713 ) 30.5 5.2
Impairment losses on other assets (net) (85 ) (131 ) (508 ) (35.1 ) (74.2 )
Other nonfinancial gain (losses) 308 21 156 1,440.0 (87.2 )
Operating profit before tax 9,664 22,273 15,910 (56.6 ) 40.0
Income tax 3,787 (5,642 ) (3,110 ) (167.1 ) 81.4
Consolidated profit for the year 13,451 16,631 12,800 (19.1 ) 29.9
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Consolidated ~~Profit~~Net Income for the Year
Our consolidated net income for the year ended December 31, 2021, was R$15,559 million, an increase of R$2,108 million, or 15.7%, as compared to our consolidated net income of R$13,451 million for the year ended December 31, 2020, as a result of an increase in net interest income of R$6,875 million, or 15.5%, to R$51,318 million in the year ended December 31, 2021 from R$44,443 million in the year December 31, 2020 to driven by our credit portfolio.
Our consolidated ~~profit~~net income for the year ended December 31, 2020 was R$13,451 million, a decrease of R$3,180 million, or 19.1%, as compared to our consolidated ~~profit~~net income of R$16,631 million for the year ended December 31, 2019 as a result of an increase of R$4,080 in impairment losses on financial assets (net) mainly due to the global COVID-19 pandemic that resulted in a R$3,200 million additional allowance for potential loan losses. This was partially offset by the growth of the credit portfolio.
Our consolidated profit for the year ended December 31, 2019 was R$16,631 million, an increase of R$3,832 million, or 29.9%, as compared to our consolidated profit of R$12,800 million for the year ended December 31, 2018 as a result of:
~~(i)~~ ~~an increase of R$2,400 million in net interest income mainly due to the growth in our loan portfolio driven by our commercial banking segment;~~
~~(ii)~~ an increase of R$1,581 million in net fees and commissions, 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 due to a 7% increase in our total active customer base, a 12% increase in the number of loyal customers.
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Net Interest Income
Net interest income for the year ended December 31, 2021, was R$51,318 million, a 15.5% or R$6,875 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 and 9.25% as of December 31, 2021.
Net interest income for the year ended December 31, 2020, was R$44,443 million, a 0.3% or R$122 million increase from R$44,321 million for the year ended December 31, 2019. This increase was mainly due to a 20.3% increase in our credit portfolio driven by our global wholesale banking segment.
Average total earning assets in 2020 were R$750.1 billion, a 14.5% or R$94.9 billion increase from R$655.2 billion in ~~2019.~~2019, The principal drivers were an increase of R$61.2 billion, or 18.9%, in the average of loans and advance to customers and an R$24.8 billion increase in average of debt instruments. Net yield (the net interest income divided by average earning assets) was 5.9% in 2020 compared to 6.8% in 2019, a decrease of 0.8 p.p.
Net yield (net interest income divided by average earning assets) was 5.9% in 2020 compared to 6.8% in 2019, a decrease of 0.8 p.p.
Average total interest-bearing liabilities in 2020 were R$~~572.0~~573.4 billion, a ~~16.5%~~16.7% or R$~~80.8~~82.2 billion, increase from R$491.2 billion in 2019. The main driver of this growth was an increase of R$~~109.4~~76.3 billion in customer deposits, given the shift in investor assets toward more stable instruments.
Finally, the yield spread (the difference between gross yield on earning assets and the average cost of interest-bearing liabilities) was 5.2% in 2020, mainly due to lower share of our Commercial Banking segment in our total results and the effect of the reduction in the SELIC interest rate in the year ended December 31, 2020 from 4.5% inas of December 31, 2019 to 2.0% inas of December 31, 2020.
Income from Equity Instruments
~~Net interest income~~Income from equity instruments for the year ended December 31, ~~2019 was~~2021, totaled R$~~44,321~~90 million, a ~~5.7% or~~ R$~~2,400~~56 million increase from R$~~41,921~~34 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 were R$655.2 billion, a 7.8% or R$47.1 billion increase from R$608.0 billion in 2018. The principal drivers were an increase of R$45.9 billion, or 81.8%, 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 a R$14.7 billion increase in average of debit instruments, which were partially offset by a R$32.3 billion decrease in average of cash on balances with the Brazilian Central Bank.
~~Net yield (the net interest income divided by average earning assets) was 6.8% in 2019 compared to 6.9% in 2018, a decrease of 0.1 p.p.~~
Average total interest-bearing liabilities in 2019 were R$491.2 billion, a 6.0% or R$27.8 billion increase from R$463.4 billion in 2018. The main drivers of this growth were an increase of R$18.0 billion in customer deposits, an increase of R$5.3 billion in deposits from the Brazilian Central Bank and deposits from credit institutions and an increase of R$4.7 billion in marketable debt securities.
~~Finally, the yield spread (the difference between gross yield on earning assets and the average cost of interest-bearing liabilities) was 5.3% in 2019 as compared to 5.4% in 2018,~~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 ~~decrease~~result of gains in the ~~cost of funding, associated with the overall reduction in the SELIC interest rate from 6.50% in 2018 to 4.5% in 2019.~~equities positions towards derivatives hedge, R$84.8 million.

~~Income from Equity Instruments~~
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Income from equity instruments for the year ended December 31, 2020, totaled R$34 million, a R$15 million increase from R$19 million for the year ended December 31, 2019, mainly due to higher dividend gains from the Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior as a result of gains in the equities positions towards derivatives hedge.

Income from Companies Accounted for by the Equity Method
Income from companies accounted for by the equity ~~instruments~~method for the year ended December 31, ~~2019 totaled~~2021 was R$19144 million, a R$1432 million ~~decrease~~increase from R$33112 million for the year ended December 31, ~~2018,~~2020, mainly due to ~~lower dividends received from Santander Fundo de Investimento Guarujá Multimercado Crédito Privado Investimento no Exterior.~~
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~~Income from Companies Accounted for by~~R$23.5 million in the ~~Equity Method~~
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.
Income from companies accounted for by the equity method for the year ended December 31, 2020 was R$112 million, a R$37 million decrease from R$149 million for the year ended December 31, 2019, mainly due to a decrease of R$33 million in the results of ~~operation~~operations of Banco RCI Brasil S.A. and a decrease of R$8 million in the results of ~~operation~~operations of Gestora de Inteligência de Crédito, both jointly-controlled company. These results were partially offset by an increase of R$10 million in the results of ~~operation~~operations of Tecban (Tecnologia Bancária S.A.), a jointly-controlled company.
Net Fee and Commission Income
~~Income from companies accounted for by the equity method~~Net fee and commission income for the year ended December 31, ~~2019 was~~2021, reached R$~~149~~15,273 million, ana 5.9% or R$84956 million ~~increase from~~decrease compared to R$6616,229 million for the year ended ~~2018,~~December 31, 2020, impacted mainly due to ~~an increase~~decrease of ~~R$59 million in~~credit and debit cards, due to the higher card issuance costs as a result of ~~operations~~the growth of ~~Banco RCI Brasil S., a jointly-controlled company, an increase~~the business and the impact of ~~R$19 million in~~ the ~~results~~Spin-Off of ~~operations of Tecnologia Bancária S.A., a jointly-controlled company and an increase of R$12 million in the results of operations of Webmotors S.A., a jointly-controlled company.~~Getnet. This was partially offset by ~~a decrease~~the growth of ~~R$5 million in the results of operations of Gestora de Inteligência de Crédito, a jointly-controlled company~~insurance, capitalization, asset management and ~~a R$2 million reduction in the results of operations of Santander Auto S.A. a jointly-controlled company.~~
~~Net Fee and Commission Income~~
pension funds.
Net fee and commission income for the year ended December 31, 2020 reached R$16,229 million, a 3.3% or R$515 million increase compared to R$15,713 million for the year ended December 31, 2019, impacted mainly due to the increase in (i) trade finance, (ii) insurance and capitalization and (iii) credit and debit cards.
Net ~~fee~~fees and ~~commission income for the year ended December 31, 2019 reached~~commissions from trade finance totaled R$~~15,713 million, an increase of 11.2% or R$1,581 million compared to R$14,132~~1,758 million for the year ended December 31, ~~2018. This increase was mainly due to~~2021, an increase of R$722 million in revenues from credit and debit cards, R$417 million in revenues from sale of insurance and premium bonds, R$295 million in revenues from capital markets and R$138 million from revenues from current account services.
1.0% compared to the year ended December 31, 2020.
Net fees and commissions from trade finance totaled R$1,740 million for the year ended December 31, 2020, an increase of 32.1% compared to the year ended December 31, ~~2019.~~2019, This increase was mainly a result of higher demand for this service during the COVID-19 pandemic and the effects of variations in exchange rates.
Net fees and commissions from ~~trade finance~~insurance and capitalization totaled R$~~1,317~~4,311 million for the year ended December 31, ~~2019,~~2021, an increase of ~~7.2%~~12.5% compared to the year ended December 31, ~~2018.~~2020. This increase was ~~primarily as~~mainly a result of ~~variations~~an increase in ~~exchange rates.~~
our credit life insurance portfolio.
Net fees and commissions from insurance and capitalization totaled R$3,831 million for the year ended December 31, 2020, a 6.8% increase compared to the year ended December 31, ~~2019.~~2019, For the year ended December 31, 2019, the net fees and commissions from insurance and capitalization totaled R$3,586 million, a 13.2% increase compared to the year ended December 31, 2018. The performance in both periods was primarily driven by increases in our portfolio of credit life insurance.
Net fees and commissions from credit and debit cards totaled R$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.
Net fees and commissions from credit and debit cards totaled R$5,151 million for the year ended December 31, 2020, an increase of 3.3% compared to the year ended December 31, ~~2019.~~2019, This increase was mainly due to a recovery of transaction volumes in the second half of 2020, despite the reduction in volume during the first half of 2020.
Net fees and commissions from credit and debit cards totaled R$4,986 million for the year ended December 31, 2019, an increase of 16.9% compared to the year ended December 31, 2018. This increase was as a result of a higher turnover (R$236.4 billion in the fiscal year ended December 31, 2019 as compared to R$201.6 billion the fiscal year ended December 31, 2018).
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The following table reflects the breakdown of net fee and commission income for the ~~year~~years ended December 31, 2021, 2020 ~~2019~~ and ~~2018:~~2019:

For the Year Ended December 31
2020 2019 2018 % Change 2020/2019 Change% 2019/2018
(in millions of R$, except percentages)
Current account services 3,716 4,051 3,913 (8.3 ) 3.5
Collection and payment services 1,459 1,313 1,291 11.1 1.7
Insurance and capitalization 3,831 3,586 3,169 6.8 13.2
Asset Management and pension funds 1,114 1,434 1,289 (22.3 ) 11.2
Credit and debit cards 5,151 4,986 4,264 3.3 16.9
Capital markets 858 1,211 916 (29.2 ) 32.2
Trade finance 1,740 1,317 1,228 32.1 7.2
Tax on services (678 ) (622 ) (671 ) 8.9 (7.3 )
Others (964 ) (1,562 ) (1,266 ) (38.2 ) 23.4
Total 16,229 15,713 14,133 3.3 11.2
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For the Year Ended December 31
2021 2020 2019
% Change
2021/2020

% Change
2020/2019
(in millions of R$, except percentages)
Current account services 3,549 3,716 4,051 (4.5 ) (8.3 )
Collection and payment services 1,626 1,459 1,313 11.4 11.1
Insurance and capitalization 4,311 3,831 3,586 12.5 6.8
Asset Management and pension funds 1,418 1,114 1,434 27.3 (22.3 )
Credit and debit cards 3,666 5,151 4,986 (28.8 ) 3.3
Capital markets 1,053 858 1,211 22.8 (29.2 )
Trade finance 1,758 1,740 1,317 1.0 32.1
Tax on services (712 ) (678 ) (622 ) 5.1 8.9
Others (1,396 ) (964 ) (1,562 ) 44.8 38.2
Total 15,273 16,229 15,713 (5.9 ) 3.3

Gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net)
Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2021, were 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) were gains of R$731 million for the year ended December 31, 2021, a R$1,149 million, increase from gains of R$1,880 million compared to the year ended December 31, 2020, mainly due to the positive results in our derivative position.
Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2020 were losses of R$11,703 million, a R$11,377 million increase from losses of R$326 million for the year ended December 31, 2019. This variation is mainly due to gains of R$9,732 million related to financial assets measure at fair value through profit or loss held for trading and losses of R$21,912 million related to exchange differences (net). Excluding the results of hedging on investments abroad effect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were gains of R$1,880 million for the year ended December 31, 2020, a R$942 million increase from gains of R$938 million compared to the year ended December 31, 2019 mainly due to the positive results in our derivative position. Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
Gains/losses on financial assets and liabilities (net) and exchange differences (net) for the year ended December 31, 2019 were losses of R$326 million, a reduction of R$5,263 million in losses from R$5,589 million for the year ended December 31, 2018. This variation is mainly due to gains of R$5,156 million related to financial assets measure at fair value through profit or loss held and gains of R$17.9 million related to exchange differences (net). Excluding the results of hedging on investments abroad effect, gains/losses on financial assets and liabilities (net) and exchange differences (net) were gains of R$938 million for the year ended December 31, 2019, a R$660 million increase from gains of R$278 million compared to the year ended December 31, 2018 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”.
The following table presents our gains/losses on Financial Assets and Liabilities (net) and Exchange Differences (net) for the periods ~~indicated.~~indicated,
For the Year Ended December 31 For the Year Ended December 31
2020 2019 2018 % Change 2020/2019 Change% 2019/2018 2021 2020 2019
% Change
2021/2020

% Change
2020/2019
(in millions of R$, except percentages) (in millions of R$, except percentages)
Gains/losses on financial assets and liabilities (net) and exchange differences (net) (11,703 ) (326 ) (5,589 ) 3,489.9 (94.2 ) (1,781 ) (11,703 ) (326 ) (84.8 ) 3,489.9
Effects of the hedge for investment held abroad 13,583 1,264 5,867 974.6 (78.5 ) 2,512 13,583 1,264 (81.5 ) 974.4
Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding Hedge Impact(1) 1,880 938 278 100.4 237.7
Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding Hedge Impact (1) 731 1,880 938 (61.1 ) 100.4

(1) Gains/losses on financial assets and liabilities (net) and exchange differences (net) excluding the effects of the hedge investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”

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Other Operating Income/Expenses
Other operating income/expenses for the year ended December 31, ~~2020~~2021 were expenses of R$1,119 million, an increase of R$246 million compared to expenses of R$873 million ~~a decrease~~for the year ended December 31, 2020, mainly due to the lower result of our expenses with Benefit Guarantor Fund – FGB (Fundo Garantidor de Crédito) pension plan and higher FGC (Fundo Garantidor de Crédito) expenses given the increase in the balance of deposits from R$~~236~~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, 2020, other operating income/expenses were expenses of R$873 million, compared to expenses of R$1,108 million for the year ended December 31, ~~2019, mainly due to the lower result of our FGB pension plan and higher FGC (~~~~Fundo Garantidor de Crédito~~) expenses given the increase in the balance of deposits. For the year ended December 31, 2019, other operating income/expenses were expenses of R$1,108 million, compared to expenses of R$1,056 million for the year ended December 31, 2018.2019.

Administrative Expenses
Administrative expenses for the year ended December 31, ~~2020~~2021, were R$17,316 million, a R$ 202 million increases compared to expenses of R$17,115 million for the year ended December 31, 2020, mainly due wages and salaries, and technology and system due to the growth of the business. For the year ended December 31, 2020, our administrative expenses of R$17,115 million reflected a R$173 million increase compared to administrative expenses of R$16,942 million for the year ended December 31, 2019, mainly as a result of higher expenses with technology and systems. ~~For the year ended December 31, 2019, our administrative~~
Personnel expenses ofincreased R$~~16,942 million reflected a R$149 million increase compared to administrative expenses of R$16,792~~154 million for the year ended December 31, ~~2018, mainly explained by an increase in (i) personnel expenses, which are in line;~~2021, primarily resulting from higher employee wages and ~~(ii) data processing expenses in order~~salaries, deriving from the collective bargaining agreement applied to ~~support~~ the ~~increase in the volume of our customer transactions.~~
~~Personnel expenses decreased R$457 million for~~Company's salary base since September 2021. In the year ended December 31, 2020, our personnel expenses decreased R$456 million (compared to the year ended December 31, 2019). This performance can be attributed to primarily resulting from lower employee wages and salaries, benefits, and share-based compensation. In the year ended December 31, 2019, our personnel expenses increased R$122 million (compared to the same period in 2018). This performance can be attributed to the increase in the benefits line and higher wages and salaries.
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,
2020 2019 2018 % Change 2020/2019 Change% 2019/2018 2021 2020 2019
% Change
2021/2020

% Change
2020/2019
(in millions of R$, except percentages) (in millions of R$, except percentages)
Wages and salaries 5,730 5,876 5,813 (2.5 ) 1.1 5,905 5,731 5,876 3.0 (2.5 )
Social security costs 1,222 1,277 1,405 (4.3 ) (9.1 ) 1,153 1,222 1,277 (5.7 ) (4.3 )
Benefits 1,390 1,492 1,387 (6.8 ) 7.5 1,435 1,390 1,491 3.2 (6.8 )
Training 49 66 63 (25.8 ) 4.8 55 49 66 11.9 (25.9 )
Other personnel expenses 480 617 538 (22.2 ) 14.7 477 479 617 (0.4 ) (22.3 )
Total 8,871 9,328 9,206 (4.9 ) 1.3 9,026 8,871 9,328 1.7 (4.9 )

Other administrative expenses increased R$~~629~~47 million to R$~~8,244~~8,291 million for the year ended December 31, 2021, from R$8,243 million for the year ended December 31, 2020, mainly as a result of higher expenses with property, fixtures and supplies and technology and systems, resulting from the expansion of our business, which was partially offset by the decrease in expenses for communications.
Other administrative expenses increased R$630 million to R$8,243 million for the year ended December 31, 2020 from R$7,614 million for the year ended December 31, 2019 mainly due to a R$~~296~~297 million increase in technology and systems, and a R$176 million increase in communications.

Other administrative expenses increased R$28 million to R$7,614 million for the year ended December 31, 2019 from R$7,586 million for the year ended December 31, 2018, mainly due to a R$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 as a result of the adoption of IFRS 16. Prior to the adoption, leasing expenses were recognized as general maintenance expenses. After the adoption of IFRS 16, these expenses are now split into interest and depreciation expenses.
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The following table sets forth our other administrative expenses for each of the periods indicated:

For the Year Ended December 31, For the Year Ended December 31,
2020 2019 2018 % Change 2020/2019 Change% 2019/2018 2021 2020 2019 % Change 2021/2020
% Change
2020/2019
(in millions of R$, except percentages) (in millions of R$, except percentages)
Specialized and technical services 2,171 2,173 2,090 (0.1 ) 4.0 2,184 2,171 2,173 0.6 (0.1 )
Property, fixtures and supplies 744 748 1,331 (0.5 ) (43.8 ) 889 744 748 19.6 (0.6 )
Technology and systems 2,355 2,059 1,786 14.4 15.3 2,474 2,355 2,059 5.1 14.4
Advertising 654 713 622 (8.3 ) 14.6 621 654 713 (5.0 ) (8.2 )
Communications 649 473 457 37.2 3.5 353 649 473 (45.6 ) 37.2
Per diems and travel expenses 70 140 127 (50.1 ) 10.2 72 69 140 4.,2 (50.8 )
Taxes other than income tax 280 112 89 150.1 25.9 202 280 112 (27.7 ) 150.1
Surveillance and cash courier services 595 631 617 (5.7 ) 2.3 598 595 631 0.5 (5.7 )
Insurance premiums 17 35 29 (51.4 ) 18.2 22 17 35 34.6 (52.2 )
Other (1) 709 531 437 33.5 21.5
Other administrative expenses 874 710 531 23.2 33.5
Total 8,244 7,614 7,586 8.3 0.4 8,291 8,243 7,614 0.6 8.3
~~________________________________~~
~~(1)~~ For the year ended December 31, 2020, includes mainly Data Processing Expenses in the balance of R$176.1 million (2019 – R$2.4 million and 2018 – R$67.7 million), Service Expenses in the balance of R$27.7 million (2019 - revenue of R$2.2 million and 2018 - R$26. 8 million), Expenses with Benefit Guarantor Fund - FGB R$8.5 million (2019 – R$53.5 million and 2018 - R$35.0 million), Interest on Own Capital R$0 (2019 – R$0 and 2018 - R$38.0 million) and Recovery of Charges and Expenses R$212.8 million (2019 – R$97.4 million and 2018 – R$92.4 million).
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.
The efficiency ratio, which we calculate as total administrative expenses divided by total income, increased to 35.5% in the year ended December 31, 2020, as compared to 28.8% for the year ended December 31, ~~2019.~~2019, This increase of 6.7 p.p. in the ratio is primarily due to the effects of the hedge for investment held abroad. For the year ended December 31, 2018, the efficiency ratio was 33.9%. Our adjusted efficiency ratio, which excludes the effect of the hedge for investment held abroad (see “—Hedging in Foreign Investments” and “Selected Financial Data—Selected Consolidated Ratios, Including Non-GAAP Ratios”), was 27.7%, 28.2% and 30.3% in 2020, 2019 and 2018, respectively.
Depreciation and Amortization
Depreciation and amortization 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 a 24.0% decrease in expenses with 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.
For the year ended December 31, 2020 was R$2,579 million, a R$187 million increase from R$2,392 million for the year ended December 31, 2019, primarily due to higher expenses with amortization of hardware and software items, resulting from investments made in this period. For the year ended December 31, 2019, depreciation and amortization amounted to R$2,392 million, a R$652 million increase from R$1,740 million for the year ended December 31, 2018, primarily due to the change in accounting practices 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 included elsewhere in this annual report.
Provisions (Net)
Provisions principally include provisions for tax, civil, and especially labor claims. Provisions (net) totaled R$2,179 million for the year ended December 31, 2021, a 31.5%, or R$523 million, increase compared to R$1,657 million for the year ended December 31, 2020, driven by the fact that the amounts provisioned are indexed to the SELIC rate (for tax proceedings), the National Consumer Price Index (Índice Nacional de Preços ao Consumidor) (for civil proceedings) and the Broad National Consumer Price Index — Special (Índice Nacional de Preços ao Consumidor Amplo — Especial) and SELIC rate for labor proceedings, each of which increased significantly in the year ended December 31, 2021.
In the year ended December 31, 2020, provisions (net) totaled R$1,657 million for the year ended December 31, 2020, a decrease of R$2,025 million compared to R$3,682 million for the year ended December 31, 2019, primarily due to a higher than usual level of provisions in 2019, as explained below.
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In the year ended December 31, 2019, provisions (net) totaled R$3,682 million, an increase of R$1,682 million compared to R$2,000 million for the year ended December 31, 2018, mainly due to an increase of R$700 million related to the creation of an efficiency and productivity fund, an increase in civil and labor proceedings due to revision of the operational model and a constitution of provisions related to the legal proceeding brought by the association of retired employees of Banespa (Associação dos Funcionários Aposentados do Banco do Estado de São Paulo), or AFABESP, an association of former employees of Banespa in which the classification of the chance of loss was revised to probable in December ~~2019 (for~~2019. For further information see note 22 to our audited consolidated financial statements included elsewhere in ~~the ”Item 18. Financial Statements” of~~ this annual ~~report).~~
report.
Impairment Losses on Financial Assets (Net)
Impairment losses on financial assets (net) for the year ended December 31, 2021 were R$17,113 million, an R$338 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, 2020, impairment losses on financial assets (net) were R$17,450 million, ana R$4,080 million increase compared to R$13,370 million for the year ended December 31, ~~2019. This increase was~~2019, principally due
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to ~~global~~the adverse effects of the COVID-19 pandemic ~~that~~which resulted in athe creation of additional (overlay) R$3,200 million ~~additional~~ allowance for potential loan losses and to the recurrent growth of the credit portfolio.
For the year ended December 31, 2019, impairment losses on financial assets (net) were R$13,370 million, a R$657 million increase compared to R$12,713 million for the year ended December 31, 2018, principally due to the growth of our portfolio of installment loans to individuals.
Our credit risk exposure portfolio increased by R$~~74.5~~74.8 billion to R$540.9 billion as of December 31, 2021 compared to R$466.1 billion as of December 31, 2020, ~~compared to~~Furthermore, our impaired assets increased R$~~391.6~~3.7 billion from R$23.2 billion as of December 31, ~~2019. Furthermore, our impaired assets decreased R$0.2 billion from R$23.4 billion as of December 31, 2019~~2020 to R$~~23.2~~26.9 billion for the year ended December 31, ~~2020. The default rate decreased by 10 base points in 2020 in comparison with 2019.~~
2021.
The following table shows the ratio of our impaired assets to total credit risk exposure and our coverage ratio as of December 31, ~~2020~~2021 and December 31, ~~2019~~2020 and ~~2018.~~2019.
As of December 31,
2020 2019 2018 2017 2016
(in millions of R$ except percentages)
Loans and advances to customers, gross 417,819 347,257 321,933 287,829 268,438
Impaired assets 23,176 23,426 22,426 19,145 18,887
Provisions for impairment losses 25,640 22,626 22,969 18,262 18,191
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 466,104 391,569 364,194 330,474 301,703
Ratios ��
Impaired assets to credit risk exposure 5.0 % 6.0 % 6.2 % 5.8 % 6.3 %
Coverage ratio ⁽²⁾ 110.6 % 96.6 % 102.4 % 95.4 % 96.3 %
Impairment losses (17,451 ) (13,370 ) (12,713 ) (12,339 ) (13,388 )
Losses on other financial instruments not
measured at fair value ⁽³⁾ - - - - 88
Impairment losses on financial assets (net)⁽⁴⁾ (17,451 ) (13,370 ) (12,713 ) (12,339 ) (13,300 )
~~________________________________~~
As of December 31,
2021 2020 2019 2018 2017
(in millions of R$ except percentages)
Loans and advances to customers, gross 493,355 417,822 347,257 321,933 287,829
Impaired assets 26,923 23,176 23,426 22,426 19,145
Provisions for impairment losses 29,723 25,640 22,626 22,969 18,262
Credit risk exposure Non-GAAP – customers ⁽¹⁾ 540,873 466,104 391,569 364,194 330,474
Ratios
Impaired assets to credit risk exposure 5.0 % 5.0 % 6.0 % 6.2 % 5.8 %
Coverage ratio ⁽²⁾ 110.4 % 110.6 % 96.6 % 102.4 % 95.4 %
Impairment losses (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )
Losses on other financial instruments not
  measured at fair value ⁽³⁾ -   -   -   -   -
Impairment losses on financial assets (net) ⁽⁴⁾ (17,113 ) (17,450 ) (13,370 ) (12,713 ) (12,338 )

(1) Credit risk exposure is a non-GAAP financial measure. Credit risk exposure is the sum of the amortized cost amounts of loans and advances to customers (including impaired assets) amounting to R$~~466,115~~540,873 million and guarantees and documentary credits amounting to R$~~48,282~~47,518 million. 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, 2021, 2020 ~~2019~~ and ~~2018,~~2019, our total of impairment losses on financial instruments included R$~~1,577~~1,191 million, R$~~2,055~~1,577 million and R$~~2,714~~2,055 million, respectively, relating to debt instruments.
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The following chart shows our impaired assets to credit risk ratio from ~~2016~~2017 through ~~2020:~~2021:

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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, 2021, 2020 ~~2019~~ and ~~2018.~~2019.
For the Year Ended December 31, For the Year Ended December 31,
2020 2019 2018 % Change 2020/2019 Change% 2019/2018 2021 2020 2019 % Change 2021/2020
% Change
2020/2019
(in millions of R$, except percentages) (in millions of R$, except percentages)
Commercial and industrial 10,558 10,073 11,832 4.8 (14.9 ) 11,440 10,558 10,073 8.3 4.8
Real estate 456 827 1,036 (44.8 ) (20.2 ) 470 456 827 3.1 (44.8 )
Installment loans to individuals 12,144 12,497 9,499 (2.8 ) 31.6 14,996 12,144 12,497 23.5 (2.8 )
Financial leasing 17 29 59 (40.6 ) (50.2 )
Lease financing 17 17 29 (0.6 ) (40.6 )
Total 23,176 23,426 22,426 (1.1 ) 4.5 26,923 23,176 23,426 16.2 (1.1 )

For a discussion of the evolution in impairment in our lending portfolios and our methodology for loan loss allowances with respect to the following lending portfolios, see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—~~Assets—~~Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.” See also “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—Ongoing investigations relating to corruption and diversion of public funds that are being conducted by the Brazilian federal police as well as other Brazilian and non-Brazilian regulators and law enforcement officials may adversely affect the growth of the Brazilian economy and could have a material adverse effect on us” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally—The financial problems faced by our customers could adversely affect us.”
Commercial and Industrial
Impaired assets in the commercial and industrial loans portfolio amounted to R$11,440 million as of December 31, 2021, an increase of R$881 million, or 8.3%, compared to R$10,558 million as of December 31, 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the adverse macroeconomic situation caused by the COVID-19 pandemic.
Impaired assets in the portfolio of commercial and industrial loans amounted to R$10,558 million as of December 31, 2020, an increase of R$~~485~~486 million, or 4.8%, compared to R$10,073 million as of December 31, ~~2019. This~~19, The increase in impaired assets in this portfolio was mainly due to the collective assessment ~~of R$1,660 million~~ performed by Santander Brasil which was based on macroeconomic forecasts sensitiveness that ~~indicates~~indicated stage transfers upon athe deterioration of the ~~portfolio.~~portfolio,
Impaired assets in the portfolio of commercial and industrial loans amounted to R$10,073 million as of December 31, 2019, a decrease of R$1,759 million, or 14.9%, compared to R$11,832 million as of December 31, 2018. The decrease in impaired assets in this portfolio was the result of the measures that Santander Brasil put in place to manage it, including collection practices with respect to our borrowers whereby we offered certain customers the chance to negotiate a restructuring of their debts or asset disposal.
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For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—~~Assets—Impaired~~ Short-Term Borrowings —Impaired Assets—Methodology for Impairment ~~Losses.~~Losses,”
Real Estate
Impaired assets in the real estate lending portfolio totaled R$470 million on December 31, 2021, an increase of R$14 million, or 3.1%, compared to R$456 million as of December 31, 2020, The increase in impaired assets in this portfolio was the result of the recurrent growth of the credit portfolio.
Impaired assets in the real estate lending portfolio totaled R$456 million on December 31, 2020, a decrease of R$371 million, or 44.8%, compared to R$827 million as of December 31, 2019. The decrease ~~in impaired assets in this portfolio~~ was primarily the result of the measures that Santander Brasil put in place to manage it, including collection practices with respect to our borrowers.
Impaired assets in the real estate lending portfolio totaled R$827 million on December 31, 2019, a decrease of R$209 million, or 20.2%, compared to R$1,036 million as of December 31, 2018. The decrease was primarily due to changes on monetary policy that led to reduction on the interest rates on real estate portfolio in Brazil.
For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—~~Assets—~~Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.”
Installment Loans to Individuals
Impaired assets in the installment loans to individuals lending portfolio totaled R$14,996 million as of December 31, 2021, with an increase of R$2,852 million, or 23.5%, compared to 2020. The increase in impaired assets in this portfolio was the result of growth of the credit portfolio and the deterioration of the macroeconomic situation caused by the COVID-19 pandemic.
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Impaired assets in the installment loans to individuals lending portfolio totaled R$12,144 million as of December 31, 2020, with a decrease of R$353 million, or 2.8%, compared to 2019. The decrease in impaired assets in this portfolio was the result of the measures that Santander Brasil put in place to manage it, including collection practices with respect to our borrowers whereby we offered certain customers the chance to negotiate a restructuring of their debts, especially during the COVID-19 pandemic, or asset ~~disposal~~.
Impaired assets in the installment loans to individuals lending portfolio totaled R$12,497 million as of December 31, 2019, with an increase of R$2,998 million, or 31.6%, compared to 2018. This increase was a consequence of the recurrent growth of the portfolio and the weak macroeconomic conditions in Brazil which affected the portfolio, such as the unemployment rate and degree of income commitment.
disposal. For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—~~Assets—~~Short-Term Borrowings—Impaired Assets—Methodology for Impairment Losses.”
Financial Leasing
Impaired assets in the lease financing lending portfolio totaled R$17 million on December 31, 2021, a remaining similar to December 31, 2020.
Impaired assets in the lease financing lending portfolio totaled R$17 million on December 31, 2020, a decrease of R$12 million compared to December 31, 2019. This decrease in impaired assets was mainly due to asset write-offs in an amount of R$~~15.6~~15.3 million which took place in ~~2020.~~
~~Impaired assets in~~ the ~~lease financing lending portfolio totaled R$29 million on~~year ended December 31, ~~2019, a decrease of R$30 million compared to December 31, 2018. This decrease in impaired assets was mainly due to defaults by certain borrowers as a result of weak macroeconomic conditions in Brazil.~~
2020.
For further information, please see “Item 4. Information on the Company—B. Business Overview—Selected Statistical Information—~~Assets—~~Short-Term Borrowings—Impaired Assets—Methodology for Impairment ~~Losses”.~~Losses.”
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Impairment Losses on Other Assets (Net)
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 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. For the year ended December 31, 2020, impairment losses on other assets (net) amounted to losses of R$85 million, a decrease of R$4647 million as compared to the year ended December 31, 2019, mainly due to less intangible asset impairment losses during the year. ~~For~~
Other Nonfinancial Gains/Losses
Other nonfinancial gains/losses were gains of R$33 million during the year ended December 31, ~~2019, impairment losses on other assets (net) amounted to losses~~2021, a negative variation of R$~~131~~275 million ~~a decrease~~from gains of R$~~377~~308 million ~~as compared to 2018,~~during the year ended December 31, 2020, mainly due to ~~impairment loss~~positive extraordinary effects of ~~assets in~~2020, highlighted below.
During 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.~~
~~Other Nonfinancial Gains/Losses~~
~~Other~~year ended December 31, 2020, other nonfinancial gains/losses were gains of R$308 million during the year ended December 31, 2020, a positive variation of R$288 million from gains of R$20 million during the year ended December 31, 2019, primarily due to the R$169 million gain on the sale of Superdigital in the first quarter of 2020.
During the year ended December 31, 2019, other nonfinancial gains/losses were gains of R$20 million, a negative variation of R$136 million from gains of R$156 million during the year ended December 31, 2018, primarily due to an increase of R$104 million relating to income from the reversal of the provision for impairment of properties and R$78 million which is related to the sale of assets received in the recovery of credits with customers that occurred in 2018 that did not occur in 2019.
Operating ~~Profit~~Income Before Tax
Operating ~~profit~~income before tax for the year ended December 31, ~~2020~~2021, was R$~~9,664~~24,750 million, ~~a decrease~~an increase of R$~~12,609~~15,086 million, or ~~56.6%~~156.1%, as compared to R$~~22,273~~9,664 million for the year ended December 31, ~~2019.~~2020. In the year ended December 31, ~~2018,~~2019 our operating ~~profit~~income before tax ~~for the year~~ was R$~~15,910~~22,273 million.
Excluding the effects of the hedge for investment held abroad operating ~~profit~~income before tax amounted to R$~~23,247~~27,262 million for the year ended December 31, ~~2020,~~2021, a ~~1.2% decrease~~17.3% increase from R$~~23,537~~23,247 million compared to the year ended December 31, ~~2019.~~2020. In the year ended December 31, ~~2018,~~2019, operating ~~profit~~income before tax was R$~~21,777~~23,537 million. Operating ~~profit~~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.”
The table below presents our operating ~~profit~~income before tax and our operating ~~profit~~income before tax excluding the effects of the hedge for investment held abroad for the periods presented.
For the Year Ended December 31,
2020 2019 2018 % Change 2019/2018 Change% 2018/2017
(in millions of R$, except percentages)
Operating Profit Before Tax 9,664 22,273 15,910 (56.6 ) 40.00
Effects of the hedge for investment held abroad 13,583 1,264 5,867 974.6 (78.5 )
Adjusted operating profit before tax (1) 23,247 23,537 21,777 (1.2 ) 8.1
For the Year Ended December 31,
2021 2020 2019 % Change 2021/2020
% Change 2020/2019
(in millions of R$, except percentages)
Operating Income Before Tax 24,750 9,664 22,273 156.1 (56.6 )
Effects of the hedge for investment held abroad 2,512 13,583 1,264 (81.5 ) 974.4
Adjusted operating income before tax (1) 27,262 23,247 23,537 17.3 (1.2 )

(1) Adjusted operating ~~profit~~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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Income Taxes
Income ~~tax~~taxes expenses include income tax, social contribution, PIS and COFINS (which are social contributions due on certain income net of ~~some~~certain expenses). ~~The sum~~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 ~~totaled~~income balance of R$3,787 million in the year ended December 31, ~~2020, with an improvement~~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 the line “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 ~~R$9,429 million in relation~~operations to ~~expenses of~~ R$~~5,642~~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 14,183/2021. For more information, see note 24 to our audited consolidated financial statements included in this annual report.
For the year ended December 31, 2020, income tax expenses amounted to positive R$3,787 million for the year of 2020, a R$9,429 million increase from expenses of R$5,642 million for the year ended December 31, 2019. This ~~improvement~~increase was mainly ~~attributed~~attributable to the following events: (i) losses of R$13,583 million as a result of the effects of exchange rate variations on foreign investment in our subsidiary and subsidiary abroad and for hedge instruments, affecting the “Gains (losses) on financial assets and liabilities (net)” line; (ii) the reduction in Operating Income before taxation resulting from the result of the ~~entities'~~entities’ operations, and (iii) the recognition of certain deferred tax credits during the year ofended December 31, 2020. For more information, see note 23 to our financial statements audited consolidated figures included in this annual report.
For the year ended December 31, 2019, income tax expenses amounted to of R$5,642 million for the year of 2019, a R$2,532 million increase from expenses of R$3,110 million for the year ended December 31, 2018. This increase was mainly attributable 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 hedge instruments, affecting the line “Gains (losses) on financial assets and liabilities (net)” line; (ii) the increase in Operating Income before taxation arising from the result of 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 (due to constitutional amendment No. 103/2019). For further information, see note 23 from our audited consolidated financial statements included in this annual report.
The following table shows our income taxes and income taxes excluding the effects of the hedge for investment held abroad for the periods indicated.

For the Year Ended December 31, For the Year Ended December 31,
2020 2019 2018 %Change 2020/2019 Change% 2019/2018 2021 2020 2019
%Change
2021/2020

% Change
2020/2019
(in millions of R$, except percentages) (in millions of R$, except percentages)
Income taxes 3,787 (5,642 ) (3,110 ) (167.1 ) 81.4 (9,191 ) 3,787 (5,642 ) (342.7 ) (167.1 )
Effects of the hedge for investment held abroad (13,583 ) (1,264 ) (5,867 ) 974.6 (78.5 ) (2,512 ) (13,583 ) (1,264 ) (81.5 ) 974.4
Income taxes excluding effects of the hedge for investment held abroad (*) (9,796 ) (6,906 ) (8,977 ) 41.9 (23.1 ) (11,703 ) (9,796 ) (6,906 ) 19.5 41.9

* Income taxes excluding effects of the hedge for investment held abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
Results of Operations by Segment for the Years Ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~
2019
The following tables show our results of operations for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018,~~2019, for each of our operating segments.

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Commercial Banking
For the Year Ended December 31,
2021 2020 2019 % Change 2021/2020
% Change 2020/2019
(in millions of R$, except percentages)
Net interest income 46,236 41,457 42,044 11.5 (1.4 )
Income from equity instruments 10 4 5 182.4 (25.6 )
Income from companies accounted for by the equity method 105 84 149 25.6 (43.8 )
Net fee and commission income 13,285 14,405 13,923 (7.8 ) 3.5
Gains/losses on financial assets and liabilities (net) and exchange differences (net) (1,433 ) (13,515 ) (1,541 ) (89.4 ) 777.0
Other operating income (expenses) (974 ) (767 ) (1,069 ) 27.0 (28.3 )
Total income 57,229 41,668 53,511 37.4 (22.1 )
Personnel expenses (8,221 ) (8,140 ) (8,554 ) 1.0 (4.8 )
Other administrative expenses (7,697 ) (7,635 ) (7,140 ) 0.8 6.9
Administrative expenses (15,918 ) (15,775 ) (15,694 ) 0.9 0.5
Depreciation and amortization (2,343 ) (2,489 ) (2,297 ) (5.9 ) 8.4
Provisions (net) (2,177 ) (1,639 ) (3,669 ) 32.8 (55.3 )
Impairment losses on financial assets (net) (17,170 ) (17,380 ) (13,423 ) (1.2 ) 29.5
Impairment losses on other assets (net) (164 ) (28 ) (73 ) 477.2 61.2
Other nonfinancial gain (losses) 33 308 20 (89.5 ) 1,404.1
Operating income before tax 19,491 4,666 18,375 317.8 (74.6 )
For the Year Ended December 31,
2021 2020 2019 %Change 2021/2020 %Change 2020/2019
(in millions of R$, except percentages)
Operating Income Before Tax 19,491 4,666 18,375 317.8 (74.6)
Effects of the hedge for investment held abroad 2,512 13,583 1,264 (81.5 ) 974.4
Adjusted Operating Income Before tax (1) 22,003 18,249 19,639 20.6 (7.1)
(1) Adjusted operating income before tax is a non-GAAP measure. For further information, see "Item 3. Key Information–A. Selected Financial Data–Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures."

For the Year Ended December 31,
2020 2019 2018 % Change 2020/2019 %Change 2019/2018
(in millions of R$, except percentages)
Net interest income 41,457 42,044 39,391 (1.4 ) 6.7
Income from equity instruments 4 5 10 (25.6 ) (51.0 )
Income from companies accounted for by the equity method 84 150 66 (43.8 ) 126.5
Net fee and commission income 14,404 13,923 12,537 3.5 11.1
Gains/losses on financial assets and liabilities (net) and exchange differences (net) (13,515 ) (1,541 ) (6,752 ) 777.0 (77.2 )
Other operating income (expenses) (767 ) (1,069 ) (966 ) (28.3 ) 10.7
Total income 41,667 53,511 44,286 (22.1 ) 20.8
Personnel expenses (8,140 ) (8,554 ) (8,404 ) (4.8 ) 1.8
Other administrative expenses (7,635 ) (7,140 ) (7,186 ) 6.9 (0.6 )
Administrative expenses (15,775 ) (15,694 ) (15,590 ) 0.5 0.7
Depreciation and amortization (2,489 ) (2,297 ) (1,637 ) 8.4 40.3
Provisions (net) (1,639 ) (3,669 ) (1,948 ) (55.3 ) 88.3
Impairment losses on financial assets (net) (17,379 ) (13,423 ) (12,420 ) 29.5 8.1
Impairment losses on other assets (net) (28 ) (73 ) (450 ) (61.2 ) (83.7 )
Other nonfinancial gain (losses) 309 21 156 1,404.1 (86.9 )
Operating profit before tax 4,666 18,375 12,397 (74.6 ) 48.2
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.
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Excluding the effects of ~~Contents~~the hedge for investments held abroad on our revenues, our operating income before taxes would have been R$22.0 billion, 20.6% higher than in the fiscal year ended December 31, 2020. Operating income excluding the effects of the hedge for investment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
For the Year Ended December 31,
2020 2019 2018 %Change 2019/2018 %Change 2018/2017
(in millions of R$, except percentages)
Operating Profit Before Tax 4,666 18,375 12,397 (74.6 ) 48.2
Effects of the hedge for investment held abroad 13,583 1,264 5,867 974.6 (78.5 )
Adjusted Operating Profit Before tax 18,249 19,639 18,264 (7.1 ) 7.5

2020 and 2019
Operating ~~profit~~income before tax attributed to the Commercial Banking segment for the year ended December 31, 2020 was R$4.7 billion, a R$13.7 billion decrease from R$18.4 billion for the year ended December 31, 2019. This variation was mainly due to:
·● an increase of R$~~3,956~~3,957 million in impairment losses on financial assets mainly due to the global COVID 19 pandemic that resulted in a R$3,200 million additional allowance for potential loan losses and the recurrent growth of the credit ~~portfolio.~~portfolio; and
·● a decrease of R$587 million in net interest income for the year ended December 31, 2020, compared to the year ended December 31, 2019 mainly attributed to the impact from spread pressure, due to the impact of the reduction of the SELIC rate, and the ~~mix effect as a result of the economic effects of~~fact that corporate customers looked to enhance their liquidity during the COVID-19 pandemic.
This variation was partially offset by an increase of R$481 million in net fee and commission income for the year ended December 31, 2020, compared to the year ended December 31, 2019, mainly due to (i) an increase in revenues from the sale of insurance and capitalization, and (ii) an increase in revenues from trade finance, and (iii) an increase in revenues from credit and debit cards.
Excluding the effects of the hedge for investments held abroad on our revenues, our operating ~~profit~~income before taxes would have been R$18.2 billion, 7.1% lower than in the fiscal year ended December 31, 2019.
~~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.
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~~In 2019, our operating profit before taxes,~~ excluding the effects of the hedge for investments held abroad, on our revenues would have been R$19.6 billion, 7.5% higher than in the fiscal year ended December 31, 2018. Operating profit before taxes excluding the hedge of investments heldinvestment abroad is a non-GAAP measure. For further information, see “Item 3. Key Information—A. Selected Financial Data—Reconciliation of Non-GAAP Measures and Ratios to Their Most Directly Comparable IFRS Financial Measures.”
Global Wholesale Banking
For the Year Ended December 31,
2021 2020 2019 % Change 2021/2020
%Change
2020/2019
(in millions of R$, except percentages)
Net interest income 5,082 2,985 2,277 70.2 31.1
Income from equity instruments 80 30 14 165.2 114.2
Income from companies accounted for by the equity method 39 28 -   37.5 -
Net fee and commission income 1,988 1,823 1,790 9.1 1.8
Gains/losses on financial assets and liabilities (net) and exchange differences (net) (347 ) 1,812 1,215 (119.1 ) 49.2
Other operating income (expenses) (145 ) (105 ) (39 ) 37.6 172.4
Total income 6,697 6,574 5,258 1.9 25.0
Administrative expenses (1,399 ) (1,340 ) (1,247 ) 4.3 7.4
Personnel expenses (805 ) (732 ) (773 ) 10.1 5.4
Other administrative expenses (593 ) (609 ) (474 ) (2.5 ) 28.4
Depreciation and amortization (91 ) (91 ) (95 ) 0.8 (4.6 )
Provisions (net) (3 ) (18 ) (13 ) (85.3 ) 37.9
Impairment losses on financial assets (net) (57) (71 ) 53 (180.6 ) (232.1 )
Impairment losses on other assets (net) (2 ) (57 ) (58 ) (96.7 ) (2.9 )
Operating income before tax 5,260 4,998 3,898 5.2 28.2
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2021 and 2020
For the Year Ended December 31,
2020 2019 2018 % Change 2020/2019 %Change 2019/2018
(in millions of R$, except percentages)
Net interest income 2,985 2,277 2,531 31.1 (10.0 )
Income from equity instruments 30 14 23 114.2 (37.9 )
28 - - - -
Net fee and commission income 1,823 1,790 1,595 1.8 12.2
Gains/losses on financial assets and liabilities (net) and exchange differences (net) 1,812 1,215 1,163 49.2 4.5
Other operating income (expenses) (105 ) (39 ) (90 ) 172.4 (57.0 )
Total income 6,574 5,258 5,222 25.0 0.7
Administrative expenses (1,340 ) (1,248 ) (1,202 ) 7.4 3.8
Personnel expenses (732 ) (774 ) (802 ) (5.4 ) (3.6 )
Other administrative expenses (609 ) (474 ) (400 ) 28.4 18.5
Depreciation and amortization (91 ) (95 ) (103 ) (4.6 ) (8.3 )
Provisions (net) (18 ) (13 ) (53 ) 37.9 (75.5 )
Impairment losses on financial assets (net) (71 ) 54 �� (294 ) (229.7 ) (118.4 )
Impairment losses on other assets (net) (56 ) (58 ) (58 ) (4.7 ) -
Operating profit before tax 4,998 3,898 3,512 28.2 11.0
Operating income before tax attributed to the Global Wholesale Banking segment for the year ended December 31, 2021, was R$5.3 billion, a 5.2% or R$262 million increase from R$5.0 billion for the year ended December 31, 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 R$128 million in impairment losses on financial assets relating to an increase in the coverage for potential loan losses.
2020 and 2019
Operating ~~profit~~income before tax attributed to the Global Wholesale Banking segment for the year ended December 31, 2020 was R$5.0 billion, a 28.2%, or R$1,100 million increase from R$3.9 billion for the year ended December 31, 2019.
This variation was mainly due to:
·● an increase of R$708 million, or 31% in net interest income, ~~representing a 31% change from~~compared to the year ended December 31, 2019, mainly due to the increase in the credit portfolio resulting from the economic effects of the COVID-19 ~~pandemic.~~pandemic; and
·● ~~Gain~~gains on financial assets and liabilities and exchange differences of R$597 million due to the positive ~~gains from increased~~effects of an increase in market operations in derivatives and especially gains in the IPCA-indexed bonds portfolio.
This variation was partially offset by an increase of R$~~125~~123 million in impairment losses on financial assets due to an increase in the coverage for potential loan losses.

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~~2019 and 2018~~
~~Operating profit before tax attributed to the Global Wholesale Banking segment for the year ended December 31, 2019 was R$3.9 billion, a 11.0%, or R$385 million increase compared to December 31, 2018.~~
~~This variation was 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 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.
~~This variation was partially offset by a decrease of R$253 million in net interest income mainly lower volume in the corporate portfolio.~~
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.
Most of our liquidity is raised in the local market and we maintain a portfolio of high quality public bonds for liquidity management. Legal reserve requirements consume a significant amount of funding in Brazil, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Compulsory Reserve Requirements.”
Due to our diversified sources of funding, which include a large client deposit base in the local market and a large number of correspondent banks with long-standing relationships, historically we have not experienced liquidity problems. In our opinion, our current levels of liquidity ~~and working capital~~ are sufficient for our present requirements.
See also “Item 4. Information on the Company—B. Business Overview—Selected Statistical 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.
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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. Debt Instruments Eligible~~20 to ~~Compose Capital and 20. Other Financial Liabilities to~~ our audited consolidated financial statements included elsewhere in this annual report.
The following tables present the composition of our consolidated funding at the dates indicated.
As of December 31, As of December 31,
2020 2019 2018 2021 2020 2019
(in millions of R$) (in millions of R$)
Customer deposits 445,813 336,515 304,198 468,961 445,814 336,515
Current accounts 35,550 28,231 18,854 41,742 35,550 28,231
Savings accounts 62,210 49,040 46,068 65,249 62,210 49,040
Time deposits 269,929 200,740 190,983 280,955 269,929 200,740
Repurchase agreements 78,124 58,504 48,293 81,014 78,124 58,504
Backed operations with Private Securities(1) 14,944 9,506 6,978 20,103 14,944 9,506
Backed operations with Public Securities(1) 63,180 48,997 41,316 60,911 63,180 48,997
Deposits from the Brazilian Central Bank and credit institutions 131,657 99,271 99,023 121,006 131,657 99,271
Demand deposits 296 685 710 126 296 685
Time deposits(2) 76,489 56,602 47,227 75,755 76,489 56,602
Repurchase agreements 54,872 41,984 51,086 45,125 54,872 41,984
Backed operations with Private Securities(1) 13,844 9,506 6,978 13,478 13,844 9,506
Backed operations with Public Securities(1) 41,028 32,478 44,108 31,647 41,028 32,478
Total deposits 577,470 435,786 403,221 589,967 577,470 435,786
Marketable debt securities 56,875 73,702 74,626 79,037 56,876 73,702
Agribusiness Credit Notes 14,747 14,777 11,925 16,989 14,747 14,777
Treasury Bills 12,750 27,587 30,721 25,074 12,750 27,587
Real Estate Credit Notes 19,979 22,623 27,463 24,020 19,979 21,266
Bonds and other securities 9,399 8,715 4,517 12,952 9,399 10,072
Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital 13,120 10,176 9,780 19,641 13,120 10,176
Subordinated liabilities - - 9,886
Total Funding 647,465 519,664 497,513 688,645 647,466 519,664

(1) Refers primarily to repurchase agreements backed by debentures issued by the Bank as collateral security.
(2) This includes transactions with credit institutions in connection with export and import financing lines, BNDES and FINAME on-lending and abroad on other credit lines abroad.

Deposits
Customer Deposits
Our balance of customer deposits was R$~~445.9~~468.9 billion on December 31, 2021, R$445.8 billion on December 31, 2020 and R$336.5 billion on December 31, 2019, representing 68.1%, 68.9% and ~~R$304.2 billion on December 31, 2018, representing 68.9%,~~ 64.8% ~~and 61.1%~~ of our total funding, respectively.
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Current Accounts
Our balance of current accounts was R$~~35.7~~41.7 billion on December 31, 2021, R$35.6 billion on December 31, 2020 and R$~~29.5~~ 28.2 billion on December 31, 2019, representing 7.1%, 6.2% and ~~R$18.9 billion on December 31, 2018, representing 6.2%, 6.8%, and 4.7%~~6.5% of total deposits, respectively.
Customer Savings Deposits
Our balance of customer savings deposits was R$65.2 billion on December 31, 2021, R$62.2 billion on December 31, 2020 and R$49.0 billion on December 31, 2019, representing 11.1%, 10.8% and ~~R$46.1 billion on December 31, 2018, representing 10.8%,~~ 11.3% ~~and 11.4%~~ of total deposits, respectively.
Customer Time Deposits
Our balance of customer time deposits was R$281,0 billion on December 31, 2021, R$269.9 billion on December 31, 2020 and R$~~176.0~~200,7 billion on December 31, 2019, representing 47.6%, 46.7% and ~~R$191.0 billion on December 31, 2018, representing 46.7%, 40.4% and 47.4%~~46.1% of total deposits, respectively.
Customer Deposits – Repurchase Agreements
We maintain a portfolio of Brazilian public and private sector debt instruments used to obtain overnight funds from other financial institutions or investment funds by selling such securities and simultaneously agreeing to repurchase them. Due to the short-term (overnight) nature of this funding source, such transactions are volatile and composed, generally, of Brazilian public securities and of repurchase agreements linked to debentures. Securities sold under repurchase agreements ~~decreased~~increased to R$81.0 billion on December 31, 2021 from R$78.1 billion on December 31, 2020 ~~from~~and R$~~82.0~~58.5 billion on December 31, 2019, representing 13.7%, 13.5% and ~~R$48.3 billion on December 31, 2018, representing 13.5%, 18.8% and 12.0%~~13.4% of total deposits, ~~respectively.~~
respectively
Deposits from the Brazilian Central Bank and Credit Institutions
Our balance of deposits from the Brazilian Central Bank and credit institutions was R$121.0 billion on December 31, 2021, R$131.7 billion on December 31, 2020 and R$99.3 billion on December 31, 2019, ~~and R$99.0 billion on December 31, 2018,~~ representing ~~22.8%~~20.5%, 22.8% and ~~24.6%~~22.9% of total deposits, respectively.
Our balance of deposits includes mainly borrowings and domestic onlendings:
·● Borrowings. We have relationships with banks all over the world, providing credit lines as foreign currency-linked (either to the U.S. dollar or to a basket of foreign currencies). We apply the proceeds from these transactions mainly to U.S. dollar-linked lending operations and in particular to trade finance operations.
·● Domestic Onlendings. We 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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Other Funding
Marketable Debt Securities
Our balance of marketable debt securities was R$79.0 billion on December 31, 2021, R$56.9 billion on December 31, 2020 and R$73.7 billion on December 31, 2019, representing 11.6%, 8.8% and ~~R$74.6 billion on December 31, 2018, representing 8.8%,~~ 14.2% ~~and 15.0%~~ 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, reached R$17.0 billion on December 31, 2021, R$14.7 billion on December 31, 2020 and R$14.8 billion on December 31, ~~2019, and R$11.9 billion on December 31, 2018.~~2019.
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Treasury bills (Letras Financeiras) are a funding alternative available to banks that can be characterized as senior or eligible to compose the Regulatory ~~Capital.~~Capital, Pursuant to CMN Resolution ~~4.733~~4,733 of June 2019, its minimum term must be 24 months and it must be issued for a minimum amount of R$300,000 for subordinated transactions and R$50,000 for senior transactions. Our balance of treasury bills totaled R$~~12.8~~25.1 billion ~~as of~~on December 31, ~~2020,~~2021, a ~~53.8% decrease~~97% increase from December ~~2019.~~
31, 2020.
Real estate credit notes (Letras de Crédito Imobiliário) ~~decreased 6.1%~~increased 20%, from ~~R$21.3 billion on December 31, 2019 to~~ R$20.0 billion on December 31, ~~2020.~~
2020 to R$24.0 billion on December 31, 2021.
We undertake issuances of securities, including under our Global Medium Term Notes Program. Our balance of bonds and other securities was R$13.0 billion on December 31, 2021 and R$9.4 billion on December 31, ~~2020 and R$10.1 billion on December 31, 2019.~~2020. This change was principally due to the fact that ~~certain debt instruments reaching maturity were not replaced.~~in 2021 we issued a greater aggregate amount of securities than those which matured in that year.
Debt Instruments Eligible to Compose Tier 1 and Tier 2 Capital
On November 2018, we issued U.S. dollar-denominated Notes that constitute Tier 1 and Tier 2 regulatory capital as part of our plan to optimize our capital structure, as follows:
· ~~USD1.25 billion indexed 7.25% per year with no maturity (perpetual) and interest paid semiannually; and~~
· ~~USD1.25 billion indexed 6.125% per year maturing in November 2028 and interest paid semiannually.~~
U.S.$1.25 billion indexed 7.25% per year with no maturity (perpetual) and interest paid semiannually; and
U.S.$1.25 billion indexed 6.125% per year maturing in November 2028 and interest paid semiannually.
These issuances were made through our branch in the ~~Cayman Agency~~ and as a result they do not generate liability for income tax at source.
In November and December 2021, Santander Brasil issued Financial Bills with a subordination clause, to be used to compose our Tier 2 regulatory capital, in the total amount of R$ 5.5 billion. The Financial Bills have a term of ten years, and redemption and repurchase options in accordance with the applicable regulations. The Financial Bills had an estimated impact of 92 basis points on our Tier 2 regulatory capital.
As of December 31, ~~2020~~2021, the balance for both Tier 1 and Tier 2 debt instruments was R$~~13.1~~19.6 billion compared to R$~~10.2~~13.1 billion as of December 31, ~~2019.~~2020. This ~~variation~~increase of 49.3% was due to ~~foreign exchange differences arising from~~ the ~~depreciation~~issuance of the ~~real~~ ~~relative to the U.S. dollar in 2020 compared to 2019.~~abovementioned Financial Bills.

Subordinated Liabilities
On December 31, 2018 the subordinated liabilities we had were repurchased, according to the approval issued by Brazilian Central Bank on December 18, 2018. For further information, see note ~~“19 - Debt Instruments Eligible~~19 to ~~Compose Capital”~~our audited consolidated financial statements included elsewhere in ~~“Item 18. Financial Statements”.~~
this annual report.
Capital Management
Our capital management is based on conservative principles and continuous monitoring of the items that affect our solvency level. We are required to comply with Brazilian capital adequacy regulations under Brazilian Central Bank rules. In October 2013, the new regulations implementing the capital and the regulatory capital requirements of the Basel Committee on Banking Supervision (Basel III) came into effect in Brazil.
For additional information regarding minimum regulatory level and other Basel III requirements, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision— Capital Adequacy and Leverage - Basel—Basel III” and note ~~“30 -~~30, Operational ~~Ratios”~~Ratios, to our audited consolidated financial statements ~~prepared~~included elsewhere in ~~accordance with IFRS as issued by~~this annual report.
CMN regulations establish conservative capital and countercyclical buffers for Brazilian financial institutions, and determine the ~~IASB.~~
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~~5C. Research and Development, Patents and Licenses, etc.~~
~~We do not have any policy or significate project involving research and development, and we do not own patents or patents licenses, bearing in mind that we only have licenses involving trademarks.~~
~~5D. Trend Information~~
The following discussion is based largely upon our current expectations about future events, and trends affecting our business. Actual results for our industry and performance could differ substantially. For further information related to our forward-looking statements, see “Forward-Looking Statements” and for a description of certain factors that could affect our industry in the future and our own future performance, see “Item 3. Key Information—3D. Risk Factors.”
~~Impact of COVID-19 on our Business~~
We expect that our business will continue to be affected by the COVID-19 pandemic and governmental responses to it, including by their respective impacts on our customers, suppliers and other third parties with whom interactminimum percentages applicable as well as ~~on Brazilian~~which sanctions and ~~global economic conditions.~~limitations will apply in case of non-compliance with such additional requirements. See “Item ~~3. Key Information—D. Risk Factors—Risks Relating to~~4. Information on the ~~Brazilian~~Company—B. Business Overview—Regulation and Supervision—Principal Limitations and Obligations of Financial Services Industry and Our Business—The current 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,Institutions.”
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Capital Expenditures
See “Item 4. Information on the Company—A. History and Development of the Company—~~Important Events—Impact of COVID-19”~~Capital Expenditures and ~~“—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.~~Divestitures.”
~~Other Trends Affecting our Business~~
The following list sets forth, in our view, the most important trends, uncertainties and events that are reasonably likely to continue to have a material effect on our revenues, income from continuing operations, profitability, liquidity and capital resources, or that may cause reported financial information to be not necessarily indicative of future operating results or financial condition, in addition to those set forth under “—Impact of COVID-19 on our Business”:
· since December 2019, a novel strain of coronavirus has spread in China and other countries, culminating in the COVID-19 pandemic. Such events have caused disruption of regional or global economic activity, which could affect our operations and financial results. The extent to which the COVID-19 pandemic impacts our results will depend on future developments, which are highly uncertain, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the COVID-19 pandemic or treat its impact, among others. See “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The current global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations,” “Item 4. Information on the Company—A. History and Development of the Company—Important Events—Impact of COVID-19” and “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19”;
· 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;
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· 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 that could cause an increase in interest rates and lower growth in lending activities;~~
· ~~continued market volatility and instability that could affect our revenues;~~
· ~~restrictive regulations or government intervention in the banking business, which could affect our margins and/or growth in lending activities;~~
· ~~regulatory capital changes toward more restrictive rules as a response to any potential financial crisis or general macroeconomic conditions;~~
· ~~decreased liquidity in domestic capital markets;~~
· ~~tax policies that could decrease our profitability;~~
· ~~currency fluctuation and exchange rate controls that could have an adverse impact on international investors;~~
· ~~failure to adequately protect ourselves against risks relating to cyber-security;~~
· ~~our dependence on the proper functioning of information technology systems; and~~
· in contrast to all the points mentioned above, a recovery in the Brazilian economy, with new reforms underway (such as the pension reform and the foreign trade reform), and ongoing control of inflation, could have a positive effect 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
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 ~~“43 – Other disclosures” in~~43 to our audited consolidated financial statements included elsewhere in 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 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.~~guarantees, In fact, the maximum potential amount of future payments significantly exceeds inherent losses.
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For further information, see note ~~“43 – Other disclosures” in “Item 18. Financial Statements,” which contains~~43 to our audited consolidated financial statements ~~prepared~~included elsewhere in ~~accordance with IFRS as issued by the IASB.~~this annual report.
~~5F.~~ Contractual Obligations
Our contractual obligations as of December 31, ~~2020~~2021 are summarized as follows:
As of December 31, 2020 As of December 31, 2021
Total Less than 1 year 1-3 years 3-5 years More than 5 years Total Less than 1 year 1-3 years 3-5 years More than 5 years
(in millions of R$) (in millions of R$)
Contractual Obligations
Deposits from the Brazilian Central Bank and credit institutions 131,657 127,238 3,764 - 655 121,006 110,429 6,676 1,671 2,230
Customer deposits 445,900 346,515 62,769 36,578 38 468,961 221,917 163,642 83,327 75
Marketable debt securities 56,876 27,552 28,158 747 418 79,037 33,091 35,850 9,341 755
Debt Instruments Eligible to Compose Capital(1) 13,120 220 12,899 - - 19,641 5,552 14,089 - -
Total 647,552 501,525 107,590 37,325 1,110 688,646 370,990 220,257 94,339 3,060

(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—~~5. Operating And Financial Review And Prospects—A. Operating Results.”
(2) Calculated for all Deposits from credit institutions, Customer Deposits, Marketable debt securities, Subordinated liabilities and Debt Instruments Eligible to Compose Capital (Tier II) assuming a constant interest rate based on data as of December 31, ~~2020~~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, ~~2020~~2021 reflected liabilities of R$~~3,109~~3,479 million, compared to liabilities of R$~~1,983~~3,109 million as of December 31, ~~2019.~~
2020.
In addition, we lease several properties under standard lease contracts, which can be cancelled or renewed at our option and include escalation clauses. The total future minimum payments of non-cancelable operating leases as of December 31, ~~2020~~2021 was R$~~2,450~~2,318 million. From this total, R$~~671~~715 million matures in up to one year, R$~~1,608~~1,421 million matures from one year to up to five years and R$~~171~~181 million matures after five years. Additionally, we have contracts with indeterminate maturities totaling R$~~0.9~~0.8 million for the year ended December 31, ~~2020.~~2021.
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5C. Research and Development, Patents and Licenses, etc.
We do not have any policy or significate project involving research and development, and we do not own patents or patents licenses, bearing in mind that we only have licenses involving trademarks.
~~5G. Safe Harbor~~5D. Trend Information
~~See~~The following discussion is based largely upon our current expectations about future events, and trends affecting our business. Actual results for our industry and performance could differ substantially. For further information related to our forward-looking statements, see “Forward-Looking ~~Statements.~~Statements” and for a description of certain factors that could affect our industry in the future and our own future performance, see “Item 3. Key Information—3D. Risk Factors.”
Impact of COVID-19 on our Business
We expect that our business will continue to be affected by the COVID-19, and its variants, pandemic, and governmental responses to it, including by their respective impacts on our customers, suppliers and other third parties with whom interact as well as on Brazilian and global economic conditions. See “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations,” “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”
Other Trends Affecting our Business
The following list sets forth, in our view, the most important trends, uncertainties and events that are reasonably likely to continue to have a material effect on our revenues, income from continuing operations, profitability, liquidity and capital resources, or that may cause reported financial information to be not necessarily indicative of future operating results or financial condition, in addition to those set forth under “—Impact of COVID-19 on our Business”:
● since December 2019, a novel strain of coronavirus has spread in China and other countries, culminating in the COVID-19 pandemic. These events have caused disruption of regional or global economic activity and are expected to continue to have a negative impact on global economic activity. A continued downturn in local, regional or global economic conditions may adversely affect our business, results of operations and financial condition. The extent to which the COVID-19 pandemic and its variants impact our results will depend on future developments, which are highly uncertain, as new variants of the virus have emerged, and existing vaccines and acquired immunity may not be effective, as well as the actions to contain the COVID-19 pandemic. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Brazil and Macroeconomic and Political Conditions in Brazil and Globally— The COVID-19 pandemic has had, and is expected to continue to have, a negative impact on global, regional and Brazilian economies, and we would be materially adversely affected by a protracted economic downturn, “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations” and “Item 4. Information on the Company—A. History and Development of the Company—Impact of COVID-19” and “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19”;
● 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, 2019, may adversely affect the performance of the Brazilian economy. As a result, our credit portfolio, which is focused on Brazil, may not grow or could decrease and our provisions for loan losses increase;
● a global economic downturn as a result of pandemics, epidemics or outbreaks of infectious diseases, or instability or conflicts, can have an adverse effect on the global market and economy, including Brazil.
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It may decrease the interest of investors in Brazilian assets, in addition to making it difficult for us to access the capital markets and finance our operations, including on acceptable terms;
● uncertainties regarding the political scenario for 2022, increased volatility in economic indicators and deceleration in growth rates may negatively affect our strategic plan, with impacts on our profitability, asset quality, portfolio expansion and financing conditions.
● exposure to various types of inflation and interest rate risks, and the Brazilian government’s efforts to control inflation and interest rates;
● continued market volatility and instability that could affect our revenues;
● extensive regulation by the Brazilian government and the Brazilian Central Bank, among others, which could affect our margins and/or growth in lending activities;
● regulatory capital changes toward more restrictive rules as a response to any potential financial crisis or general macroeconomic conditions;
● decreased liquidity in domestic capital markets;
● changes in taxes or other fiscal assessments that could decrease our profitability;
● exchange rate volatility and exchange rate controls that could have an adverse impact on international investors;
● our ability to protect ourselves against cybersecurity risks; and
● our dependence on the proper functioning of information technology systems.
Conversely, a recovery in the Brazilian economy by means of economic reforms (including the pension and the foreign trade reform, and inflation control) could have a positive effect on the Brazilian economy and, therefore, on 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. Critical Accounting Estimates
Our 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 the most significant effect on the amounts recognized in the financial statements, see “—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Critical Accounting Policies” and note 2 to our audited consolidated financial statements for the fiscal years ended December 31, 2021, 2020 and 2019, included elsewhere in this annual report.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
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.
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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:
Members of the Board of Directors:
Name
Position
Date of Birth
~~Álvaro Antonio Cardoso de Souza~~ ~~Chairman~~ ~~September 5, 1948~~
~~Sergio~~Sérgio Agapito Lires Rial ~~Vice-Chairman~~Chairman July 28, 1960
Mario Roberto Opice Leão Member July 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
Alberto Monteiro de Queiroz Netto Member November 30, 1967
Angel Santodomingo Martell Member 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
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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 Vice President Executive Officer September 5, 1967
Elita Vechin Pastorelo Ariaz Vice President Executive Officer March 28, 1970
Jean Pierre Dupui Vice President Executive Officer September 23, 1968
~~Juan Sebastián Moreno Blanco~~João Marcos Pequeno De Biase Vice President Executive Officer ~~December 17, 1964~~
~~Mário Roberto Opice Leão~~ ~~Vice President Executive Officer~~ ~~July 21, 1975~~October 12, 1967
Patricia Souto Audi Vice President Executive Officer May 15, 1968
Vanessa de Souza Lobato Barbosa Vice President Executive Officer December 24, 1968
Adriana Marques Lourenço de Almeida Officer October 4, 1972
Alexandre Guimarães Soares(*) Officer August 27, 1969
Amancio Acúrcio Gouveia Officer March 31, 1963
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
André Rosenblit(*) Officer May 1, 1969
Carlos Aguiar Neto Officer March 5, 1971
Cassio Schmitt Officer April 23, 1971
Celso Mateus de Queiroz(*) Officer September 19, 1974
Claudenice Lopes Duarte Officer July 25, 1972
Daniel ~~Fantossi~~Fantoni Assa Officer December 12, 1975
~~Elita Vechin Pastorelo Ariaz~~ ~~Officer~~ ~~March 28, 1970~~
Francisco Soares da Silva Junior Officer January 23, 1970
Franco Luigi Fasoli Officer September 18, 1975
Geraldo José Rodrigues Alckmin Neto Officer September 8, 1981
Germanuela de Almeida de Abreu Officer December 6, 1975
Gilberto Duarte de Abreu Filho Officer August 7, 1973
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 Officer May ~~09,~~9, 1980
~~João Marcos Pequeno De Biase~~Leandro Alves(*) Officer ~~October 12, 1967~~January 5, 1984
Luciana de Aguiar Barros(*) Officer January 3, 1980
José Teixeira de Vasconcelos Neto Officer March 8, 1975
Luis Guilherme Mattos de Oliem Bittencourt Officer December 4, 1973
Luiz Masagão Ribeiro Filho Officer September 1, 1976
Marcelo Augusto Dutra Labuto Officer September 9,3, 1971
Maria Teresa Mauricio da Rocha Pereira Leite Officer June 21, 1967
Marilize Ferrazza Santinoni Officer November ~~20,1965~~20, 1965
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~~Marino Alexandre Calheiros Aguiar~~
Murilo Setti Riedel(*) Officer May ~~14, 1971~~17, 1963
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 Officer May 25, 1969
Reginaldo Antonio Ribeiro Officer May 19, 1969
Ricardo Olivare de Magalhães Officer January 26, 1979
Roberto Alexandre Borges Fischetti Officer August 28, 1975
Robson de Souza Rezende Officer January 24, 1967
Rogério Magno Panca Officer December 30, 1970
Sandro Kohler Marcondes Officer April 16, 1964
Sandro Mazerino Sobral Officer February 24, 1975
Sandro Rogério da Silva Gamba Officer August 31, 1975
Thomaz Antonio Licarião Rocha(*) Officer March 02, 1977
Thomas Gregor Ilg Officer September 12, 1968
~~Vitor Ohtsuki~~Tiago Celso Abate(*) Officer June ~~05,~~12, 1980
Vítor Ohtsuki Officer June 5, 1977
(*) Pending approval by the Brazilian Central Bank.
Below are the biographies of the members of our (i) Board of Directors, which were elected at the Shareholders’ Meetings held on April ~~26, 2019~~30, 2021 (election of all members but ~~Pedro Augusto~~Mario Roberto Opice Leão, Angel Santodomingo Martell and Alberto Monteiro de ~~Melo)~~Queiroz Netto); and ~~June 10, 2020~~December 17, 2021 (election of ~~Pedro Augusto~~Mario Roberto Opice Leão, Angel Santodomingo Martell, and Alberto Monteiro de ~~Melo)~~Queiroz Netto); and (ii) our Board of Executive Officers, as elected at the Board Meetings held on May 3, ~~2019~~2021 (election of all members but ~~Ana Paula Vitali Janes Vescovi,~~ Sandro Mazerino Sobral, Rogério Magno Panca, Maria Teresa Mauricio da ~~Silva Gamba, Marcelo Augusto Dutra Labuto,~~Rocha Pereira Leite, Gilberto Duarte de Abreu Filho and Andrea Marques de Almeida); July 1, 2021 (election of Sandro Mazerino Sobral and Rogério Magno Panca); November 1, 2021 (election of Andrea Marques de Almeida, Maria Teresa Mauricio da Rocha Pereira Leite and Gilberto Duarte de Abreu Filho); December 1, 2021 (election of Gustavo de Souza Fosse); December 17, 2021 (change of position of Mario Roberto Opice Leão from the position of Vice President Executive Officer to the position of Chief Executive Officer and the change of position of Andrea Marques de Almeida, Elita Vechin Pastorelo Ariaz and João Marcos Pequeno De Biase Adriana Marques Lourenço de Almeida, Francisco Soares da Silva Junior, Marilize Ferrazza Santinoni, and Ricardo Olivare de Magalhães); July 2, 2019 (election of Ana Paula Vitali Janes Vescovi); December 31, 2019 (conduction of Ede Ilson Viani from the position of ~~Officer~~Officers to the position of Vice President Executive ~~Officer)~~Officers); ~~February 28, 2020~~January 3, 2022 (elections of Alexandre Guimarães Soares, André Juaçaba de Almeida, André Rosenblit, Celso Mateus de Queiroz, Leandro Alves, Luciana de Aguiar Barros, Paulo César Ferreira de Lima Alves, Paulo Sérgio Duailibi, Thomaz Antonio Licarião Rocha and Tiago Celso Abate); and January 20, 2022 (election of Sandro Rogério da Silva Gamba); April 7, 2020 (election of Marcelo Augusto Dutra Labuto); July 3, 2020 (election of João Marcos Pequeno De Biase); and December 18, 2020 (election of Adriana Marques Lourenço de Almeida, Francisco Soares da Silva Junior, Marilize Ferrazza Santinoni, and Ricardo Olivare de Magalhães)Murilo Setti Riedel).
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Members of the Board of Directors:
~~Álvaro Antonio Cardoso de Souza~~. Mr. 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 at the University of Pennsylvania. He is the Managing Director of AdS - Management, Consulting and Investments, a firm which provides advice on investments and general management. He is the Chairman of the Board of Santander Brasil and a member of Santander Global Board in Spain. He developed his career in the banking business and has worked at Citigroup for thirty-two years, in Brazil and abroad. 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). 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. He was also President of the Board of Directors of WWF Brasil. Mr. Souza is coordinator of the Nomination and Governance Committee, and a member of the Compensation Committee and Risk and Compliance Committee of Santander Brasil, as well as chairman of the Risk and Compliance Committee of Santander Group.
Sérgio Agapito Lires Rial. Mr. Rial is Brazilian and was born on July 28, 1960. He ~~has~~joined Santander Brasil, in the very early part of 2015, as Executive Chairman. From 2016, he acted as the Chief Executive Officer of Santander Brasil (during six years until December 31, 2021), and as head of South America from 2019 to 2021. South America, of which Brazil is a ~~degree in Law from~~significant component, is a key part of the ~~Universidade Federal do Rio de Janeiro and a degree in Economics from the Universidade Gama Filho.~~Santander Group. In January 2022, Mr. Rial ~~also holds an MBA from IBMEC~~assumed the position of Chairman of Santander Brasil, remaining a board member of Santander Spain as well. Before joining the Santander Group, he held leadership positions in ~~São Paulo,~~several large financial and agribusiness companies. Mr. Rial worked at ABN AMRO for 18 years, serving as ~~well~~a member of ABN AMRO’s Global Executive Board (the first non-Dutch) and prior to that, as ~~specialization degrees from Harvard Business School,~~Chief Executive Officer of Asia Pacific, SVP Client Coverage in Europe, President in China and Hong Kong, and Head of the ~~Wharton School~~Fixed Income Emerging Markets Desks in Amsterdam. After ABN AMRO, he led Bear Stearn’s Capital Markets businesses internationally out of ~~Business at~~New York. Right after Bear Stearns, Mr. Rial joined Cargill’s team of senior executives, focusing initially on Cargill´s poultry and food ingredient business throughout Latin America and later on assuming Cargill’s Global Chief Financial Officer role out of Minneapolis, and being part of Cargill’s senior leadership team and board of directors. Returning to Brazil, he became the ~~University of Pennsylvania, and INSEAD in France. His professional career includes serving as~~ Chief Executive Officer of Marfrig Global Foods, ~~S.A, Vice-President Executive Officer~~the world’s second-largest meat company, leading one of the most challenging restructuring stories in the country. He served on the boards of Mosaic Fertilizer and ~~World Chief~~Carval in the U.S. and Cyrela Realty in Brazil. Currently, he serves as a board member for Delta Airlines in Atlanta and is a co-chair of The Nature Conservancy Board for Latin America, named LACC, and Chairman of Ebury, a cross-border payment fintech focused on SME´s. He is also currently the Chairman of CNF (Brazil´s Financial ~~Officer of Cargill. He was also~~National Confederation) and is a member of the ~~board of directors of Cargill for nine years.~~FIESP (São Paulo’s Industrial Federation) Strategic Advisory Board. He ~~was~~studied Law and Economics in Rio de Janeiro (UFRJ and UGF), holds a ~~Managing Director of Bear Stearns & Co.,~~MBA from IBMEC and has participated in ~~New York, Officer of ABN AMRO Bank~~several courses at Insead, Harvard and a member of the board of directors of ABN AMRO Bank in the Netherlands, as well as a member of the board of directors of Mosaic Fertilizers. Currently, he is Vice-Chairman of the Board of Directors and Chief Executive Officer of Santander Brasil, Chairman of the Board of Directors of Universia Brasil S.A and member of the Board of Directors of the Santander Group.Wharton.
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José Antonio Álvarez Álvarez. Mr. Álvarez is Spanish and was born on January 6, 1960. He holds a 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 Chairman on January 15, 2019. Prior to this, he 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 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. 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 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., among others, and served on the supervisory boards of Santander ~~Group's~~Group’s independent subsidiaries, such as Poland, Germany and the United States. He was Chairman of the European Banking Federation Board and chaired the Banking Supervision Committee from 2009 to 2012. Mr. Álvarez ~~is currently~~has been a member of our Board of Directors since 2009.
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José de Paiva Ferreira. Mr. Paiva is Portuguese and was born on March 1, 1959. He has a specialization degree in Business Administration from the Fundação Getúlio Vargas, and an MBA from the Wharton School of Business at the University of Pennsylvania. He has worked in the financial markets for more than 40 years. He started at Banco Bradesco in 1973 and occupied several different positions. Afterwards, he joined Banco Geral do Comércio, Noroeste and Santander Brasil, where he was Vice President Executive Officer, responsible for the Business, Human Resources, Operations, Technology, Property, Products, Marketing, Credit Cards, Insurance, Leasing and Branch Network. From 2000 to 2001, he occupied the position of e-Business Officer for Latin America, in the American Division of Santander Central Hispano. At the end of 2001, he returned to Brazil to work at as Vice President Executive Officer of Banco Banespa, where he was responsible for ~~the~~ Human Resources, 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 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 a member of Santander Brasil’s Board of Directors, and joined the 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 and compliance committee.
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~~School. Mr. García Cantera is Senior Executive Vice President of the University of Zaragoza. He started at Santander as Executive Director and Chief Risk Officer at Banco Español de Credito, S.A. (Banesto). In 2010, Mr. Badía served as Executive Director and Chief Risk Officer of Santander UK. From June 2014 to 2019, he served as Chief Risk Officer of Santander Group. Currently, Mr. Badia is Group Chairman Senior Risk Advisor of 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 ~~well 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 ~~Santander Brasil, Santander Spain~~Citigroup Capital Markets UK and ~~other entities~~Citigroup EMEA. During his time as a Latin American stock analyst, he was rated as best analyst by a number of ~~the Santander Group.~~
specialized publications including Institutional Investor, Reuters, Extel and Global Investor between 1995 and 2002.
Pedro Augusto de Melo. Mr. de Melo is Brazilian and was born on November 4, 1961. He ~~holds~~has a ~~graduate~~ degree in accounting sciences and a postgraduate degree in accounting and financial administration from the São Judas Tadeu University of Accounting Sciences (São Paulo). Since March 2, 2020 ~~Mr. de Melo~~he has ~~served as~~occupied the position of CEO of the Brazilian Institute of Corporate Governance (IBGC). ~~He is also a member of~~In July 2021, he was appointed to coordinate the ~~Governance~~Audit Committee of ~~Amcham Brasil and executive of the Union of Accounting Companies - SESCON.~~Hospital Sírio Libanês. He developed his career in the ~~audit areas of~~ Deloitte and ~~KPMG.~~KPMG audit areas. From 2008 to 2017, he was CEO of KPMG Brazil, ~~attaining,~~ in ~~2015,~~addition to being the ~~position of~~ CEO for KPMG South ~~America.~~America from 2015 to 2017. On October 1, 2017, he assumed the roles of COO for South America and Leader of Customers and Markets for South America until he retired from the firm in early 2020. ~~Additionally, he~~He also actively participated in other levels of Governance at KPMG International, KPMG Americas and KPMG South America. He was Chairman of the Board of Directors of IBRACON - Brazilian Institute of Independent Auditors between 2009 and 2010. He was also a member of the Governance Committee of Amcham Brasil and executive of the Union of Accounting Companies - SESCON. Currently, he is an independent member of ~~board~~the Board of ~~directors~~Directors and the coordinator of the Risk and Compliance Committee of the Banco Santander ~~Brasil S.A~~.(Brasil) S.A.
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Deborah Patricia Wright. Mrs. Deborah Wright is Brazilian and was born on September 4, 1957. She holds a Business Administration degree from the São Paulo School of Business Administration (EAESP-FGV). Mrs. Wright started her career in 1980 at Kibon’s Marketing Department, where she remained until 1989. In 1989, she joined Unilever as Marketing Manager and worked in the food division. In 1991, she returned to Kibon as Marketing Director, ~~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, where she~~firm. She has ~~also~~ 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 2009 she was a member of the Board of Directors of the Samaritano Hospital in São Paulo. From 2008 to 2014 she was a board member offor Lojas ~~Renner’s board,~~Renner, a Brazilian publicly-traded company, specializing in apparel retail, as well as Chairwoman of ~~the~~their Sustainability Committee from 2012 to 2014. From 2013 to 2016, she was a member of the Advisory Board offor Eurofarma, ~~4th~~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 WCD Group (Women Corporate Directors), of which she co-founded in 2010; ~~Strategy Commission at~~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); ~~she is part of~~ AmCham’s (American Chamber of Commerce); Amcham’s Strategic ~~Forum of~~ Corporate ~~Governance;~~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~~(Brasil) S.A.
Deborah Stern Vieitas. Mrs. Vieitas is Brazilian and was born on August 21, 1957. She holds a degree in Public Administration from FGV-SP and a degree in Journalism from the School of Communications and Arts (Escola de Comunicações e Artes) of the University of São Paulo. She also holds a master’s degree in Business from FGV-SP and in Public Administration from École Nationale d’Administration. She is currently the Chief Executive Officer of American Chamber of Commerce Brazil (Amcham Brazil). From 2015 to 2017, she was an independent member of the Board of AXA Seguros ~~SA.~~S.A. From 2008 to 2014, she was CEO and Board Member of the Banco Caixa Geral – Brasil. From 2000 to 2008, 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. Currently she is an independent member of our Board of Directors and chairwoman of the ~~Audit Committee,~~audit committee, in addition to having already been a member of the Risks and Compliance Committee.
Marília Artimonte Rocca. ~~Ms.~~Mrs. Rocca ~~is Brazilian and was born on January 31, 1973. She serves as~~has been CEO of Hinode Group, ~~since November 2018,~~ the largest Marketing Multilevel consumer goods company in Brazil, ~~with~~since November 2018. It also has operations ~~also~~ in Latin America. Previously, she was Ticket’s Managing Director in Brazil, a food voucher Edenred Group company. Formerly, she served as vice president at TOTVS, the ~~6th~~sixth largest software company worldwide, based in São Paulo. From 2008 ~~until~~till 2012, ~~Ms.~~Mrs. Rocca was a managing partner at Mãe Terra, a natural and organic foods B-Corp sold to Unilever in 2017. Prior to that she co-founded and managed Endeavor Brazil, the most successful NGO supporting innovative entrepreneurship in ~~Brazil.~~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, ~~Ms.~~Mrs. Rocca worked for Walmart as one of the ~~organization's~~organization’s first female directors in Brazil. For 20 years ~~Ms.~~Mrs. Rocca has served as a board member at privately and ~~public~~publicly held companies in the Education, ~~Information Technology,~~IT, Services and Consumer Goods industries. ~~Ms.~~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, ~~Ms. Rocca~~Marilia is an independent Board member and coordinator of the Sustainability Committee of Banco Santander ~~Brasil.~~
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~~Members of the Board of Executive Officers:~~
(Brasil) S.A.
~~Sérgio Agapito Lires Rial~~Mario Roberto Opice Leão. ~~See “—Members of the Board of Directors.”~~
~~Alberto Monteiro de Queiroz Netto.~~Mr. ~~Monteiro~~Leão is Brazilian and was born on ~~November 30, 1967.~~July 21, 1975. He holds a ~~bachelor’s~~ degree in ~~Business Administration~~Production Engineering from ~~Faculdade de Ciências Políticas e Econômicas do Rio de Janeiro. He also completed a post graduate degree in Banking at~~the Escola Politecnica of the Universidade de São ~~Paulo~~Paulo. He joined Santander Brasil in October 2015 as an Executive Director in Corporate and ~~received an MBA in corporate finance at Fundação Getúlio Vargas do Rio de Janeiro. From 2009 to 2011,~~Investment Banking. In July 2017 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., where he was responsible for finance. In 2017, Mr. Monteiro served asbecame Executive Vice President of ~~Banco do Brasil S.A., overseeing the Finance, Investor Relations~~Corporate and ~~M&A Departments. Currently, Mr. Monteiro is the Vice President Executive Officer~~SMEs and ~~Head~~a member of the ~~Private Banking Segment of Santander Brasil. He is also the~~executive committee. Since January 2022 he has acted as Chief Executive Officer of ~~Return Gestão de Recursos S.A.~~Santander Brasil. Before joining Santander Brasil, he was a Managing Director in Capital Markets at Morgan Stanley from 2008 to 2015, worked for Goldman Sachs from 2006 to 2008 and for Citibank from 1996 to 2006.
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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 ~~the~~ ICADE University in Madrid and a CFA (Chartered Financial Analyst) from the CFA Society of the United States. As one of our Vice President Executive Officers, he holds the position of Chief Financial Officer and Investor Relations ~~Officer.~~Officer since 2014. He started at the Santander Group in 2005 as Head of International ~~Developments and~~Development in the Asset Management ~~and then~~unit after which he became ~~globally~~global responsible for the ~~investor relations~~Santander Group Investor Relations area. HePrior to this he was the head of Grupo Fortis in ~~Brazil~~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 ~~occupied~~acted as founding member of the ~~position of Chief Executive Officer of the~~nonprofit organization CFA Society in Spain, ~~where he acted as a founding member of this nonprofit organization focused on serving the holders of financial analyst accreditations (CFA). Additionally,~~also occupying different positions including President; and from 2009 to 2014 ~~Mr. Santodomingo served as~~he was Vice President of AERI’s ~~(Asociació~~(Asociación Española de Relaciones con ~~Inversores)~~Inversores) Board of Directors. He was Chairman of the Board of Directors of Webmotors S.A. from 2018 to 2021. Currently, he is ~~also~~ Chief Executive Officer of ~~Aymoré CFI,~~ Santander Leasing S.A. Arrendamento Mercantil, ~~and~~ Santander Corretora de Seguros, Investimentos e Serviços S.A., ~~Chairman~~a member of the Advisory Board of ~~Directors~~Fundo Garantidor de Créditos (FGC) and a member of ~~Webmotors S.A.,~~the boards of directors of Banco Hyundai Capital Brasil S.A., ~~and~~ 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.
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 by FEA/USP and an MBA in Corporate Finance by FGV/RJ. 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. where he was responsible for finance. In 2017, Mr. Monteiro served as executive vice president at Banco ~~RCI~~do Brasil S.A., where he was in charge of the finance, investor relations and M&A departments. Currently Mr. Monteiro is the Vice President Executive Officer head of the Wealth Management segment of Santander ~~Leasing S.A. Arrendamento Mercantil.~~Brasil, and on December 17, 2021, he was elected member of the Board of Directors of Santander Brasil.
Members of the Board of Executive Officers:
Mario Roberto Opice Leão. See “—Members of the Board of Directors.”
Alberto Monteiro de Queiroz Netto. See “—Members of the Board of Directors.”
Angel Santodomingo Martell.See “—Members of the Board of Directors.”
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 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~~has been the ~~Head~~head of the ~~Legal Litigation, Legal Consulting~~legal litigation, legal consulting in ~~Labor~~labor and ~~Pension Funds Departments~~pension funds departments at Santander Brasil. From ~~January~~ 2000 to ~~May~~ 2010, he served as ~~the~~ head of the labor and pension funds legal department at Banco Itaú S.A. Since January ~~2017,~~2020, he has been Executive Director of FEBRABAN. He is aalso member of the ~~Legal Counsel~~Board of ~~ABRAPP (Brazilian Association~~Directors at CACEIS as 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~~Montes. Mr. Pardo de Santayana is Spanish and was born on November 5, 1971. He holds ~~degrees~~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
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Andrea Marques de Almeida. Ms. de Almeida is ~~also Vice-President Officer of Banco Bandepe S.A., and Executive Officer of Aymoré CFI, Santander Leasing S.A. Arrendamento Mercantil, and Sancap Investimentos e Participações S.A.~~
~~Carlos Rey de Vicente~~~~. Mr. Rey is Spanish~~Brazilian and was born on ~~February 20, 1974. He graduated with~~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 ~~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, as well as team management. Previously, Mr. Rey 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 ~~and Quality~~ departments. He is also a member of the Board of Directors of Santander Leasing S.A. Arrendamento Mercantil, Santander Caceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A., Zurich Santander Brasil Seguros e Previdência S.A., Zurich Santander Brasil Seguros S.A. and Santander Brasil Establecimiento Financeiro de Crédito S.A. Mr. Rey currently serves as Vice President Officer and Chairman of the Board of Directors of Santander Cultural, as well as Executive Officer of Esfera Fidelidade S.A. and Santander Corretora de Seguros, Investimentos e Serviços S.A. He is also a member of our Sustainability Committee.
Ede Ilson Viani. Mr. Viani is Brazilian and was born on September 5, 1967. He holds a degree in Accounting ~~from Faculdade Tibiriçá,~~ and an MBA in Finance from IBMEC Instituto Brasileiro de ~~Ensino e Pesquisa - Insper.~~Mercado de Capitais. He was an auditor at Banco Itaú S.A. from 1986 to 1990 and worked at BankBoston S.A for 16 years as a Senior Auditor, Credit Risk Management Superintendent, Head of Local Currency Loans and Head ~~Officer and~~of the Small ~~and Medium Companies Head Officer.~~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 areas. 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 ~~Tecnologia Bancária S.A.~~LeBoeuf, Lamb, Greene and ~~President Officer~~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 ~~Tecnologia S.A.,~~where she served as Director responsible for the Business Legal Department – wholesale and retail until 2021. As one of our Executive ~~Officer of Santander Tecnologia e Inovação Ltda.~~
Vice Presidents, she is currently responsible for Human Resources area.
Jean Pierre Dupui. Mr. Dupui is Brazilian and was born on September 23, 1968. He holds a bachelor’s degree in Economics and a specialization degree ~~both~~ from Boston University. Currently he is responsible for Global Corporate & Investment Banking at Santander Brasil. From 1992 to 1998 he worked at the structured finance and trade finance department of Lloyds TSB Group in São Paulo and London. From 1998 to 2001 he worked at the structured finance department of Citigroup Brasil. From 2001 to 2004 he worked for BBVA Brasil in the ~~Debt Capital Markets Department.~~debt capital markets department. From 2004 to 2006 he was a Corporate Finance Officer at Citigroup New York and São Paulo. He started his career in Santander Group in 2006, where he took charge of the Credit Markets ~~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, ~~Banco Bandepe S.A.~~a member of Curator Counsel at Fundação Santander and ~~Return Gestão de Recursos S.A., as well as~~a member of the ~~Board~~boards of ~~Directors~~directors of ~~Santander~~S3 Caceis Brasil ~~Distribuidora de Títulos e Valores Mobiliários~~DTVM S.A.
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~~Juan Sebastián Moreno Blanco~~João Marcos Pequeno De Biase. Mr. ~~Moreno~~De Biase is Brazilian and was born on ~~December 17, 1964, in Spain.~~October 12, 1967. He graduated in ~~Business Administration~~Economics from the Federal University of ~~Houston, TX. From 1987 to 1994, he~~Rio de Janeiro - UFRJ. Before joining Banco Santander Brasil, Mr. De Biase worked at ~~Bankinter~~Banco Itaú BBA between 2008 and 2020, where he served as ~~Commercial Officer,~~Global Head of Corporate and Investment Banking - CIB, Executive Director responsible for the commercial area and head of the bank’s origination team. From 2005 to 2008, he served as Director and Head of Sales and Global Market Coverage for Deutsche Bank. From 1998 to 2005, Mr. De Biase was Director of Investment Banking and Sales of fixed income products at Credit Suisse in São Paulo. From 1991 to 1998, he held various positions at Banco de Investimentos Garantia, including Head of the office located in Rio de Janeiro and Head of the Capital Markets area where he was responsible for the ~~Commercial Department~~liquidation and back office of all Client Company Transactions. Mr. De Biase started his career in 1989 as ~~well as for the Enterprises segment in Santander. From 1994 to 1997, he worked as Project Officer~~a Trainee in the ~~financial system~~Economic Planning team at Petrobrás Comercial Internacional. Currently, Mr. De Biase holds the position 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, overseeing the area of products~~Vice President 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 Officersegment of Banco Santander ~~– Puerto Rico. As of 2010, he occupied the position of Vice President Officer~~Brasil, responsible for serving larger and medium-sized companies, both national and multinational. At Santander since 2020, João was also Executive Director of the ~~Commercial~~Corporate & Investment Banking area of ~~Banco Santander Mexico, overseeing~~ the business areas. At that time, he was also a member of the Board 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 Officer of Banco Bandepe S.A. and President Officer of Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.
~~Mário Roberto Opice Leão~~. Mr. Leão is Brazilian and was born on July 21, 1975. He holds a degree in Production Engineering from the Escola Politecnica of the Universidade de São Paulo. He began his career in 1996 as an associate at Citigroup, in the financial control area, being the Financial Analyst of all wholesale products from Citigroup Brazil, including global markets, financing, and corporate banking accounts. In 2006, he served as Global Markets Manager, 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.Corporate Banking segment.
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Patricia Souto Audi. ~~Ms.~~Mrs. Souto Audi is Brazilian and was born on May 15, 1968. She holds a ~~bachelor’s~~ degree in Business Administration from the University of Brasilia and ~~she is an expert~~a Specialization in ~~public policies~~Public and ~~government management. Between 2015 and 2018, she served as~~Government Management, National School of Public Administration from the ~~secretary~~Public Management National School (ENAP) in Brasilia. She was Secretary of Transparency and Corruption Prevention ~~of Corruption~~ at the ~~Brazilian~~ Ministry of Transparency; ~~director of~~INSS Benefits ~~at INSS (National Institute of Social Security); coordinator at~~Director; ILO Coordinator (International Labor Organization) in Brazil; ~~secretary~~Secretary of Management at the Ministry of Planning, Budget and Management of the Federal ~~government~~Government and ~~secretary~~Secretary of the Economic and Social Development Council, ~~at Civil House,~~ a ~~governmental~~civil society body ~~directly connected~~that gives advice to the Presidency of the Republic of Brazil. She joined Santander Brasil in August 2018 as the head of Institutional Relations. Nowadays, she holds the position of Executive ~~Superintendent Head of the Institutional Relations Department. Since January 2019,~~Vice President, where she is ~~one of our Vice President Executive Officers,~~ responsible for ~~the Communication, Marketing, Institutional Relations~~institutional relations and Sustainability Departments of Santander Brasil. She is also chief executive officer of Rojo Entretenimento S.A., Executive Officer of Universia Brasil S.A. and a member of the Board of Directors of Santander Cultural.
sustainability.
Vanessa de Souza Lobato Barbosa. Ms. Lobato is Brazilian and was born on December 24, 1968. She holds a bachelor’s degree in Business Administration from Pontifícia Universidade Católica de Minas Gerais, and a specialization degree in Marketing from Universidade Federal de Minas Gerais. From ~~1992~~1990 to 1995 she served as Marketing Local Manager at Banco Nacional, ~~where she was responsible~~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, overseeing~~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, totaling 258 branches in 94 cities. From 2013 to 2020, she led, as one of our Executive Vice Presidents, the Vice President 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 United States. She 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 automotive sector. Since 2019, she led the Global Transaction Banking division (cash management, supply chain finance and local currency loans) for the wholesale bank at Banco Santander (Brasil) S.A.
Alexandre Guimarães Soares. Mr. Soares is Brazilian and was born on August 27, 1969. He has a degree in engineering from the Escola Mauá de Engenharia and has an extension in economics from the Faculdade de Economia e Administração / USP and a post-graduate degree in marketing from the Escola Superior de Propaganda e Marketing. Prior to joining Santander Brasil, Mr. Soares held management positions at Banco Safra, BankBoston Banco Múltiplo S.A. and Banco Real S.A. He is an alternate member of the deliberative councils of the Câmara Interbancária de Pagamentos and TECBAN – Tecnologia Bancária. As one of our officers, Alexandre is Vice President ~~Executive Officers, she is currently~~ responsible for ~~the Human Resources department. She is also a member of the Board of Directors of Santander Cultural.~~Manufacturing and Technology & Operations.
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Amancio Acúrcio ~~Gouveia~~Gouveia.. Mr. Gouveia is Brazilian and was born on March 31, 1963. He holds a degree in Accounting from the Universidade Santa Úrsula. As one of our officers, he has been acting as a controller working in the Accounting and Fiscal management areas of our companies since 2001. He was an Audit Manager for KPMG until 1991 and an accounting manager of Unibanco – União de Bancos Brasileiros S.A. from 1991 to 1999, and assistant superintendent of BankBoston Banco Múltiplo S.A. from 1999 to 2001. He is Chief Executive Officer of Banco Bandepe S.A. and Executive Officer of Santander Leasing S.A. Arrendamento Mercantil, Atual Serviços de Recuperação de Créditos e Meios Digitais S.A., Santander Capitalização S.A., Aymoré CFI, Evidence Previdência S.A. and Sancap Investimentos e Participações S.A. He is also Administrator of Santander Brasil Administradora de Consórcio Ltda. He also serves as a member of the Fiscal Council of the Brazilian Federation of Banks, of the National Federation of Banks, of the Brazilian Institute of Banking Science and of the Banks Union in the ~~States~~states of São Paulo, Paraná, Mato Grosso, Mato Grosso do Sul, Acre, Amazonas, Pará, Amapá, Rondônia and Roraima. He has professional experience as a ~~teacher:~~teacher at ABEU—Faculdades Integradasm, as Professor III, between March 1991 and February 1999, as a teacher for General Accounting under the accounting degree curriculum; at the Faculdade de Direito Cândido Mendes, as a substitute professor between March of 1997 and December of 1998, where he taught Elements of Accounting under the law degree curriculum; and at the Sponsor of Seminars promoted by IOB and IBRACON, in the year 1990, where he taught as part of the Training Programs of Accounting for Non-Accountants.
Ana Paula Vitali Janes Vescovi.Mrs. 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 and currently~~Eletrobras. Nowadays, she serves as a ~~board~~ 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.
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André de Carvalho Novaes. Mr. Novaes is Brazilian and was born on April 14, 1969. He holds a degree in Economics from the Universidade Federal Fluminense and an executive MBA from BPS Business School (São Paulo and Toronto). From 1993 to 1997, he served as Products Coordinator in Santander Brasil, where he was responsible for credit proposals analysis, and in several areas at Aymoré CFI and in posts as commercial operator and credit and collection chief. In 1996, he served as coordinator of products in São Paulo. From 1997 to 2001, he served as commercial manager. From 2002 to 2008, he served as Regional Manager. From 2008 to 2012, he served within Santander Brasil as the person responsible for the Other Assets segment in Aymoré CFI. Since 2012, he has served as Executive Superintendent in Santander Brasil, with responsibility for Aymoré CFI’s Vehicle Partnerships. In December 2012, he became the Commercial Coordinator of Aymoré CFI, with responsibility for the Commercial and Partnerships team. Currently, Mr. Novaes is head of Santander Financiamentos and reports to the CFO. He is also Executive Officer of Aymoré CFI, Vice Chairman of the Board of Directors and Vice President Officer of Webmotors S.A., and a member of the Board of Directors of Banco Hyundai Capital Brasil S.A., Santander Auto S.A. and Loop Gestão de Pátios S.A. ~~and~~He is also a member of the Board of Directors and Institutional Relations Officer of Banco RCI Brasil S.A.
André Juaçaba de Almeida. Mr. Juaçaba de Almeida is Brazilian and was born on September 27, 1974. He holds a degree in economic sciences from Universidade Candido Mendes. Prior to joining Santander Brasil, Mr. Juaçaba de Almeida held positions in structured transaction at Citibank and at Banco Goldman Sachs in the commercial area of Foreign Exchange Derivatives, Interest and Commodities. As one of our officers, Mr. Juaçaba de Almeida is responsible for the relationship with large corporations: Banking, as well as our Investment Banking.
André Rosenblit. Mr. Rosenblit was born May 1, 1969. He holds a degree in business administration from the Fundação Álvaro Penteado. Prior to joining Santander Brasil, Mr. Rosenblit held management positions at Banco Safra S.A. and Banco Deutsche. Currently he is also an officer of Santander Corretora de Câmbio e Valores Mobiliários S.A. As one of our officers, Mr. Rosenblit is responsible for the Equities Area.
Carlos Aguiar Neto. Mr. Aguiar is Brazilian and was born on March 5, 1971. He holds a degree in Electrical Engineering from Fundação Armando Alvares Penteado with a specialization in Business Administration from Fundação Getúlio Vargas. From 1996 to 2007, he worked as Treasurer of Cargill Agrícola S.A., officer of Cargill Previdência and Executive Officer of Banco Cargill S/A. From 2007 to 2010, he was CFO and Investor Relations at BrasilAgro – Cia Brasileira de Propriedades Agrícolas S.A. From 2010 to 2015, he was CEO at Macquarie Crop Partners LP at Macquarie Bank, responsible for funds that invest in farms and grain production in Brazil and Australia. Mr. Aguiar is also Executive Officer of ABAG (Associação Brasileira do Agronegócio), a member of COSAG (Conselho Superior do Agronegócio da Fiesp) and Executive Officer of FEBRABAN (Federação Brasileira de Bancos) on the Rural Credit Sector Commission. Since 2015, he has been responsible for the agribusiness area of Santander Brasil. He is also a member of our Sustainability Committee and ~~a member~~Executive Officer of ~~the Board of Directors of Gira, Gestão Integrada de Recebíveis do Agronegócio~~Banco Bandepe S.A.
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Cassio Schmitt. Mr. Schmitt is Brazilian and was born on April 23, 1971. He holds a degree in Economics from the Universidade Federal do Rio Grande do Sul, a master’s degree in Corporate Economics from Fundação Getúlio Vargas and an MBA from the Sloan School of Business, Massachusetts Institute of Technology. He was ~~the~~an Economist of Banco de Crédito Nacional S.A. ~~from 1995 to 1996,~~ and ~~Senior Economist at~~of UNIBANCO – União de Bancos Brasileiros S.A. from ~~1996~~1995 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~~Banker of ~~UNIBANCO~~UNIBANCO’s Representative Office in New York from 2003 to 2004. He became responsible for the project finance team of Santander Brasil infrom 2004 ~~and for~~to 2010, adding the areas of acquisition finance and syndicated ~~lending in 2010.~~lending. From 2011 to 2012, he was the Director responsible for the ~~GCB Clients~~Wholesale Risk Department, and from 2013 to 2014 he was responsible for Global Transaction Banking, including Cash and ~~from~~Trade. From 2015 ~~to 2018~~onwards, he ~~was~~led several businesses in the ~~officer responsible for~~Retail Banking, such the Credit Recovery Business and the Personal and ~~Real Estate~~SMEs Credit Products, including Payroll Loans, Agro and Mortgage Loans, and ~~from 2019 to 2020 he was in charge of~~ the ~~Retail Corporate Business, Government and Institutional customers.~~Innovation team. Currently, Mr. Schmitt serves as our officer in charge of the Retail ~~Credit Products~~Corporate Business, Government and aInstitutional clients. He was member of the Board of Directors of ~~Gira, Gestã~~Banco Olé Consignado S.A. and Super Pagamentos e Administração ~~Integrada~~ de ~~Recebíveis do Agronegócio~~Meios Eletrônicos S.A. (“Superdigital”).
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Celso Mateus de Queiroz. Mr. de Queiroz is Brazilian and was born on September 19, 1974. He holds a degree in Business Administration from UNIB – Universidade Ibirapuera and a postgraduate degree in marketing administration from Fundação Armando Alvares Penteado, an MBA in business management from Fundação Getúlio Vargas and an MBA in Business Management from INSPER. Prior to joining Santander Brasil, de Queiroz held management positions at Banco Real S.A. As one of our officers, Mr. de Queiroz is responsible for Rede SP Capital.
Claudenice Lopes Duarte. Mrs. Duarte is Brazilian and was born on July 25, 1972. She holds a degree in Journalism from Faculdades Integradas Alcântara Machado with a specialization in Business Communication from Fundação Getúlio Vargas. From 1996 to 2009, she worked at GWA Comunicação Integrada as Senior Director. From 2009 to 2010, she was Executive Manager of Press Relations at Santander Brasil. From 2011 to 2012, she was Superintendent of Relations with the Press and Institutional Relations at Santander Brasil and, as one of our officers, she is currently responsible for Internal and External Communications at Santander Brasil.
Daniel Fantoni Assa. Mr. Assa is Brazilian and was born on December 12, 1975. He holds a degree in Business Administration from Fundação Alberto Alvares Penteado and an MBA from Instituto Brasileiro de Mercado de Capitais. He started his career at Banco Real working at Corporate and Investment ~~Bank~~Banking and was responsible for structuring the areas of the commercial bank and investment bank. At Santander Brasil, between 2008 and 2011, he was Executive Superintendent of Corporate & Investment Banking; between 2011 and 2014, he was Executive Superintendent of Credit Recovery; between 2015 and 2016, he was Executive Superintendent of Corporate; and between 2016 and 2019, he was Executive Superintendent of Wholesale Risk. As one of our officers, he is responsible for the Corporate Risks area.
~~Elita Vechin Pastorelo Ariaz.~~Francisco Soares da Silva Júnior. ~~Ms. Vechin~~Mr. Soares is Brazilian and was born on ~~March 28,~~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 Consignado, where ~~she now serves~~he served until 2020. Currently, as one of our ~~officers. She~~Executive Officers, he is ~~also Executive Officer of Return Gestão de Recursos S.A.~~responsible for the external distribution and sales channels.
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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 clients and Santander Capitalização S.A.
Germanuela de Almeida de Abreu. Mrs. de Abreu is Venezuelan and was born on December 6, 1975. She holds a degree in Economics from Universidad Católica Andrés Bello – Caracas/Venezuela with an MBA in Human Resources from USP (Universidade de São Paulo – São Paulo). She completed the Development Program for Board Members by Fundação Dom Cabral. She served at Banco da Venezuela (Grupo Santander Caracas) as Senior Risk Analyst from 1999 to 2001. At Santander Brasil, she was Senior Sales Support Manager between 2001 and 2002, Human Resources Training Consultant between 2002 and 2003, HR Risk Consultant between 2003 and 2006, Executive Manager of HR between 2006 and 2008 and Superintendent of Human Resources between 2008 and 2013. At Banco Santander ~~Brasil,~~(Brasil) S.A., she served as Executive Superintendent between 2013 ~~and~~to 2018, ~~with responsibility over~~where she was responsible for the strategy of Performance Management, ~~Careers,~~Career, Compensation, Benefits and Budget and Expenditure Management for the Bank, and in 2018 she was ~~appointed as officer for~~elected an Officer in our Human Resources area.
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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 ~~HR department.~~
University of São Paulo and a MBA from the Massachusetts Institute of Technology in Cambridge, MA. Before joining Santander Brasil, Mr. Abreu was a senior manager at McKinsey & Company, managing projects in the financial and retail areas. He is also the Chief Executive Officer of Sancap Investimentos e Participações S.A., and Executive Officer of Banco Bandepe S.A.
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.~~Division in the Wholesale Bank. He currently serves as our Retail Chief Financial Officer and is ~~also Executive~~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 ~~Atual Serviços de Recuperação de Créditos e Meios Digitais~~Business Development and Technology. In 2021 he was a member of the Board of Directors of Cielo S.A.
As one of our officers, Mr. Fosse is responsible for Retail and Financial.
Igor Mario Puga. Mr. Puga is Brazilian and was born on November 10, 1981. He holds a degree in Social Communication from the Casper Líbero School of Social Communication and a degree in Statistics and Applied Research from the Institute of Mathematics and Statistics of the University of São Paulo. After joining IG - Internet Group of Brazil (2000 to 2001) and Terra Networks (2002), he was JWT’s Digital Intelligence Manager from 2003 to 2004 and Africa Propaganda’s Digital Media Manager (from 2005 to 2006). From 2007 to 2014, as Founding Partner and General Officer, he served in the ID\TBWA group. Between 2014 and 2016, he served as Chief Interactive Officer and then Vice President of Integration and Innovation of the DM9DDB. Mr. Puga joined Santander Brasil in 2016, as the officer responsible for the Marketing Department. He ~~is also a 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.
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José Teixeira de Vasconcelos Neto. Mr. Neto is Brazilian and was born on March 8, 1975. He ~~holds a degree~~received degrees in ~~Business Administration~~business administration from the ~~Universidade de~~University of Pernambuco ~~- FCAP~~ and in ~~Economic Sciences~~economics from the ~~Universidade Católica de~~Catholic University of Pernambuco. He completed specialization courses in ~~Finance from FCAP-University~~finance at the University of Pernambuco, received an MBA in ~~Marketing~~marketing from Fundação Getúlio Vargas, and an MBA in ~~Retail (GVPEC)~~retail from Fundação Getúlio Vargas. HePreviously, he was ~~General Manager~~the general manager of ~~the~~ Banco Citibank S.A. from 2000 to ~~2003. He served as Commercial Superintendent~~2003, and ~~Executive Superintendent~~a commercial superintendent and executive superintendent at Banco Citibank S.A. - Consumer Finance Unit (Citi Financial) from 2003 to 2007. He was ~~Regional Superintendent at~~also regional superintendent of Santander ~~Brasil~~Brazil from August 2007 to July ~~2010. From~~2010, and, from August 2010 to September 2015, ~~Mr. Neto served as the Executive Superintendent~~was an executive superintendent of the ~~Network in~~ Banco HSBC ~~Brasil.~~Brasil network. He ~~served as one of the officers responsible for our Branch network since 2015, and since January 2019, he~~ has been responsible for our network of branches since 2015, and, in January 2019, was made responsible for the Rede Direct ~~network.~~area.

Leandro Alves. Mr. Alves is Brazilian and was born on January 5, 1984. He holds a degree in computer engineering from the Centro Universitário FIEO and a postgraduate degree in administration and Risk Management from Insper. Prior to joining Santander Brasil, Mr. Leandro held data management positions at Banco Real ABN AMRO. As one of our officers, Mr. Alves is responsible for Natural Person and Financial Risk.
Luciana de Aguiar Barros. Ms. de Aguiar Barros is Brazilian, and was born on January 3, 1980. She holds a degree in statistics from the Universidade de Campinas, a postgraduate degree in business administration from Fundação Getúlio Vargas and an MBA in credit risk management from INSPER. She has been a member of the Santander Group since 2010, having several roles in our credit area. As one of our officers, Ms. de Aguiar Barros is currently responsible for Consigned Credit area.
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Luis Guilherme Mattos de Oliem Bittencourt. Mr. Bittencourt is Brazilian and was born on December 4, 1973. He holds a degree in Computer Engineering from the University of Campinas. He started his professional career in Banco Itaú-Unibanco serving in the areas of Business Intelligence, Electronic Channels and CRM, where he acquired 14 years of experience. From 2010 to 2012, in Banco HSBC Brasil, Mr. Bittencourt served in the areas of Distribution, Digital Channels and Customer Relationship Management, or “CRM.” Since 2013, Mr. Bittencourt has served in Santander Brasil, initially as Executive Superintendent of CRM, Digital Channels and Management Information System, Customers Intelligence and CRM, and currently serves as the officer responsible for Customers’ Service.
Luiz Masagão Ribeiro Filho. Mr. Masagão is Brazilian and was born on September 1, 1976. He holds a degree in Business Administration from Fundação Getulio Vargas. He started his career in 1997, serving as Operator of Interest Rates Options in Brazil at Banco Citibank S.A. until 2005. He was the Senior Operator of Foreign Exchange Options from February 2005 to September 2005 in ING Bank N.V. Back toat Banco Citibank S.A., he was Executive Manager from 2005 to 2008 and Superintendent from 2008 to 2009. Mr. Masagão served as Executive Superintendent of Fixed Income Sales from 2009 to 2010 at Morgan Stanley and then joined Santander Brasil’s team, initially serving as Chief of the GCB/Corporate Sales team, from 2010 to 2014, and last as Brazil’s Sales Executive Superintendent. On November 2018, he became the Treasurer of Santander Brasil, responsible for treasury operations, including Proprietary Trading, Market Making, Sales and Products. He is also Executive Officer of Banco Bandepe S.A. and Santander Corretora de Seguros, Investimentos e Serviços S.A.
Marcelo Augusto Dutra Labuto. Mr. Labuto is Brazilian and was born in Belo Horizonte, in the State of Minas Gerais on September 3, 1971. He holds a Bachelor’s Degree in Business Administration from UNB (Universidade de Brasília) with an MBA in Marketing from COPPEAD UFRJ (Instituto de Pós-Graduação em Administração e Pesquisa da Universidade Federal do Rio de Janeiro). He served as Vice President of Retail Business at Banco do Brasil between 2017 and 2018 and CEO between 2018 and 2019. Previously, Mr. Labuto was CEO of BB Seguridade Participações S.A; Officer of Insurance, Open Pension Plans and Capitalization; Loans and Financing Officer; General Manager at the Affiliated Entities Governance Unit and General Manager at the Strategic Partnerships Unit at Banco do Brasil. Mr. Labuto was a member of the Board of Directors of BB Seguridade Participações S.A.; Banco Votorantim; Brasilcap Capitalização S.A.; IRB Brasil Resseguros; Elo Participações S.A.; Companhia Brasileira de Soluções e Serviços; BB Mapfre SH1 Participações S.A.; Mapfre BB SH2 Participações S.A.; Brasilprev Seguros e Previdência S.A.; CIELO S.A.; Vale S.A.; Brasildental Planos Odontológicos; Alelo S.A; Movera S.A; Livelo S.A; and Banco CBSS. He served as a member of the Advisory Committee of Brasilprev Seguros e Previdência; a member of the Executive Committee of Grupo Segurador BB and Mapfre; a member of the Innovation Committee of CIELO S.A.; and a member of the Compliance and Risk Committee of Vale S.A. As one of our officers, he was responsible for the Natural Persons Area, in Retail during 2020 and 2021 and currently leads our distribution channels.
~~Marino Alexandre Calheiros Aguiar~~Maria Teresa Mauricio da Rocha Pereira Leite. ~~. Mr. Aguiar~~Ms. Pereira Leite is ~~Portuguese~~Brazilian and was born on ~~May 14, 1971. He graduated~~June 21, 1967. She holds a degree in finance from Fundação Armando Alvares Penteado. Prior to joining Santander Brasil, Ms. Pereira Leite held management positions at ABN AMRO Bank N.V., Royal Bank of Scotland Business and Deutsche Bank. She was also CEO & Head of Corporate Banking at Deutsche Bank responsible for corporate banking products and relationships with multinational subsidiaries. Ms. Pereira Leite joined Santander Brasil in 2021 as a Statutory Director of the Corporate Banking division.
Marilize Ferrazza Santinoni. Mrs. Santinoni is Brazilian and was born on November 20, 1965. She holds a degree in Business Administration from the ~~Technical University of 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~~the banking network of Paraná and the northern region of Santa Catarina for Banco Santander (Brasil) S.A.
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Murilo Setti Riedel. Mr. Riedel is Brazilian and was born on May 17, 1963. He holds a degree in business administration from the ~~Vice Presidency~~University of ~~Proceedings, Technology~~São Paulo – FEA, and ~~Operations unit. He is also~~an MBA from the University of São Paulo – FEA. Before joining Santander, Mr. Riedel held management positions at HDI Seguros S.A, acting as Technical Director and Chief Executive ~~Officer~~Officer. From 2019 to 2022 he was chairman of the Board of Directors of Santander Auto S.A.
Paulo César Ferreira de Lima Alves. Mr. de Lima Alves is Brazilian, born on October 18, 1968. He holds a degree in economics from the Universidade de Fortaleza – UNIFOR and a postgraduate degree in Financial Management and Controllership from the Fundação Getúlio Vargas. Prior to joining Santander Brasil, ~~Tecnologia~~Mr. Paulo held management positions at Banco ABN AMRO Real S.A. As one of our officers, he is currently responsible for Northern Network Banking.
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 ~~Santander Tecnologia e Inovaç~~BankBoston Banco Múltiplo S.A. He was Vice-Chairman of the Board of Directors and Effective Member of the Deliberative Council of the Associação ~~Ltda.~~
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~~Table~~Brasileira das Empresas de Crédito Imobiliário e Poupança. As one of ~~Contents~~our officers, he is responsible for the NI & Financial Technology Platform and has been director of Santander 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.
Ramon Sanchez Santiago. Mr. Ramon Sanchez Santiago is Spanish and was born on May 25, 1969. He graduated in Law from the University of Salamanca, Spain. From 2000 to 2010, he was Head for Internal Audit at different Banks of Santander Group (Puerto Rico, Chile, SCF). Between 2010 and 2011, he was Project Leader of the Santander Group, responsible for the project to reduce the Risk Weighted Assets (RWA) throughout the Group. He was also Head of Internal Audit at Santander UK from 2011 to 2014. From 2015 to 2018, he served as Internal Audit Officer of the Santander Group for Capital and Solvency. As one of our Executive Officers, Mr. Santiago has been responsible for our Internal Audit area since September 2018.
Reginaldo Antonio Ribeiro. Mr. Ribeiro is Brazilian and was born on May 19, 1969. He holds a degree in Economics from the Universidade Estadual de Campinas, an Accounting degree from the Universidade Paulista and an MBA from the Fundação Instituto de Pesquisas Contábeis, Atuariais e Financeiras – FIPECAFI of the Universidade de São Paulo. He ~~worked~~served for Arthur Andersen Consultoria Fiscal Financeira S/C Ltda. from 1990 to 2001 rendering tax advisory services to Brazilian and ~~multinationals~~multinational entities. He was also a member of the Fiscal Council of Companhia Energética de São Paulo and AES Tietê from 2002 to 2006. As one of our ~~officers,~~Officers, he is responsible for tax issues, accounting ~~and tax procedures, planning strategies~~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 ~~Chairman~~Director of Analytical Marketing from 2010. In 2012 he returned to Banco Santander (Brasil) S.A. to assume the ~~Board~~position of ~~Directors~~Executive Superintendent responsible for the credit recovery strategy. In 2017 he became Executive Superintendent of ~~Santander Leasing~~products and channels of Aymore Crédito, Financiamento e Investimento S.A. ~~Arrendamento Mercantil.~~
He currently holds a position as Statutory Director of Aymore Crédito, Financiamento e Investimento S.A. and Webmotors S.A.
Roberto Alexandre Borges Fischetti. Mr. Fischetti is Brazilian and was born inon August 28, 1975. He holds a degree in Economics from the business school of the University of São Paulo (Faculdade de Economia, Administração e Contabilidade (FEA), Universidade de São Paulo). Mr. Fischetti has acted in the Brazilian financial market and banking industry since 1998. From 1998 to 2003, he worked at ~~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 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 ~~an alternate~~a member of the Board of Directors of Banco RCI Brasil S.A.
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Robson de Souza Rezende. Mr. Rezende is Brazilian, born January 24, 1967. He holds a degree in Statistics from Associação - Salgado de Oliveira de Educação e Cultura in Niteroi in the state of Rio de Janeiro and an MBA in Marketing from ESPM-SP. He began his career at Unibanco, where he worked between 1985 and 1999 in the Management of Agencies and later in the Human Resources Area working in Training and Development with a focus on the Agencies of Unibanco. Mr. Rezende joined Santander Brasil in 1999. From 1999 to 2003, he served as a Superintendent of Human Resources. From 2003 to 2008, he served as Regional Superintendent. From 2008 to 2010, he worked as Superintendent of Commercial Models, during which time he participated in the integration of the commercial model of Santander Brasil and Banco Real. He also led the Santander branch expansion project in Brazil for three years from 2010 to 2013. He was responsible for the Branch network in the state of Rio de Janeiro, managing approximately 290 branches and 3,700 employees in the region. As one of our officers, he is currently responsible for the Commercial Retail Network.
Rogério Magno Panca. Mr. Panca is Brazilian and was born on December 30, 1970. He holds a degree in Economics from the Universidade Católica de Santos, holds a postgraduate degree in Business Administration from Fundação Getúlio Vargas and an MBA in International Business from FEA-USP. He served as executive manager of structured operations by Banco do Brasil between 2008 and 2011. In the period from 2011 to 2013, he was Head of Large Corporate for Banco do Brasil and in 2014, became Head of the Governance Unit of Entities Linked to Banco do Brasil. Between 2015 and 2019, he was a member of the Board of Directors of Banco Digio S.A., Cateno S.A., Elo Serviços S.A., Livelo S.A., Alelo S.A. and Cielo S.A. During this period he was also officer of Banco do Brasil responsible for division of Means of Payment. Since 2019, he is a superintendent and an officer and member of the Board of Directors of Elopar. He joined Santander Brasil in 2019 and currently is one of our directors responsible for the area of Cards and Digital Payments.
Sandro Kohler Marcondes. Mr. Marcondes is Brazilian and was born on April 16, 1964. He ~~holds a degree~~graduated in Business Administration from Unicentro Paraná ~~and a Master’s~~. He completed his Master Degree in Business Administration ~~from~~by Fundação Getúlio Vargas. At Santander Brasil since 2018, he served as Executive Superintendent Global Debt Financing. In 2018, he served as Executive Officer of Financing and Investor Relations at Neoenergia S.A. From 2005 to 2018 he served as Executive Officer at Banco do Brasil S.A. and also at Banco do Brasil S.A. from 1999 to 2004 he served as General Manager in Paris and Assistant General Manager. Currently he is the Officer responsible for Global Debt Financing structure, managing the activities of Debt Capital Markets.
Sandro Mazerino Sobral. Mr. Sobral is Brazilian and was born on February 24, 1975. He holds a degree in Economics from the Universidade Presbiteriana Mackenzie with a specialization in Economic Sciences from the FEA USP and in Banking from the IBMEC-SP. An employee of Banco Santander (Brasil) S.A. since 2003, he has held various positions in the Company’s capital markets and trading area, being responsible for managing the portfolios of fixed income, inflation, accrual, FX and equities. Since 2017 he has been in charge of our trading desks.
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Sandro Rogério da Silva Gamba. Mr. Gamba is Brazilian and was born on August 31, 1975. He holds a degree in Civil Engineering from Universidade Mackenzie, an a post-graduate ~~degrees~~degree in ~~Industrial~~Production Engineering from Universidade de São Paulo –USP and Real ~~State~~Estate Business from Fundação Armando Alvares Penteado – FAAP and ~~holds an~~ MBA ~~degree~~ from Insper. ~~Mr. Gamba served at~~At Gafisa S.A., from 1998 to 2004 ~~in different positions: as an~~he held positions like: engineer, coordinator and ~~manager. From~~manager; from 2004 to 2007 he served ~~at Gafisa S.A.~~ as new business manager; from 2007 to 2011 he served as Director; from 2011 to 2014 served as Executive Officer and, at last, ~~Mr. Gamba~~he served as CEO ~~at Gafisa S.A~~ from 2014 to 2018. In addition, he served as member of the Board of Directors of Construtora Tenda from 2012 to 2014 and of Alphaville Urbanismo from 2017 to 2019. Currently he is the Officer responsible for Real Estate Business and Real Estate Credit platforms.
Thomaz Antonio Licarião Rocha. Mr. Licarião Rocha is Brazilian, born on March 2, 1977. He ~~also occupies~~has a degree in advertising and marketing from the ~~position~~Escola Superior de Propaganda e Marketing. He has been part of ~~Chief Executive Officer~~the Santander Group since 2000, having several roles within the commercial area. As one of ~~Santander Holding Imobiliária S.A.~~
our officers, he is currently responsible for Assets and Risks Platform.
Thomas Gregor Ilg. Mr. Ilg is Brazilian and was born on September 12, 1968. He holds a degree in Agricultural Engineering from the Universidade Estadual de Campinas, and a postgraduate diploma in Business Administration from the Fundação Getúlio Vargas. He has been engaged in the financial markets for almost 30 years, including almost 20 years with Santander Brasil and 10 years with The First National Bank of Boston, where he first joined as a trainee in the Risks and Business areas. At Santander Brasil, he was responsible for the Corporate Banking Business until the beginning of 2007 when he joined our Treasury Division to develop an area designed to distribute derivatives to the Middle Market, Private Banking and Retail Business in general. At the end of 2008, he moved to the Credit Division to manage the Corporate Banking Risk area, and currently he is responsible for our SMEs Retail Risks area.
Tiago Celso Abate. Mr. Abate is Brazilian and was born on June 12, 1980. He holds a degree in economics from the Pontifical Catholic University and a postgraduate degree in finance from INSPER and an MBA in Retail Management and Digital Business from FIA and FIAP, respectively. He has worked for Grupo Santander since 2005, having several roles related to the retail area of the Bank. As one of our officers, he is currently responsible for the structure of Consumers and High Income in Retail.
Vitor Ohtsuki. Mr. Ohtsuki is Brazilian and was born on June 5, 1977. He holds a degree in Production Engineering from Universidade de São Paulo, an MBA degree in Marketing from Universidade de São Paulo and a Master’s Degree in Global Management from Stanford University. At Santander Brasil since 2004, he served as Private Banking Head, Executive Superintendent of Wealth Management, Private Banking Superintendent, Executive Manager and General Manager. 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. 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. The~~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
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 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.~~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 and/or 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
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 and/or 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
The members of our ~~Audit Committee~~audit committee are entitled to fixed compensation consisting of monthly fees, as established by the Board of Directors. 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 the ~~Audit Committee,~~audit committee, 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
Our Fiscal Council is a non-permanent body. Members of our ~~Fiscal Council~~fiscal council are entitled to fixed compensation composed of monthly fees in the amount approved at our General Shareholders’ ~~Meeting.~~Meeting, the last of which was held on April 30, 2021.
Advisory Committees
The members of advisory committees are also entitled to fixed compensation composed of monthly fees.
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~~Table~~ Only those members who do not occupy a position on the Board of ~~Contents~~Executive Officers are entitled to this compensation.
Compensation Plan Overview
At the general shareholders meeting held on April 30, ~~2020,~~2021, the compensation limit was set up to R$~~400~~433.94 million for our Directors and Executive Officers and R$~~4.0~~4,832 million for our Audit Committee for the 12-month period starting on January 1, ~~2020,~~2021, as proposed by the Board of Directors at the meeting held on March 26, ~~2020.~~2021. As for the Fiscal Council, the general shareholders’ meeting approved a monthly compensation of R$~~11.8~~11,985 thousand for each of the members, provided that the alternate members shall only receive such compensation in the event they replace the effective members. For the abovementioned twelve-month period, members of our Board of Directors and Executive Officers received a total of approximately R$~~258.3~~352.6 million, members of our ~~Audit Committee~~audit committee received a total of approximately R$~~2.9~~3.2 million and members of our Fiscal Council received a total of approximately R$~~419~~449.7 thousand. The total amount of contributions for pension plans of our Board of Directors and Executive Officers in ~~2020~~2021 was R$~~37.9~~57 million.
Under Brazilian law, companies are required to disclose the highest, lowest and average compensation of their directors, members of the Fiscal Council, if installed, and officers without stating their names. The table below presents the information for the years ofended 2021, 2020 ~~2019~~ and ~~2018:~~2019:
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Board of Executive Officers Board of Directors Fiscal Council
Year ended December 31, 2020 Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2020 Year ended December 31, 2019 Year ended December 31, 2018 Year ended December 31, 2020 Year ended December 31, 2019 Year ended December 31, 2018

Nº of members 45.00 41.70 42.20 9.00 9.90 10.00 6.00 2.50 -
Nº of paid members 39.00 40.90 40.80 4.75 4.80 5.00 3.00 1.30 -
Value of highest compensation (Reais) 46,953,181.92 45,325,345.00 43,068,683.26 1,802,918.40 1,752,022.72 1,563,056.44 139,600.00 55,370.00 -
Value of lowest compensation (Reais) (1) 1,791,418.04 1,843,405.07 2,026,240.06 762,000.00 769,131.80 700,542.46 139,600.00 - -
Average value of compensation (Reais) 6,495,886.87 6,647,842.60 6,884,079.47 1,037,445.25 1,012,232.27 772,680.82 139,600.00 132,888.00 -

Board of Executive Officers
Board of Directors
Fiscal Council

Year ended December 31, 2021
Year ended December 31, 2020
Year ended December 31, 2019
Year ended December 31, 2021
Year ended December 31, 2020
Year ended December 31, 2019
Year ended December 31, 2021
Year ended December 31, 2020
Year ended December 31, 2019
Nº of members 50.00 45.00 41.70 12.00 9.00 9.90 6.00 6.00 2.50
Nº of paid members 45.16 39.00 40.90 5.58 4.75 4.80 3.00 3.00 1.30
Value of highest compensation (Reais) 59,029,586.25 46,953,181.92 45,325,345.00 2,129,585.07 1,802,918.40 1,752,022.72 142,710.00 139,600.00 55,370.00
Value of lowest compensation (Reais)(1) 2,098,466.40 1,791,418.04 1,843,405.07 762,000.00 762,000.00 769,131.80 142,710.00 139,600.00 —
Average value of compensation (Reais) 7,674,778.20 6,495,886.87 664,784,260 1,064,162.32 1,037,445.25 1,012,232.27 149,901.00 139,600.00 132,888.00

(1) The value of the lowest individual remuneration considers only members who have exercised their functions in the 12-month period of the fiscal year in question. The amounts do not include social charges.

As approved by our Board of Directors at the meeting held on December 23, 2009, our Directors and Executive Officers, ~~as well as Audit Committee and Fiscal Council members~~ 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 ~~also granted~~disclosed to the members of the ~~Audit Committee,~~audit committee, the Compensation Committee and the Fiscal Council.
Variable Compensation
The criteria for granting and paying variable compensation vary according to the activities performed by the different areas and, therefore, payment of the variable compensation may differ depending on the department and activities performed by each member.
Long Term Incentive Programs
~~We have three programs for~~Our long-term ~~compensation: (i)~~incentive plans are established in line with our business strategy. Each plan has a specific set of indicators and operating rules, and grants within our plans may be either global (i.e., based on shares in Santander Spain) or local (i.e., based on shares in Santander Brasil). The grants and payments under each of our long-term incentive plans must be approved by our governance, structures in place at the ~~Deferral Program; (ii)~~time of approval, including the ~~Global Plan LTIP DTA 2019,~~human resources and ~~(iii) Nine Local Plans – Grants between 2019~~finance departments, and ~~2020.~~must comply with applicable laws and regulations governing such plans.
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Executive ~~Officers~~officers and ~~Executives~~executives in key positions are eligible to participate in these plans, which last three years, and ~~promote~~foster our ~~Executive Officers~~executive officers and ~~Executives’~~executives’ commitment to our long-term ~~results.~~results, Members of the Board of Directors can only participate if they are Executive Officers.
Deferral Program
Our deferral program is available to our Statutory Officers, Officers in positions of management and certain other eligible employees. As part of the deferral program, we defer between 40% and 60% of the variable compensation of an employee over a period of three to five years, depending on the employee’s level of responsibility.
The program aims to (i) align the program with the principles of the Financial Stability Board, or “FSB,” agreed upon at the G20; (ii) align our interests with those of the plan’s participants (to achieve sustainable and recurring growth and profitability of our businesses and to recognize the participants’ contributions); (iii) allow the retention of participants; and (iv) improve our performance and protect the interests of shareholders via a long-term commitment.
Pursuant to Brazilian law, variable compensation is required to be compatible with the financial institution’s own risk management policies. At least 50% of variable compensation must be paid in stock or stock-based instruments and at least 40% of variable compensation must be deferred for future payment by at least 3 years. These rules ~~are~~became effective as from January 1, 2012.
The following table summarizes the rules of payment to variable compensation taking as an example the exercise ended of on December 31, ~~2020~~.2021.
2022
2023
2024
2025
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 (with one year lockup)
Payment calculated on ⅓ units awarded Payment calculated on ⅓ units awarded Payment calculated on ⅓ units awarded

2021
2022
2023
2024
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 (with one year lockup)
Payment calculated on ⅓ units awarded Payment calculated on ⅓ units awarded Payment calculated on ⅓ units 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.
Still pursuant to Brazilian law, all deferral plans are subject to the application of malus/clawback, that is, the Board of Directors of the Company, on the recommendation of the Compensation Committee and after the evaluation of the Malus/Clawback Committee, may approve to reduce up to 100% of the amount of each participant in the cases previously approved by Internal Governance.
We renew and update our deferral program every year. As of December 31, ~~2020,~~2021, we had six plans outstanding: one for each fiscal year: ~~2015,~~ 2016, 2017, 2018, 2019 and ~~2019.~~2020. As of December 31, ~~2020,~~2021, we recorded total expenses of R$~~202~~186 million in connection with our Deferral Program compared to total expenses of R$~~203~~202 million in ~~2019.~~
2020.
Deferral Program ~~–2015,~~– 2016, 2017 and 2018
Our ~~2015~~2016 to 2018 deferral programs are divided ininto two programs:
·● Collective Identified. – Statutory officers and executives who take significant risks in Santander Brasil and are in charge of the control areas. Deferred compensation will be paid 50% in cash, indexed to 100% of the CDI, and 50% in ~~Units.~~units.
·● Collective Unidentified – Employees., Individuals eligible for this program include manager employees and certain of our other employees. Deferred compensation will be paid 100% in cash, indexed to 100% of the CDI.
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Deferral Program ~~–2019~~– 2019, 2020 and ~~2020~~
2021
·● ~~From~~Since the financial year 2019, the rule for the Collective Unidentified was changed to “Other ~~Employees”,~~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 iswill be paid 50% in cash, and 50% in units.
Long-Term Incentive Plans
Our long-term programs are divided into Local and Global plans. Each plan has specific performance indicators and conditions to best maintain the participant’s employment relationship until the payment date in order to be entitled to the receipt.
The payment of the plans is calculated based on the percentage of achievement of the indicators applied on the reference value (target).
Local Long-Term Incentive Program
We have ~~nine~~eleven retention plans for key positions launched ~~during~~between 2019 and ~~2020.~~2021. These plans will be paid in SANB11 units and are subject to the application of the malus/clawback clauses, which may result in a reduction or full cancellation in the number of shares to be delivered in cases of failure to comply with internal rules and exposure to excessive risks.
Each participant has a reference value defined in cash, converted into SANB11 units, usually at the average price of the last 15 trading sessions ~~of the month~~ immediately prior to the ~~grant under each plan.~~payment of the plan, At the end of the vesting period, the resulting shares are delivered with a one-year restriction, and this payment is still subject to the application of the malus/clawback clauses, which may reduce or cancel the shares to be delivered in cases of non-compliance with internal rules and exposure to excessive risks.
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For the fiscal year ~~2020,~~2021, we incurred expenses of R$1126 million, with respect to the Local Long-Term Incentive ~~Program.~~
~~Global Long-Term Incentive~~ Program,
~~LTIP Digital Transformation Award~~
~~This global plan was launched in September 2019. The eligible executives had a target incentive defined in reais. The payment, according the achievement~~ compared to total expenses of ~~performance indicators, will be~~R$11 million in ~~shares and options of Grupo Santander (SAN), after a deferral period of three years.~~
In the year ended December 31, ~~2020, we incurred expenses of R$0.9 million, with respect to the~~ 2020.
Global Long-Term Incentive ~~Program.~~
Program
Long-Term Incentive Global Plan CRDIV – Grant 2015
~~In 2015, a second global long-term incentive plan was created for executives included in the Identified Collective (CRDIV Global Plan).~~
The indicators that will be used to measure the attainment of the targets are presented below and will be used at two different stages: (i) to calculate the maximum target of each participant (2015-2016); and (ii) to calculate the amount of shares to be paid (2016, 2017 and 2018).
~~1.       TSR vs. Competitor~~
~~RTA in 2015~~ ~~“Coefficient RTA 2015”~~
~~(% on the RTA 2015 budgeted)~~
~~≥ 90%~~ 1
~~> 75% to < 90%~~ ~~0.75 – 1 (*)~~
~~≤ 75%~~ 0
~~(*)~~ ~~Linear increase of the RTA 2015 coefficient in function of the concrete percentage that the RTA 2015 represents on the budget of this scale line.~~
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~~2.       ROTE Bank (Return on Tangible Equity) vs. Budgeted~~
~~ROTE in 2015~~ ~~“Coefficient ROTE 2015”~~
~~(% on the ROTE 2015 budgeted)~~
~~≥ 90%~~ 1
~~> 75% to < 90%~~ ~~0.75 – 1 (*)~~
~~≤ 75%~~ 0
~~(*)~~ ~~Linear increment of the ROTE 2015 coefficient in function of the concrete percentage that the ROTE 2015 represents on the budget of this scale line.~~
~~3.       Employee 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%~~ 1
~~> 90% and < 100%~~ ~~0.5 – 1 (*)~~
~~≤ 90%~~ 0
~~(*)~~ Linear increment of the coefficient companies according to the concrete percentage, within these lines of each scale that the number of linked clients of each type represents on December 31, 2017 on the budgeted.
~~Each executive had a target 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.~~
~~Due to the Santander Group’s capital increase (2017), the number of target shares was increased by approximately 1.5%.~~
~~At the end of the benchmarking period, the achievement of Phase 1 was 91.5% and Phase 2 was 73.09%, resulting in the plan's final achievement of 66.88%.~~
Payment for the Santander Spain shares resulting from the final achievement of the plan was made in cash in March 2019 based at a price of R$45.49 to the “Extended Group” participants (without restriction of disposal) and to the participants of the Identified Collective in March 2020, after the one year restriction ~~period.~~period, following which this plan was discontinued.
Long-Term Incentive Plan – Digital Transformation Award
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~~Table~~We currently have two global plans launched in 2019 and 2020. Eligible executives had an incentive target set in reais. Payment according to the achievement of ~~Contents~~performance indicators will be calculated in shares and options of Santander Spain (SAN), after a deferral period of three years, with equivalent settlement in reais.
InFor the ~~years~~year ended December 31, ~~2020 and 2019, no “pro rata”~~2021, we incurred expenses ~~recorded relating~~of R$4.3 million in connection with the Global Long-Term Incentive Program, compared to ~~costs on the respective dates~~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.”~~R$0.9 million in 2020.
Contract Termination
Employment contracts have an undefined period. The termination of the employment relationship for non-fulfillment of obligations or voluntarily does not entitle executives to any financial compensation.
Pension and Retirement Benefits
Members of our board of directors and our executive officers may enroll in our retirement plan, SBPrevi, while they are affiliated with Santander Brasil. For further information on SBPrev, please see “— D. Employees.”
6C. Board Practices
Our shareholders elect members of our Board of Directors at the annual general shareholders’ meeting for two-year terms (members may be reelected). The Board of Directors appoints our executive officers for two-year terms (members may be reelected).
The current members of the Board of Directors were elected at the ordinary shareholders’ meeting held on April ~~26, 2019~~30, 2021 and on the extraordinary shareholders’ meeting held on ~~June 10, 2020,~~December 17, 2021, to serve until the ordinary shareholders’ meeting to be held in ~~2021.~~2023. The current Executive Officers were elected at Board of Directors meetings held on May 3, ~~2019,~~2021, July ~~2, 2019, February 3, 2020, February 28, 2020, April 7, 2020, July 3, 2020~~1, 2021 and ~~December 18, 2020~~November 1, 2021 for terms of office until the first Board of Directors meeting occurs after the ordinary shareholders’ meeting, which is to be held in ~~2021.~~2023. The Board of Directors usually meets nine times a year, but meetings may be held more frequently as the discretion of the Chairman of the Board of Directors. The Executive Officers meet as often as required by the Chief Executive Officer, or a designated person.
On May 27, 2020, our Board of Directors approved its regulations, which can be accessed by shareholders on the website www.santander.com.br/ri, in the section entitled “Corporate Governance—Management Board—Regulations of the Board of ~~Directors”.~~Directors.” The information contained on our website, any website mentioned in this annual report, or any website directly or indirectly linked to these websites, is not part of and is not incorporated by reference in, this annual report.
Fiscal Council
According to Brazilian Corporate Law, the adoption of a permanent fiscal council, as a publicly held company, is ~~voluntary.~~voluntary, Our By-Laws provide for a nonpermanent fiscal council, which can be installed at the request of shareholders, representing at least one percent of the voting shares or two percent of the nonvoting shares. The fiscal council was installed at our ordinary shareholders’ meeting held on April 30, ~~2020. All~~2021. The current members of our fiscal council were elected at the ordinary shareholders’ meeting held on April 30, ~~2020~~2021 and at the extraordinary shareholders meeting held on December 17, 2021 to serve until the ordinary shareholders’ meeting to be held in ~~2021.~~2022.
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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.
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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~~August 25, 1968
~~João Guilherme de Andrade So Consiglio~~Cassia Maria Matsuno Chibante Member ~~December 7, 1968~~May 19, 1978
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, born on August 25, 1968. He holds a bachelor’s degree in Electrical Engineering from the Faculty of Industrial Engineering (FEI) of São Paulo and a Master’s degree in Business Administration, Economics and Finance from the University of São Paulo. Mr. Machado was an engineer at Keumkang Limited from 1990 to 1991, foreign exchange manager from 1992 to 1995 and manager of trading desk for emerging markets from 1992 to 1996 at Banco CCF Brasil S.A. He was also an executive director of Banco Rabobank Internacional Brasil SA from 1998 to 2003 and was executive director of Banco Real from 2003 to 2009. He was also a member of the management of Banco Santander (Brasil) S.A. until April 2020. He is currently a member of the board of directors at Heluz, Can TeraMed | OnixCann and Bright Cities.
Cassia Maria Matsuno Chibante. Ms. Matsuno is Brazilian, born on ~~January 26, 1952. He graduated with~~May 19, 1978. She holds a ~~degree~~Bachelor’s Degree in ~~Accounting, a postgraduate degree in Accounting Management~~Law from the ~~Fundaçã~~University of São ~~Getúlio Vargas~~Paulo (USP) and ~~with an MBA~~a Bachelor’s Degree in ~~Controlling, Audit and Tax Management~~Business Administration from Fundação Getúlio Vargas. ~~He served as General Accounting Manager at Banco Noroeste S.A. until 1997. At Santander Brasil, he served as General Manager and Deputy Officer of the Accounting Department~~She also has an MBA in finance from ~~1998 to 2000. He~~IBMEC. Ms. Matsuno was ~~General Audit Manager of Banco Sudameris do Brasil S.A. from 2000 to 2003. He was also representative at FEBRABAN at the Electronic Fraud and Operational Security Subcommissions (~~~~Subcomissão de Fraudes Eletrônicas e Subcomissão de Seguranç~~a ~~Operacional~~~~), and representative at FEBRABAN at the Internal Audit Committee. He was Executive Superintendent of Santander Brasil between 2003 and 2018, working~~manager in the ~~Internal, External and Electronic Fraud Management area. He is currently a Consultant~~area of direct taxes at ~~AMB - Business Consulting in Prevention and Treatment~~Arthur Andersen / Deloitte Touche Tohmatsu from 1999 to 2004. From 2004 to 2016, she was superintendent 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 has a degree 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 over 30 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 economistfinance at the Bunge Group. He has participated in several boards of directors such as Banco RCI Brasil S.A, CIP (Interbank Chamber of Payments) and Cia. Brasileira de Soluções e Serviços, among others. He is currently a partner at Guilder Capital Investimentos, a board member of Unipar Carbocloro S.A., a Board member and member of Audit Committee of You Inc S.A., an Advisory Board member of Banco MUFG Brasil S.A. and Chairman and member of Fiscal Council of the Banco Santander (Brasil) S.A.
, with a focus on the area of tax planning. From 2016 to 2018, she acted as superintendent of the corporate development area of Banco Santander (Brasil) S.A. In 2018, she became the superintendent of strategy and market analysis at Banco Santander (Brasil) S.A.
Louise Barsi. Ms. Barsi is Brazilian and was born on September 7, 1994. She holds a degree in Economics from Universidade Presbiteriana Mackenzie and in Accounting from Fundação Escola de Comércio Álvares Penteado (FECAP). She holds a ~~post-graduate~~postgraduate degree in Capital Markets ~~at the~~from Fundação Escola de Comércio Álvares Penteado (FECAP). Ms. Barsi is a CNPI analyst, having worked at Elite Investimentos from 2015 to 2019, ~~she has also~~ participated in the Fiscal Council of Unipar Carbocloro from April 2016 to October 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~~board of ~~Directors~~directors at Eternit since December 2017, where she also coordinates the Audit and Finance Committee, is a Deputy Member of the ~~Board~~board of ~~Directors~~directors at Unipar Carboclo since April 2018 and a Fiscal Council Member at Klabin since April ~~2019.~~
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~~Table~~2019 and at Aes Brasil since April 2021. Ms. Barsi is also an effective member of ~~Contents~~Fiscal Council of Banco Santander (Brasil) S.A. for the term of 2021/2022, elected in separate votes by the majority of minority shareholders holding non-voting preferred shares attending the ordinary shareholder’s meeting held in April, 2021.
Manoel Marcos Madureira. Mr. Madureira is Brazilian and was born on December 30, ~~1951.~~1951, He holds a ~~Bachelor's~~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
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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 Santander Brasil and President of the Brazilian – Spain Chamber of Commerce.
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 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 ~~worked with~~focused his practice on commercial contracts in general. He was a lawyer at Santander Brasil for seven years, working in the Private Equity, Corporate Law and the M&A departments. He is currently one of the partners of De Luca & Oliveira Advogados, responsible for corporate related matters. Mr. Paolucci was an effective member of the Fiscal Board of Banco Olé Consignado between June 2019 and January 2020, and since April 2019, is an alternate member of the Fiscal Council of Santander Brasil.
Valmir Pedro Rossi. Mr. Rossi is Brazilian and was born on June 10, 1961. He holds a degree in Accounting from the Universidade de Passo Fundo, a postgraduate degree in Finance from the Universidade de Caxias do Sul, a Marketing degree from PUC Rio de Janeiro ~~a Master of Business Administration~~and MBAs from Universidade de São Paulo (USP) and ~~a degree in Business Management~~ from UNB-Brasília. He is a Board member and Fiscal Council member certified from ~~IBGC – Brazilian Institute of Corporate Governance.~~the IBGC. He also acted as an Accountant at Casfor Ogr. Contábeis and Bertol S.A., ~~and~~as consultant at Sebrae ~~RS. Mr Rossi also spent~~RS, and for 30 years occupied several positions at Banco do Brasil S.A, ~~occupying several positions, with emphasis on~~ the State Superintendent of Pará, State Superintendent of Rio Grande do Sul, Superintendent of retail at São Paulo, and also Corporate and Regional Superintendent for Latin America. He also served as CEO of Banco da Amazônia, a publicly traded federal bank, headquartered in Belém (PA). He worked as a Board member or Fiscal Council member at the following companies: Metalúrgica Gerdau S.A.;, Brasilprev S.A.;, BB Seguridade S.A, Fucapi S.A.;, Banco da Amazônia S.A.~~; in addition to~~, besides several other entities and associations. He is currently an effective member of the Fiscal Council of KaMin Cadam ~~S.A.,~~S.A and CSN ~~S.A.~~S.A and a member of the ~~Audit Committee~~audit committee of BRF S.A. and SIMPAR S.A. (holding company of JSI, Movida, ~~etc)~~etc.). He is ~~also an alternate~~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~~(Brasil) S.A. for the ~~term~~terms of ~~2020/2021. He~~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 ~~that attended~~attending the Annual General Meeting held in April ~~2020.~~2021.
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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.
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.”
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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;
·● 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; 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 Deborah Stern Vieitas, who ~~act~~acts as coordinator, ~~Luiz Carlos Nannini,~~Maria Elena Cardoso Figueira, who acts as financial expert, Vania Maria ~~Elena Cardoso Figueira,~~da Costa Borgerth, and René Luiz Grande. Our audit committee meets ordinarily once a month. The current members of the audit committee were appointed on May ~~21, 2020~~3, 2021 and June ~~29, 2020~~1, 2021 to serve for a one-year term.
Set forth below are the biographies of the members of our audit committee:
Maria Elena Cardoso Figueira. Ms. Figueira is Brazilian, was born on November 29, 1965 and graduated in Economics from the ~~Pontifical Catholic University of Rio de Janeiro (Pontifí~~Pontifícia Universidade Católica do Rio de ~~Janeiro).~~Janeiro. Ms. Figueira is a board ~~supervisory board~~of directors, Supervisory Board and ~~audit committee~~Audit Committee member certified by the IBGC ~~and~~ (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
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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 (from June 2017 to April 2018), as a member and Chairman of the Advisory and Audit and Risk Committee; (iii) HSBC Brasil S.A. - Banco ~~Múltiplo,~~Multiplo, from October 2014 to June 2016, as chairman and member of the Advisory Board and the Audit and Risk Committee; and (iv) Santander Brasil, from August 2004 to April 2012, as an independent member of the ~~Audit Committee,~~audit committee, Coordinator and financial expert. ~~Currently Ms. Figueira is a member of the audit committee of Lojas Americanas S.A. and of the supervisory board of Camil Alimentos S.A.~~ 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 is also a member of ~~Commerce in Brazil (Amcham Brasil).~~
the Audit Committee of the Lojas Americanas S.A. and a member of the Supervisory Board of Camil Alimentos S.A. Since 2021 she has been a member of the Audit Committee of Hospital Sírio Libanês and an alternate member of the Fiscal Council of B3 S.A. Since 2022 she has been a member of the Audit Committee of Br Properties S.A.
~~Luiz Carlos Nannini~~Vania Maria Borgerth. ~~. Mr. Nannini is Brazilian and was born on January 2, 1960. He~~Mrs. Borgerth holds a degree in Accounting ~~Sciences, with several~~from Universidade Santa Úrsula, an MBA in Finance from IBMEC, an MBA in IFRS from FIPECAFI and a specialization ~~courses~~ in ~~Brazil~~accounting from Fundação Getúlio Vargas. She holds a master's degree in Business Administration from IBMEC and ~~abroad, including~~is a ~~leadership course at Harvard. He~~PhD student in Accounting and Business Administration from FUCAPE Business School. Ms. Borgerth has ~~more than 30~~over 25 years of solid experience in the ~~conduct~~financial market. At BNDES, she held several executive positions such as Financial Policy
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and Investor Relations Manager, Chief Accountant, Advisor to the CEO and Controllership Superintendent, Council Member (Fiscal) at FAPES Pension Fund and Member of ~~independent audit services, including:~~ the preparation of financial statements in accordance with IFRS and U.S. GAAP; due diligence; implementation of internal controls (including IT); corporate restructuring; tax planning and affairs; and participation in advisory councils in Brazil, the U.S. and globally. Furthermore, Mr. Nannini has significant experience in audit committees and fiscal councils of publicly held Brazilian companies. Currently he is a member and financial expert of our Audit Committee andRisk Committee. A member of the ~~Audit~~UN Council for Corporate Reporting (UNCTAD/ISAR), she headed the Brazilian delegation from 2013-2020. Representative of Brazil in several international standards bodies such as IFRS Foundation, IAASB (auditing standards), IESBA (accounting ethics standards), Shift Project (human rights) and ~~Statutory Risks Committee of Eletrobrás, as well as a member~~IIRC (Integrated Reporting). At the IBGC, she coordinated the "Transparency" pillar of the ~~Audit Committees~~Positive Governance Agenda, represents the Institute as an IIRC Council Member and participates in the Sustainability Regulation WG. She is the Operational Coordinator of the ~~following companies: Via Varejo, Centauro, BR Malls~~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 ~~CDHU.~~
a lecturer. She holds an International Certificate in IFRS from the Association of Certified Chartered Accountants (ACCA) and a Board of Directors Certificate from the IBGC.
René Luiz Grande. Mr. Grande is Brazilian and was born on April 19, 1953. He holds a degree in Economics from Pontificia Universidade Católica de São Paulo, and a specialization degree in National Financial System from Fundação Instituto de Administração. He was an employee of the Brazilian Central Bank, qualified by the public examination since June, 1975, and worked in the Supervision and Inspection Department of the National Financial System. During his career in the Brazilian Central Bank he served as an Analyst from 1975 to 1978; Technical Assistant from 1978 to 1989; Inspection Supervisor from 1989 to 1999; Head of the Banking Supervisory and Technical Department from 1999 to 2003; and Deputy Head of the Banking Supervisory and Financial Conglomerates Department from 2003 to 2011. Before working with the Brazilian Central Bank, he occupied the position of Head of Human Resources with the Companhia Brasileira de Embalagens Metálicas BRASILATA from 1973 to 1975. ~~Currently,~~At Banco Santander (Brasil) S.A., Mr. Grande was Coordinator of ~~our Audit Committee~~the audit committee between the years 2012 and 2017, ~~and~~a member of ~~our~~the Risks and Compliance Committee between January 2018 and June ~~2020.~~
2020, and is currently an independent member of the Audit Committee.
Deborah Stern Vieitas., See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Compensation Committee
In compliance with regulations issued by the Brazilian Central Bank (specifically, CMN Resolution No. 3,921/2010 of November 25, 2010), on February 7, 2012, our shareholders established the compensation committee in our By-laws, which also acts as the compensation committee for certain of our affiliates and subsidiaries.
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Our compensation committee is composed of three to five members, appointed by the board of directors from among persons who meet all statutory and regulatory requirements for the exercise of their office. At least one of the members cannot be an executive officer and the others may or may not be members of our board of directors, and at least two members shall be independent, pursuant to paragraph 3 of article 14 of our By-Laws. The compensation committee shall have in its composition qualified members with the experience required for competent and independent judgment regarding our internal compensation policy and the repercussions of this internal compensation policy on risk management. Such persons shall serve for a term of two years and may be reelected for up to four consecutive times, pursuant to applicable legislation.
Our compensation committee has as its main functions:
·● to develop internal compensation policies applicable to our management and make proposals to our board of directors regarding policies for variable and fixed compensation, benefits, and special programs for recruiting and terminations;
·● 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
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·● 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 de Souza~~coordinator, Sérgio Agapito Lires Rial and Luiz Fernando Sanzogo Giorgi. The current members of the compensation committee were appointed on May 3, ~~2019~~2021 and December 17, 2021, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in ~~2021.~~
2023.
Set forth below are the biographies of the members of our compensation committee:
Deborah Patricia Wright. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
~~Álvaro Antonio Cardoso de Souza~~Sérgio Agapito Lires Rial. See “—A. Board of Directors and Board of Executive Officers—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 ~~46:~~46, Risk Management of the financial statements.
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 Pedro Augusto de Melo (who acts as coordinator), ~~Álvaro Antônio Cardoso de Souza,~~Sérgio Agapito Lires Rial, José de Paiva Ferreira and Virginie Genès-Petrolinho. The current members of the risk and compliance committee were appointed on May 3, ~~2019, April 28, 2020~~2021 and ~~June 12, 2020,~~December 17, 2021, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in ~~2021.~~
2023.
Pedro Augusto de Melo. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
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~~Álvaro Antônio Cardoso de Souza~~Sérgio Agapito Lires Rial. 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.”
Virginie Genès-Petronilho. Ms. Virginie Genès-Petronilho is a naturalized Brazilian ~~citizen~~ and ~~was~~ born in France on August 17, 1962. She holds a degree in business administration from ESCP EUROPE in Paris, France. With 34 years of experience in the banking and reinsurance sectors, she served as Executive Superintendent at BNP Paribas in São Paulo, being responsible for the business management of the customer relationship areas and for the credit portfolio management in Latin America. She also was responsible for the Management of the Credit Risk at Banco Caixa Brasil, also in São Paulo, from May 2009 to October 2011. She worked for 18 years in the ABN AMRO Group: ~~in March 1997~~ she served as a senior corporate credit analyst at ABN AMRO ~~Bank NV~~ in Amsterdam from 1997 until 2000, when she became Vice President of the Corporate Credit area within the Risk Department for Latin America at ABN AMRO Banco Real in São Paulo, performing this role until 2005. She was Risk Director at ABN AMRO Bank in Mexico between 2005 and 2008. ~~From 1989 to 1997 she~~She was Relationship Manager at Banque de ~~Nelflize Schluberger~~Neluflize, Schlumberger, Mallet, a filial from ABN AMRO Group in Paris ~~and~~ from ~~1981 to~~ 1989 ~~she was Relationship Manager~~until 1997 and at Credit Commercial de ~~France.~~France from 1985 until 1989. Currently, Ms. Genès-Petronilho has been a member of the ~~Board~~board of ~~Directors~~directors of Camara França Brasil since March 2020 and since February 2017 she ishas been Vice President of Risk Management for Latin America of the Reinsurance Business Unit of ~~Swiss Re~~SwissRe Brasil ~~Resseguros in São Paulo.~~
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~~Table~~Group. She has also been member of ~~Contents~~Risk and Compliance Committee of the Banco Santander (Brasil) S.A. since June 2020.
Nomination and Governance Committee
The nomination and governance committee is a consultative body which is responsible for advising the board of directors on subjects related to the nomination and governance of Santander Brasil.
The committee is composed of three to seven members, the majority of 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.
The current members of the nomination and governance committee are ~~Álvaro Antonio Cardoso de Souza~~Sérgio Agapito Lires Rial (who acts as coordinator), Deborah Patricia Wright and Luiz Fernando Sanzogo Giorgi. The current members of the nomination and governance committee were appointed on May 3, ~~2019~~2021 and December 17, 2021, to serve until the first board of directors meeting occurring after the ordinary shareholders’ meeting to be held in ~~2021.~~
2023.
~~Álvaro Antonio Cardoso de Souza~~Sérgio Agapito Lires Rial.. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Deborah Patricia Wright. See “—A. Board of Directors and Board of Executive Officers—Members of the Board of Directors.”
Luiz Fernando Sanzogo Giorgi.. See “—Compensation Committee.”
Sustainability Committee
The sustainability committee is a consultative body which is responsible for advising the board of directors on subjects relating to social and sustainable development issues, including the promotion of sustainable development and other social initiatives.
The committee comprises three to five members, and at least one of these members must be independent. The term of office is of two years, reelection permitted, and the members may be removed at any time. The committee meetings are held at least four times a year or when extraordinarily convened by its coordinator.
The current members of the sustainability committee are Marília Artimonte Rocca (who also acts as coordinator), ~~Carlos Rey~~Álvaro Antônio Cardoso de ~~Vicente,~~Souza, Andrea Marques de Almeida, Carlos Aguiar Neto, ~~Mário Roberto Opice Leã~~Luiz Masagão ~~Tarcila Reis Corrêa Ursini~~Ribeiro Filho and Tasso Rezende de Azevedo. The current members of the sustainability committee were appointed on May 3, ~~2019, August 6, 2019, December 31, 2019 and October 9, 2020~~2021 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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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.”
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~~Tarcila Reis Corrêa Ursini~~. Ms. Corrêa Ursini is Brazilian, born on May 9, 1974. She holds a degree in Economics from the University of São Paulo (Universidade de São Paulo), a Law degree from the Pontifical Catholic University of São Paulo (Pontifícia Universidade Católica de São Paulo) and a master's degree in Development and Law from Kings College, London. Ms. Corrêa Ursini began her career as a lawyer, with work experiences in Brazil, Spain and England. She was an associated lawyer at Machado, Meyer, Sendancz and Opice from 1997 to 2000 in the Corporate 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. She 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 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.
Tasso Rezende de Azevedo. Mr. Azevedo is Brazilian, ~~and was~~ born ~~on March 25,~~in 1972. He ~~graduated as~~has a ~~forest engineer~~degree in forestry engineering from the Luiz de Queiroz School of Agriculture at the University of São ~~Paulo, with a specialization in Forest Policy from the University of Oxford and Forest Certification in Sweden.~~Paulo. He is a socio-environmental entrepreneur and consultant on forestry, climate change and ~~sustainability consultant, a social entrepreneur, and a leading forestry certification auditor since 1998.~~sustainability. Mr. Azevedo is ~~the~~ coordinator of the Greenhouse Gas ~~Emission~~Emissions and Removal ~~Estimating~~Estimation System (SEEG) ~~which is a system to estimate greenhouse gas emissions in Brazil, Peru and India,~~ as well as the MAPBIOMAS Project, a platform ~~to track historical~~that maps and monitors changes in land cover and ~~land~~ use ~~change maps of~~in Brazil, the Amazon Basin and other regions by through a multi-institutional collaboration. ~~Mr. Azevedo~~He also serves as a visiting scholar at Princeton University and as a board member onfor several organizations including Rainforest Alliance, NEPCon, Imaflora and the Institute of Energy and Environment.
Currently, Mr. Azevedo is also a member of the Sustainability Committee of Banco Santander (Brasil) S.A.
Executive Committee
The Chief Executive Officer, Senior Vice President Executive Officers and Vice President Executive Officers ~~make up~~constitute the Executive Committee, which examines policies for business management, operational support, human resources and capital allocation. ItThe committee also deliberates on the main technological, infrastructure and services projects.
Contract termination
Employment contracts have an undefined period. The termination of the employment relationship for non-fulfillment of obligations or voluntary does not entitle executives to any financial compensation.
6D. Employees
On December 31, ~~2020,~~2021, we had ~~44,599~~48,834 full-time, permanent employees. The following table presents the breakdown of our full-time, permanent employees (in accordance with local criteria) at the dates indicated.
As of December 31,
2021 2020 2019
Administrative employees 17,630 12,722 12,188
Commercial areas employees 31,204 31,877 35,631
Total 48,834 44,599 47,819

As of December 31,
2020 2019 2018
Administrative employees 12,722 12,188 12,480
Commercial areas employees 31,877 35,631 35,532
Total 44,599 47,819 48,012

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The following table presents a breakdown of our full-time, permanent employees (in accordance with local criteria) by geographic location within Brazil at the dates indicated.
As of December 31,
2020 2019 2018
Region
Midwest 1,047 1,430 1,021
Northeast 4,547 4,066 4,283
North 774 674 760
Southeast 30,545 30,595 34,732
South 10,839 3,596 5,957
Other 1,082 4,238 1,066
Total 48,834 44,599 47,819

As of December 31,
Region 2020 2019 2018
Midwest 1,430 1,021 1,560
Northeast 4,066 4,283 3,785
North 674 760 671
Southeast 30,595 34,732 35,974
South 3,596 5,957 6,022
Other 4,238 1,066 -
Total 44,599 47,819 48,012

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 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, ~~2020, 34,681~~2021, 31,436 participants were enrolled in SantanderPrevi plan, and the total assets under management under the plan was approximately R$44.11 billion. As of December 31, ~~2020,~~2021, we had ~~4,032~~4,954 registered participants in the SBPrev plan, with total amount under management of R$~~271,600~~431,922 million. For additional information on our pension plans, see note 21 to our audited consolidated financial ~~statements.~~
statements included elsewhere in this annual report.
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 2020-2022 have already been concluded and the levels of compensation agreed are consistent with market practice. Since the acquisition of our predecessor banks by our indirect shareholder Santander Spain, we have not suffered significant losses through strikes and our management believes it has good relations with our employees.
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6E. Share Ownership
The following table provides the names of our directors and executive officers as well as members of our Fiscal Council who owned shares of Santander Brasil as of February ~~24, 2021.~~22, 2022.
Shareholders Common Shares Percentage of Outstanding Common Shares Preferred Shares Percentage of Outstanding Preferred Shares Percentage of Total Share Capital
Principal Shareholders
Common Shares
Percentage of Outstanding Common Shares
Preferred Shares
Percentage of Outstanding Preferred Shares
Percentage of Total Share Capital
Adriana Marques Lourenço de Almeida 33,903 (1) 33,903 (1)
Alberto Monteiro de Queiroz Netto 25,218 (1 ) 25,218 (1 ) (1 ) 28,725 (1) 28,725 (1)
Alessandro Tomao 97,861 (1 ) 97,861 (1 ) (1 ) 117,040 (1) 117,040 (1)
Amancio Acúrcio Gouveia 170,226 (1 ) 170,226 (1 ) (1 )
Alexandre Guimarães Soares 32,899 (1) 32,899 (1)
Amancio Acurcio Gouveia 178,936 (1) 178,936 (1)
Ana Paula Vitali Janes Vescovi 4,407 (1 ) 4,407 (1 ) (1 ) 13,485 (1) 13,485 (1)
André de Carvalho Novaes 17,811 (1 ) 17,811 (1 ) (1 )
Andre de Carvalho Novaes 45,885 (1) 45,885 (1)
André Juaçaba de Almeida 16,974 (1) 16,974 (1)
Andre Rosenblit 50,016 (1) 50,016 (1)
Angel Santodomingo Martell 146,632 (1 ) 146,632 (1 ) (1 ) 186,152 (1) 186,152 (1)
Antonio Melchiades Baldisera 10,096 (1 ) 10,096 (1 ) (1 )
Antonio Pardo de Santayana Montes 120,860 (1 ) 120,860 (1 ) (1 ) 103,205 (1) 103,205 (1)
Carlos Aguiar Neto 22,549 (1 ) 22,549 (1 ) (1 ) 22,249 (1) 22,249 (1)
Carlos Rey de Vicente 41,999 (1 ) 41,999 (1 ) (1 )
Cassio Schmitt 137,906 (1 ) 137,906 (1 ) (1 ) 130,810 (1) 130,810 (1)
Celso Mateus de Queiroz 12,030 (1) 12,030 (1)
Claudenice Lopes Duarte 8,974 (1 ) 8,974 (1 ) (1 ) 9,286 (1) 9,286 (1)
Daniel Fantoni Assa 101,892 (1 ) 101,892 (1 ) (1 ) 87.854 (1) 87.854 (1)
Ede Ilson Viani 71,288 (1 ) 71,288 (1 ) (1 ) 106,138 (1) 106,138 (1)
Elita Vechin Pastorelo Ariaz 17,534 (1 ) 17,534 (1 ) (1 ) 29,415 (1) 29,415 (1)
Francisco Soares da Silva 48,657 (1) 48,657 (1)
Franco Luigi Fasoli 13,413 (1 ) 13,413 (1 ) (1 ) 26,437 (1) 26,437 (1)
Geraldo José Rodrigues Alckmin Neto 59,320 (1 ) 59,320 (1 ) (1 )
Geraldo Jose Rodrigues Alckmin Neto 35,145 (1) 35,145 (1)
Germanuela de Almeida de Abreu 26,781 (1 ) 26,781 (1 ) (1 ) 10,707 (1) 10,707 (1)
Gilberto Duarte de Abreu Filho 45,048 (1) 45,048 (1)
Gustavo Alejo Viviani 150,593 (1 ) 150,593 (1 ) (1 ) 177,714 (1) 177,714 (1)
Gustavo de Souza Fosse 28,161 (1) 28,161 (1)
Igor Mario Puga 15,924 (1 ) 15,924 (1 ) (1 ) 9,800 (1) 9,800 (1)
Jean Paulo Kambourakis 40,853 (1 ) 40,853 (1 ) (1 ) 38,298 (1) 38,298 (1)
Jean Pierre Dupui 201,075 (1 ) 201,075 (1 ) (1 ) 213,704 (1) 213,704 (1)
João Guilherme A s Consiglio 160,645 (1 ) 160,645 (1 ) (1 )
João Marcos Pequeno de Biase 48,964 (1 ) 48,964 (1 ) (1 )
Jose Antonio Álvarez Alvarez 1 (1 ) - (1 ) (1 )
Joao Marcos Pequeno de Biase 70,121 (1) 70,121 (1)
José Antonio Álvarez Álvarez 1 (1) — (1)
Jose de Paiva Ferreira 429,608 (1 ) 429,607 (1 ) (1 ) 473,067 (1) 473,066 (1)
Jose Teixeira de Vasconcelos Neto 15,011 (1 ) 15,011 (1 ) (1 )
Juan Sebastian Moreno Blanco 595,436 (1 ) 595,436 (1 ) (1 )
Luis Guilherme Mattos de Oliem Bittencourt 20,160 (1 ) 20,160 (1 ) (1 )
Luiz Masagão Ribeiro Filho 176,413 (1 ) 176,413 (1 ) (1 )
José Roberto Machado Filho 32,707 (1) 32,707 (1)
Leando Alves 9,782 (1) 9,782 (1)
Luciana de Aguiar Barros 36,121 (1) 36,122 (1)
Louise Barsi — (1) 90,000 (1)
Luis Guilherme Mattoso de Oliem Bittencourt 37,898 (1) 37,898 (1)
Luiz Masagao Ribeiro Filho 208,343 (1) 208,343 (1)
Manoel Marcos Madureira 151,164 (1 ) 151,164 (1 ) (1 ) 158,208 (1) 158,208 (1)
Marcelo Augusto Dutra Labuto 43,448 (1 ) 43,448 (1 ) (1 ) 58,779 (1) 58,779 (1)
Marino Alexandre Calheiros Aguiar 13,229 (1 ) 13,229 (1 ) (1 )
Mário Roberto Opice Leão 155,466 (1 ) 155,466 (1 ) (1 )
Patrícia Souto Audi 10,132 (1 ) 10,132 (1 ) (1 )
Ramon Sanchez Santiago 8,588 (1 ) 8,588 (1 ) (1 )
Ramón Sanchez Díez 49,548 (1 ) 49,548 (1 ) (1 )
Maria Tereza Mauricio da Rocha Pereira Leite 26,215 (1) 26,215 (1)
Marilize Ferrazza Santinoni 33,197 (1) 33,197 (1)
Marino Alexandre Calheiros Aguiar (*) 27,082 (1) 27,082 (1)
Mario Roberto Opice Leao 196,072 (1) 196,072 (1)
Paulo César Ferreira de Lima Alves 15,415 (1) 15,415 (1)
Paulo Sérgio Duailibi 29,960 (1) 29,960 (1)
Patricia Souto Audi 7,327 (1) 7,327 (1)
Ramon Sanches Santiago 15,098 (1) 15,098 (1)
Ramon Sanchez Díez 60,325 (1) 60,325 (1)
Reginaldo Antonio Ribeiro 59,915 (1 ) 59,915 (1 ) (1 ) 72,051 (1) 72,051 (1)
Ricardo Olivare de Magalhaes 32,855 (1) 32,855 (1)
Roberto Alexandre Borges Fischetti 162,860 (1 ) 162,860 (1 ) (1 ) 187,726 (1) 187,726 (1)
Robson de Souza Rezende 34,329 (1 ) 34,329 (1 ) (1 ) 50,718 (1) 50,718 (1)
Rogério Magno Panca 7,601 (1) 7,601 (1)
Sandro Kohler Marcondes 13,746 (1 ) 13,746 (1 ) (1 ) 17,205 (1) 17,205 (1)
Sandro Rogério da Silva Gamba 29,823 (1 ) 29,823 (1 ) (1 )
Sandro Rogerio da Silva Gamba 40,044 (1) 40,044 (1)
Sandro Mazerino Sobral 34,234 (1) 34,234 (1)
Sérgio Agapito Lires Rial 218,115 (1 ) 218,115 (1 ) (1 ) 284,564 (1) 284,564 (1)
Thomas Gregor Ilg 47,651 (1 ) 47,651 (1 ) (1 ) 60,611 (1) 60,611 (1)
Thomaz Antino Licarião Rocha 63,359 (1) 63,359 (1)
Tiago Celso Abate 33,162 (1) 33,162 (1)
Valmir Pedro Rossi 2,000 (1) 2,000 (1)
Vanessa de Souza Lobato Barbosa 70,012 (1 ) 70,012 (1 ) (1 ) 98,771 (1) 98,771 (1)
Vítor Ohtsuki 16,267 (1 ) 16,267 (1 ) (1 )
Employees 2,046,755 2,046,757
Vitor Ohtsuki 31,801 (1) 31,801 (1)
Total 5,758,593 5,758,593 4,351,328 4,441,327

(1) Owns less than 0.01%.
(*) Mr. Marino Alexandre Calheiros Aguiar resigned as an officer on February 25, 2022.

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Shares held by members of our Board of Directors, our officers and members of our 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 “––B. Compensation.”
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7A. Major Shareholders
As of February ~~24, 2021,~~22, 2022, Santander Spain directly and indirectly through its subsidiaries, Grupo Empresarial Santander, S.L. and Sterrebeeck B.V., owned approximately ~~89.5%~~89.53% of our total capital stock.
The following table presents the beneficial ownership of our common and preferred shares as of February ~~24, 2021.~~22, 2022.
Principal Shareholders Common Shares Percentage of Outstanding Common Shares Preferred Shares Percentage of Outstanding Preferred Shares Total Shares (thousands) Percentage of Total Share Capital
(in thousands, except percentages)
Sterrebeeck BV (1) 1,809,583 47.39 % 1,733,644 47.11 % 3,543,227 47.25 %
Grupo Empresarial Santander SL 1,627,891 42.63 % 1,539,863 41.85 % 3,167,755 42.25 %
Banco Santander, S.A. 2,696 0.07 % - 0.00 % 2,696 0.04 %
Treasury Shares 18,829 0.49 % 18,829 0.51 % 37,658 0.50 %
Employees (2) 6,265 0.16 % 6,273 0.17 % 12,538 0.17 %
Other minority shareholders 353,430 9.26 % 381,227 10.36 % 734,657 9.80 %
Total 3,818,695 100 % 3,679,836 100 % 7,498,531 100 %
~~(1) An affiliate within the Santander Group.~~
~~(2) Includes members of senior management. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”~~
Principal Shareholders Common Shares Percentage of Outstanding Common Shares Preferred Shares Percentage of Outstanding Preferred Shares Total Share (thousands) Percentage of Total Share Capital

Sterrebeeck BV (1) 1,809,583,330 47.39 % 1,733,643,596 47.11 % 3,543,226,926 47.25 %
Grupo Empresarial Santander SL (1) 1,627,891,019 42.63 % 1,539,863,493 41.85 % 3,167,754,512 42.25 %
Banco Santander, S.A. 2,696,163 0.07 % -   -   2,696,163 0.04 %
Treasury Shares 15,704,544 0.41 % 15,704,544 0.43 % 31,409,088 0.42 %
Administrators/Executives (2) 4,887,646 0.13 % 4,977,644 0.14 % 9,865,290 0.13 %
Other minority shareholders 357,932,329 9.37 % 385,646,743 10.48 % 743,579,072 9.92 %
Total 3,818,695,031 100.00 % 3,679,836,020 100.00 % 7,498,531,051 100.00 %
(1) An affiliate within the Santander Group.
(2) Includes members of senior management. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”

For further information of our ownership structure, see “Item 18. Financial Statements” of this annual report on Form 20-F, in notes 27 - Shareholders’ equity (letter a) and 45 - Related party transactions (letter c).
The total ~~number~~ of ADRs held by U.S. investors as of ~~December 31, 2020 is 145,927,657.~~February 22, 2022 was 149,747,122. The total number of Units held by U.S. investors as of ~~December 31, 2020,~~February 22, 2022, is ~~53,392,884~~51,185,526 (excluding Units held by The Bank of New York Mellon as depositary).
Significant Changes in Percentage Ownership of Principal Shareholders
On April 11, 2017, Qatar Holding LLC, or the “Selling Shareholder,” participated in a secondary offering of 80,000,000 units, each of which is composed of one common share, no par value, and one preferred share, no par value, of Santander Brasil. Furthermore, the Selling Shareholder granted the international underwriters the option to purchase up to 12,000,000 additional ADSs of Santander Brasil within 30 days from, but not including, April 5, 2017, solely to cover over-allotments of ADSs, if any. The international underwriters exercised the option for 5,065,000 ADSs, and the settlement took place on May 9, 2017.
On September 18, 2017, our shareholders approved the cancellation of 64,551,366 shares held in treasury, representing 32,275,683 common shares and 32,275,683 preferred shares. Such treasury shares corresponded, as of that date, to the totality of the shares then held in treasury.
On December 31, 2018, we held 26,633,004 shares in treasury, of which 13,316,502 were common shares and 13,316,502 were preferred shares.
On December 31, 2019, we held 34,466,574 shares in treasury, of which 17,233,287 were common shares and 17,233,287 were preferred shares.
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On December 22, 2020, (i) Santander Spain transferred to 519,268,168,572 ADRs issued by Santander Brasil to Grupo Empresarial Santander S.L. and (ii) Banco Madesant Sociedade Unipessoal S.A. transferred 950,000 ADRs issued by Santander Brasil to Grupo Empresarial Santander S.L. As these transfers were both within the Santander Group there was no change in our ultimate indirect control.
On December 31, 2020, we held 37,657,924 shares in treasury, of which 18,828,962 were common shares and 18,828,962 were preferred shares.
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On ~~February 24,~~December 31, 2021, we held ~~37,657,924~~31,510,410 shares in treasury, of which ~~18,828,962~~15,755,205 were common shares and ~~18,828,962~~15,755,205 were preferred shares.
On February 22, 2022, we held 31,409,088 shares in treasury, of which 15,704,544 were common shares and 15,704,544 were preferred shares.
Voting Rights of Principal Shareholders
Our principal shareholders do not have voting rights distinct from those of our other ~~shareholders.~~shareholders, See “Item 10. Additional Information—B. By-Laws—Rights of Common Shares and Preferred Shares.
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7B. Related Party Transactions
We have a related party transactions policy, which is intended to ensure that all transactions covered by the policy are conducted in our interest and that any related party transactions are conducted on an arm’s length basis on terms substantially similar to those of comparable transactions in the market. The policy defines related transactions as those occurring between us and our shareholders, our subsidiaries, our employees, directors and officers, as well as our subsidiaries’ employees, directors and officers. The policy defines the power to approve certain transactions as resting with the board of directors. Additionally, related party transactions are included in the regular auditing program developed by our internal audit.
We currently engage in, and expect from time to time in the future to engage in, financial and commercial transactions with our subsidiaries and affiliates and those of the Santander Group. We have credit lines outstanding with certain of our affiliates within the Santander Group. As of December 31, ~~2020,~~2021, borrowings and deposits from the Santander Group represented approximately ~~3.8%~~6.3% of our total funding. In addition, from time to time, we enter into certain transactions with the Santander Group and other related parties for the provision of advisory and advertising services. Such transactions are conducted on an arm’s-length basis, based on terms that would have been applied for transactions with third parties.
The transactions and remuneration of services with related parties are made in the ordinary course of business on an arms’ length basis under similar conditions, including interest rates, terms and guarantees, and involve no greater risk than transactions with unrelated parties carried out in the ordinary course and have no other disadvantages. The following discussion describes all of our material related party transactions.
Information Technology Platform
We have entered into agreements with some affiliates of the Santander Group (Santander Global Technology, S.L., Santander Brasil Tecnologia ~~S.A,~~S.A. Santander Global Technology Brasil Ltda. and ~~the new branch~~ Santander Tecnologia e Inovação Ltda) for the outsourcing of certain products and services relating to our information technology platform, including software development and maintenance, infrastructure and cybersecurity.
We believe ~~the provisions of~~ these services are provided on an arm’s-length basis with terms substantially similar to those available from other providers in the market. In ~~2019~~2020 and ~~2020,~~2021, Santander Group affiliates received approximately R$~~859 million~~1.0 billion and R$11.3 billion, respectively, for the products and outsourcing provided above. ~~In 2020, the exchange rate variations had a significant impact on the value of the contracts into which we have entered with Santander Group affiliates outside of Brazil.~~ See “Item 4. Information on the Company—B. Business Overview—Technology ~~and Commercial Transformation—Technological~~ Infrastructure.”
Procurement Services
We have entered into agreements with Aquanima Brasil Ltda., an affiliate of the Santander Group, which provides procurement services with Santander Brasil and its affiliates. We hire solutions in trade negotiations, tactical and strategic purchasing, online procurement, supplier management, outsourcing, consulting, and ~~consulting.~~vendor risk assessment. Among the strategies used, we highlight possible joint purchases of materials and services between different customers and other economic groups, which allow greater efficiency in price negotiations and rationalization of services, as well as the engagement of ~~a vendor risk assessment~~management real state in ~~2020. We~~2021, we paid Aquanima Brasil Ltda., approximately R$47 million in 2021 and R$40 million in 2020 ~~and R$29 million in 2019~~ for the services rendered in those years.
Spin-Off of Getnet and Related Arrangements
On February 25, 2021, further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, we announced that our Board of Directors approved the spin-off of our merchant acquiring business, which was undertaken by our then-subsidiary, Getnet, in order to concentrate the technology and payments businesses of Santander Group within PagoNxt, a new technology-focused global payment platform. On March 31, 2021, the shareholders of Santander Brasil approved the Spin-Off. Prior to the conclusion of the Spin-Off, Santander Brasil owned 100% of Getnet’s total capital stock. The Spin-Off was completed on October 26, 2021. As a result of the Spin-Off: (i) Santander Spain, our controlling shareholder, became Getnet’s controlling shareholder directly and indirectly through certain of its subsidiaries, (ii) Santander Brasil’s share capital was reduced by a total amount of R$2 billion, without the cancellation of shares, with Santander Brasil’s share capital decreasing from R$57 billion as of December 31, 2020 to R$55 billion as of December 31, 2021, and (iii) we stopped consolidating Getnet within our results of operations on March 31, 2021. For more information about the Spin-Off, see “Item 4. Information on the Company—A. History and Development of the Company—The Getnet Spin-Off.”
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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 ~~Contents~~the Partnership Agreement.
Prepayment of Receivables
Pursuant to the Partnership Agreement, we provide prepayment of receivables to merchants accredited by Getnet, except where Getnet opts to provide these services itself or where the merchant opts to obtain such services from another financial institution. For these purposes, we are required to accept those receivables which are duly registered in systems authorized by the Brazilian Central Bank. The prepayment of receivables is formalized through specific agreements to be entered into between the parties from time to time.
If we prepay the merchant’s receivables, the ownership of the receivables is transferred to Santander Brasil and Getnet is required to pay the amounts due thereunder to us upon receipt.
Income or loss arising from prepayment of receivables is attributed to Getnet’s business and recorded within Getnet’s results of operations. Under the Partnership Agreement, we calculate the results of the prepayments receivables transactions as the total revenue generated by these transactions, less the expenses incurred by us to provide prepayment of receivables to merchants, which include (i) acquiring expenses, which consist of the costs incurred by us in transferring funds to other banks as a result of the prepayment of receivables and the provision of payment services by Getnet, and (ii) prepayment expenses, which consist of (a) the costs incurred by us to fund prepayment of receivables transactions, (b) the expenses incurred by us with technology systems to support the prepayment of receivables to Getnet merchants; (c) taxes incurred in connection with the prepayment of receivables to Getnet merchants; (d) costs incurred by us to transfer funds to other banks in connection with the prepayment of receivables to Getnet merchants; and (e) our operating losses in the provision of prepayment of receivables services to Getnet merchants. Santander Brasil receives a monthly fee for participating in these arrangements.
If the prepayment of receivables results in a profit, we are required to pay Getnet the amount of profit made. If the prepayment of receivables results in a loss, Getnet is required to pay us an amount equivalent to the amount of the loss.
Santander Brasil Distribution Channel
We may, pursuant to the Partnership Agreement, market certain of Getnet products and services to our customer base. Any such distribution by Santander Brasil is based on marketing materials, guidelines and instructions provided by Getnet for this purpose. Getnet has also agreed, pursuant to the Partnership Agreement, to make such materials, guidelines and instructions available to us. Additionally, we have agreed to give Getnet access to its facilities so that we may distribute equipment to customers, as provided by the Services Agreement executed on January 24, 2019 between Getnet, Itrade Marketing Smollan Brasil Ltda. (third party provider) and Santander Brasil. Getnet pays certain amounts provided for in the Partnership Agreement to Santander as consideration for these distribution services.
Santander Brasil Integrated Account
Pursuant to the Partnership Agreement, Getnet has agreed to offer preferential terms and conditions to customers who hold current accounts with Santander Brasil as part of the “Santander Brasil Integrated Account” offer (Santander Conta Integrada), including discounts on equipment rental fees, discounts in the fees charged for prepayment of receivables, and discounts on monthly service fees. In view of the special abovementioned conditions granted to Santander Brasil’s clients, Santander Brasil has agreed to reimburse Getnet for the full amount of the discounts granted to such clients.
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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
For further information, see note “45 - Related party transactions” in “Item 18. Financial Statements,” which contains our audited consolidated financial statements prepared in accordance with IFRS as issued by the IASB.
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 ~~“See~~ “Item 4. Information on the Company—~~4A.~~A. History and Development of the Company—Important Events.”
For further information, see note 45 to our audited consolidated financial statements included elsewhere in this annual report.
7C. Interests of Experts and Counsel
Not applicable.
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ITEM 8. FINANCIAL INFORMATION
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 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 aggregate, will not have a material adverse effect on our financial condition or results of operations.
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As of December 31, ~~2020,~~2021, our judicial and administrative proceedings classified as probable loss risk (tax, labor and civil) and legal obligation amounted to approximately R$~~11,723~~11,179 million and have been ~~provisioned.~~provisioned, We believe that we have made adequate provisions related to the costs anticipated to be incurred in connection with our judicial and administrative ~~proceedings.~~proceedings, Our judicial and administrative proceedings classified as possible loss risk (tax, labor and civil) amounted to approximately R$~~29,352~~32,145 million.
Tax Litigation
We are a party to several tax-related lawsuits and judicial and administrative ~~proceedings.~~
proceedings,
The main lawsuits related to ~~tax legal obligations~~ fully recognized ~~are:~~
tax liabilities are as follows:
·● PIS/~~COFINS~~COFINS:. We filed lawsuits seeking to invalidate the provisions of Law 9,718/98, pursuant to which PIS and COFINS taxes must be levied on all revenues of legal entities. Prior to the enactment of such provisions, which have been overruled by recent ~~Supreme~~decisions of the Federal Court ~~decisions~~of Justice (Supremo Tribunal Federal) , or “STF,” for non-financial institutions, PIS and COFINS were levied only on revenues from services and sale of goods. On April 23, 2015, the ~~Supreme Court~~STF issued a decision, applicable solely to Santander Brasil, accepting jurisdiction over the appeal regarding PIS and rejecting jurisdiction over the appeal related to COFINS. The tax authorities appealed the decision of the ~~Supreme Court~~STF related to COFINS and their appeal was denied on August 19, 2015. In respect of COFINS, the case is finished with a favorable decision applicable to Santander Brasil. The appeal related to PIS, as well as the appeals submitted by other companies in the group, are pending. As of December 31, ~~2020,~~2021, such claims amounted to R$~~3,994~~4,075 million and are fully ~~provisioned.~~provisioned
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As of December 31, ~~2020,~~2021, our tax proceedings with a probable ~~loss~~ risk ~~for tax litigation~~of loss amounted to approximately R$~~6,054~~6,249 million, which was fully provisioned, and our tax proceedings with a possible ~~loss~~ risk ~~for tax litigation~~of loss amounted to approximately R$~~27,447 million.~~
29,498 million.
The main judicial and administrative proceedings classified with a probable loss risk assessment ~~are:~~
are as follows:
·● Tax on services for financial ~~institutions~~institutions:. Certain municipalities levy Service Tax (Imposto Sobre Serviços – ISS) on certain revenues derived from transactions not usually classified as the rendering of ~~services, for which we~~services. We have ~~argued~~filed suit against the payment of such taxes. As of December 31, ~~2020, amounts related to~~2021, the total amount involved in these proceedings totaled R$~~263~~284 million, which ~~are~~was fully provisioned.
·● Social security contribution.: 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, ~~2020,~~2021, amounts related to these proceedings totaled R$5154 million, ~~which~~ are were fully provisioned.
·● Taxes on banking ~~transactions~~transactions:. In May 2003, the Brazilian Federal Revenue Service issued a tax assessment against Santander Distribuidora de Títulos e Valores Mobiliários Ltda., or “Santander DTVM” and another tax assessment against Santander Brasil. The tax assessments refer to the collection of CPMF (Contribuição Provisória sobre Movimentação Financeira) tax on transactions conducted by Santander DTVM in the cash management of its customers’ funds and clearance services provided by Santander Brasil to Santander DTVM in 2000, 2001 and 2002. Based on our tax advisors’ opinion, the procedures adopted by Santander DTVM were correct. The administrative discussion ended unfavorably for both companies. On July 3, 2015, Santander Brasil and Santander Brasil Tecnologia S.A. (the current name of Santander DTVM) filed a lawsuit requesting the cancellation of both tax assessments. ~~This request~~The lawsuit was ~~judged unfavorably.~~rejected. We ~~have~~ appealed ~~to the court.~~this decision. On December 8, 2020, ~~the~~our appeals were ~~decided unfavorably.~~rejected. We ~~have~~ filed ~~a motion~~an appeal for clarification against this decision, which was rejected. As a result, new appeals to the superior courts (High Court of Justice (Superior Tribunal de Justiça), or “STJ,” and ~~are awaiting a decision.~~the STF) have been filed. The amount under discussion in these proceedings as of December 31, ~~2020~~2021 totaled R$~~1,678~~1,709 million. Based on the assessment of legal counsel, a provision of R$~~924~~946 million was made to cover the probable risk of loss in these proceedings.
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Contingent liabilities classified as having a possible risk of loss refer to judicial and administrative proceedings involving tax matters ~~assessed~~which were deemed by our management, ~~taking into account~~based on the advice of our legal ~~counsels,~~counsel, as having a possible ~~losses, which~~risk of loss, and were not recognized as liabilities. The such main lawsuits include:
·● Losses on loans.: We have challenged ~~the~~ tax assessments issued by the Brazilian Federal Revenue Service claiming that our deduction of losses on loans from our corporate income tax (Imposto de Renda das Pessoas Jurídicas – IRPJ) and CSLL (Contribuição Social sobre o Lucro Líquido) bases ~~have~~did not ~~met~~meet the relevant requirements under applicable law. As of December 31, ~~2020~~2021, the amount related to this challenge was approximately R$~~581~~1,176 million.
·● Social Security Contribution – Profit Sharing Payments (Participação nos Lucros e Resultados, or “PLR”). We are involved in administrative and judicial proceedings arising from tax assessment with respect to the collection of social security contributions on profit sharing payments. The tax authorities claim that payments by us were not made in accordance with the law. We have appealed ~~against~~ these ~~infraction notices, 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, ~~2020,~~2021, amounts related to these ~~infraction notices~~proceedings totaled approximately R$~~4,931~~7,341 million.
·● IRPJ and CSLL – Capital Gain.: The Brazilian Federal Revenue Service issued a tax assessment against Santander Seguros S.A. ~~(legal~~(the legal successor of ABN AMRO Brasil Dois Participações S.A. ~~(AAB~~, or “AAB Dois ~~Par)~~Par”) charging income tax and social contribution related to the 2005 fiscal year. The Brazilian Federal Revenue Service claims that the capital gain on the sale of Real Seguros S.A. and Real Vida e Previdência S.A. by AAB Dois Par should be paid at a 34.0% tax rate instead of 15.0%. The assessment was appealed at the administrative level based on our understanding that the tax treatment adopted in the transaction was in compliance with the ~~current~~applicable tax ~~law~~laws and the capital gain was properly taxed. The administrative discussion ended unfavorably. ~~The company~~We filed a lawsuit requesting the cancellation of tax assessments<B>.</B> We are responsible for any adverse outcome in this ~~process~~proceedings as athe former controlling shareholder of Zurich Santander Brasil Seguros e ~~Previdê~~Previdência S.A. As of December 31, ~~2020~~2021, the amount related to this proceeding was approximately R$~~488~~496 million.
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·● Goodwill amortization of the acquisition of Banco ~~Real~~Real:. In October 2014, the Brazilian Federal Revenue Service issued a tax assessment against Santander Brasil in the amount of R$1,063 million, claiming income tax and social contribution relating to the 2009 tax year. The argument of the Brazilian Federal Revenue Service is that the amortization of goodwill arising ~~before~~from our merger with Banco Real cannot be deducted. We are awaiting a decision by the CARF. As of December 31, ~~2020~~2021, the amounts related to this proceeding totaled approximately R$~~1,440~~1,466 million. This case is classified as having a possible risk of loss concerning the amortization of goodwill and asa remote risk of loss in relation to the fine charged in the case.
·● Goodwill amortization of the acquisition of Banco ~~Sudameris~~Sudameris:. In November 2014, we received a tax assessment of R$196 million related to the deduction of goodwill amortization in relation to the acquisition of Banco Sudameris. In December 2012, we received a similar tax assessment in the amount of R$239 million relating to the fiscal years encompassing August 2007 to April 2009. We have appealed in both cases to the CARF. We consider our risk of loss in this case as possible. As of December 31, ~~2020~~2021, the amount related to this proceeding was approximately R$~~646~~659 million.
·● Unrecognized ~~Compensation.~~Compensation: We are currently engaged in legal and administrative proceedings with the Brazilian 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, ~~2020,~~2021, the amount related to these proceedings was approximately R$~~4,641~~5,351 million. The risk of loss is classified as possible.
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·● Tax on Services (ISS) - Financial Institutions -: We are currently party to proceedings relating to the payment of ISS to various municipalities with respect to various revenues arising from operations that are usually not classified as services. On December 31, ~~2020~~2021, the amounts related to these proceedings totaled approximately R$~~3,582 million.~~4,146 million.
·● Use of CSLL Tax and Negative Tax Loss–: We are currently party to proceedings relating to tax assessments issued by the Brazilian Federal Revenue Service in 2009. These proceedings relate to the alleged undue compensation of tax loss carryforwards and negative basis of CSLL, because of tax assessments drawn up in previous periods. ~~Judgment~~A judgment is pending at the administrative level. As of December 31, ~~2020,~~2021, the amount ~~was R$1,072 million.~~
· ~~Goodwill Amortization of Getnet Tecnologia~~ – The tax authorities have issued infraction notices against Getnet Adquirência e Serviços para Meios de Pagamentos S.A and Santander Brasil, to require the income tax and social contribution payments, including late charges, relating to tax deduction of amortization of goodwill from the acquisition of Getnet Tecnologia for the period of 2014 to 2018. Tax authorities considered that the companies did not comply with the legal requirements for such amortization. Both companies presented their respective defenses, and are awaiting judgment at the administrative level. As of December 31, 2020, the amounts related to these ~~proceedings totaled approximately~~assessments was R$~~807~~1,093 million.
Labor Litigation
Similar to many other Brazilian banks, we are party to lawsuits brought by labor unions, associations and individual employees seeking, in general, compensation for overtime work, lost wages and retiree complaints about pension benefits and other labor rights. We believe we have either paid for or adequately provisioned ~~for~~ all such potential liabilities. In addition, we are the defendants in labor lawsuits filed by third-party employees that rendered or render services to us through service providers. The Brazilian ~~courts 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, ~~2020,~~2021, our labor proceedings with a probable ~~loss~~ risk of ~~labor-related litigation~~loss amounted to R$~~3,001~~2,025 million, which has been provisioned. Our labor proceedings with a possible ~~loss~~ risk of ~~labor-related litigation~~loss amounted to R$~~227~~267.3 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, or “AFABESP,” requesting the payment of a half-yearly bonus contemplated in the bylaws of Banespa in the event that Banespa obtained a profit and that the distribution of this profit were approved by the Board of Directors. The bonus was not paid in 1994 and 1995 since Banespa had not made a profit during those years. Partial payments were made from 1996 to 2000, as approved by the board of directors. The relevant clause in the bylaws was repealed in 2001. A Brazilian Regional Labor Court and the Brazilian Superior Labor 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 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. Our legal advisors have classified the risk of loss as probable. The current court decision does not define a specific amount to be paid by the defendants (this would only be determined once a final decision is issued and the enforcement process has begun, which is not the case yet).
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· ~~A claim was filed in 1998 by the association~~Table 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 bylaws was eliminated in 2001. The Regional 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. 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. Our legal advisors have classified the risk of loss as probable. The current court decision does not define a specific amount to be paid by the defendants (this would only be determined once a final decision is issued and the enforcement process has begun, which is not the case yet).Contents
IGP-DI Litigation
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~~Table~~A lawsuit was filed in 2002 in the Brazilian federal court by AFABESP on behalf of ~~Contents~~
~~IGPDI~~
· A claim was filed in 2002 in Brazilian 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 case the decision is unfavorable to Santander Brasil and Banesprev, there would be no estimated impact as any potential beneficiaries are parties to other ongoing litigation or have already benefitted from an 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. We are currently waiting the Brazilian Federal Regional Court to determine the date of the judgment.
its members requesting that certain pension supplements to which persons admitted to the relevant retirement plan before May 22, 1975 were entitled be adjusted in accordance with the General Index of Brazilian Domestic Availability Prices (Índice Geral de Preços - Disponibilidade Interna), or the IGP-DI, inflation index. The lower court ruling was favorable to the plaintiffs and ordered that the readjustment be made, but only for periods of time when no other form of readjustment was applied. Santander Brasil and Banesprev appealed this decision, but both appeals were denied. After the judgment of the appeals, we filed motions for clarification, which are pending judgment. At the same time, AFABESP filed for provisional compliance with the judgment in the lower court and, in response, we filed a motion to have certain members of AFABESP excluded from the list of beneficiaries of this decision, as these members were already plaintiffs in other legal proceedings related to these issues. The court has not definitively ruled on our claim, such that there is still no definitive list of beneficiaries of its decision. Based on the assessment of our legal advisors, the risk of loss is possible, which is why no provision has been recorded.
Abusive Targets Class Action -
In 2017,
· ~~The labor Federal Public Prosecutor’s Office (~~~~Ministério Público Federal do Trabalho~~~~) filed a class action against Santander Brasil alleging that our management of our employees~~ the Brazilian Labor Prosecutor’s Office (Ministério Público Federal do Trabalho), or the “MPT,” filed a class action against Santander Brasil alleging that the method used to define and assess employees’ corporate targets is 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 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. The complaint further alleges that we apply constant pressure to meet abusive, excessive and continuously increased goals, make excessive and inappropriate demands, impose excessive workloads 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 that, as a result, we have allegedly caused irreparable damage to our employees’ physical and mental health as a result of which the public social security system has suffered losses of more than R$90 million due to the 7,677 accident-related and social security benefits granted to employees from 2010 to 2015.
The ~~Federal Public Prosecutor’s Office’s 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 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 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$274.4 million, in addition to the imposition of certain daily fines. Finally, the ruling determined that we are required to implement a new experimental target program under the terms provided for in the decision ~~from~~dated January 1, 2020. We appealed this decision and obtained a ~~momentary suspension of the condemnatory decision.~~temporary stay. We estimate the risk of loss as remote.
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Civil Litigation
We are a party to civil lawsuits claiming damages and other civil remedies. These disputes normally fall within one of the following categories: (i) actions requesting the review of contractual terms and conditions or seeking monetary adjustments, including the alleged effects of implementation of certain economic government plans (as described below); (ii) actions arising from loan agreements; (iii) execution actions; and (iv) actions seeking damages. As of December 31, ~~2020,~~2021, our probable loss risk in connection with civil ~~litigation liabilities~~proceedings amounted to R$~~2,669~~2,905 million, which has been fully provisioned, ~~in full~~ and our possible loss risk in connection with civil ~~litigation liabilities~~proceedings amounted to R$~~1,753~~2,380 million. For civil lawsuits considered to be common and similar in nature, ~~the~~ provisions are recorded based on statistically averaged previous payments and on ~~the~~ legal counsel’s evaluation of success. Provisions for other lawsuits are determined individually on a case-by-case basis.
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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 econô~~micos”~~micos”). The claimants considered that their vested rights had been impaired due to the immediate application of these adjustments. The claims relate to 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 expected to be definitively settled. In August 2010, the STJ handed down a decision finding for the plaintiffs ~~in terms of substance,~~as to the merits, but excluding one of the ~~“planos”~~plans from the claim, thereby reducing the amount ~~thereof,~~of the award and once again confirming the five-year statute of ~~limitations period.~~limitations. Shortly thereafter, the STF issued an injunctive relief order whereby the proceedings in progress are stayed until the court issues a final decision. Although the STF initiated judgment in November 2013, a formal ruling has not been handed down as of the date hereof and we cannot predict when a formal ruling will be handed down by either the STJ or the STF.
In December 2017, the Brazilian Attorney-General’s Office (Advocacia-Geral da União), the Brazilian Central Bank, the Brazilian Consumer Protection Institute (Instituto Brasileiro de Defesa do Consumidor), the Brazilian Savers’ Association (Frente Brasileira pelos Poupadores) and the ~~Brazilian Federation of Banks (~~~~Federação Brasileira dos Bancos~~~~) 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 the 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.
~~In November 2018, the STF handed down a decision recognizing the leading court 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.
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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~~Table~~In November 2018, the STF handed down a decision recognizing the leading case status (repercussão geral) of ~~Contents~~an appeal discussing the matter of understated inflation in the monetary restatement of court deposits and determined that procedures related to this matter will be stayed until a final decision is reached by the court. Following ratification of the amendment to the settlement agreement in 2020, the STF determined an additional stay of the proceedings related to the matter for five years.
Insilene ~~Indústria de Silenciosos do Nordeste Ltda.~~Litigation
This is a judicial claim filed against our wholly-owned subsidiary Banco Bandepe S.A., or “Bandepe,” in connection with a loan agreement entered into between Bandepe and Insilene Indústria de Silenciosos do Nordeste Ltda., or ~~“Insilene”.~~“Insilene.” According to the complaint, Bandepe never provided the loan foreseen in the agreement, as a result of which Insilene went into bankruptcy. In ~~this judicial process,~~these proceedings, the ~~judge~~first instance court ruled in favor of Insilene, ~~and such~~which decision may no longer be appealable. The proceeding is in its liquidation phase, and there is disagreement between Bandepe and Insilene regarding the value to be paid. ~~The Court of Justice~~An appellate court of the State of Pernambuco approved the amount indicated in the expert’s report and ~~denied~~rejected the calculation criteria sustained by Bandepe. Bandepe filed an appeal to the STJ to change the form of liquidation to a form more favorable to Bandepe, on the basis that Insilene could have foreseen the damages. This appeal was successful and the liquidation phase will be restarted. After such decision and considering the changes in the form of liquidation, the risk of effective financial loss was reclassified as remote.
Fundo de Investimento em Direitos Creditórios Trendbank Banco de Fomento – ~~Multisetorial.~~
Multisetorial
A legal proceeding was filed against us in connection with the provision of custody services to Fundo de Investimento em Direitos Creditórios Trendbank Banco de Fomento – Multisetorial, or the “Fund,” related to the acquisition of fake or defective bonds. In a decision by the first instance court, the case was dismissed in relation to us on the grounds that the custodian could not be held responsible for the acquisition of bonds. ~~The Court of 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.
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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. The pension funds involved in the CVM proceeding are PETROS - Fundação Petrobras de Seguridade Social and Postalis – Instituto de Previdência Complementar. Only damages to Postalis are under discussion in the TCU ~~proceeding~~proceeding. We have presented defenses to both ~~proceedings.~~proceedings.
~~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 that took place before the signature of the Association Agreement, and that 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. The judicial process was concluded with a settlement in July 2020.
IBAMA
Litigation
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 Renová~~veis~~veis), or ~~“IBAMA”)~~“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 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
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connection with the production of seeds. As a consequence of the filing of the administrative defense, the enforceability of the fine is suspended. Although we believe we have presented valid arguments, we believe that the risk of loss in the administrative proceedings is possible. If we were to lose the administrative proceedings, we may seek a review of the administrative finding by a court.
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 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,~~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, this favorable decision was modified in favor of the Brazilian Federal Revenue Service. Concurrently with the administrative proceeding, through a ~~collective~~class action (Ação Popular), the administrative proceeding was returned to the CARF for a new judgment, which has not yet been handed down. However, the Brazilian Federal Revenue Service continues to charge us; therefore, a new lawsuit was filed to discuss this issue. There has been no decision at first instance. In June 2010, the Brazilian Federal Revenue Service issued two other infraction notices in the total amount of R$1.4 billion, based on the same concepts as the previous notice, with respect to IRPJ and CSLL related to 2005 to 2007. In these cases, Santander Brasil was not granted a favorable decision, and it has been appealed on its merits, though there was a reduction in the fine of R$367 million, and the assessment was reduced to R$984 million, the proceedings were partially unfavorable. We have filed claims for cancellation of these tax assessments. As of December 2013, the Brazilian Federal Revenue Service issued another infraction notice, in the total amount of R$344 million with respect to income tax and social contribution related to ~~2008.~~2008, Santander Brasil challenged this tax assessment and was granted a favorable decision inby the ~~first instance.~~trial court. The tax authority has appealed the decision and this was accepted. We are currently awaiting a final decision. In accordance with the advice of our external legal counsel, we believe that the Brazilian Federal Revenue Service’s position is incorrect, and that the risk of loss is remote. We did not record any provision since this issue should not have an impact on our consolidated financial statements.
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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 acquisition cost of the shares delivered in the exchange. A new appeal was filed with the CARF, which is awaiting judgment. This appeal was partially allowed and we filed an ~~injuction~~injunction against the unfavorable portion of the appeal. The case is currently awaiting judgment. Based on the advice of our external legal counsel, the position taken by the Brazilian tax authorities is not correct, and there are arguments for appeal against the infraction notice. As a result, the risk of loss is considered to be remote. Consequently, we have not ~~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) 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 are currently 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. ~~Provisional Measure (~~~~Medida Provisória~~) No. 931 issued on March 30, 2020 -(with respect to the fiscal year ended December 31, 2019) extended this timeframe to the seventh month after the end of the fiscal year as a consequence of the COVID-19 pandemic. This provisional measure was later converted into Law No. 14,030 on July 28, 2020. 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
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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.
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The amount distributed to shareholders as interest attributable to shareholders’ equity, net of any withholding tax, may be included as part of the minimum mandatory dividend. In accordance with applicable law, we are required to pay to shareholders an amount sufficient to ensure that the net amount they receive in respect of interest attributable to shareholders’ equity, after payment of the applicable withholding tax, plus the amount of declared dividends, is at least equivalent to the amount of the minimum mandatory dividend.
However, Brazilian Corporate Law allows our shareholders to suspend dividends distribution if our board of directors reports at our annual shareholders’ meeting that the distribution would not be advisable given our financial condition. Our fiscal council, if installed, should review any suspension of the 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.
In addition, the CMN issued Resolutions No. 4,797 and No. 4,820 on April 7 and May 29, 2020 which among other restrictions, prohibited the payment of dividends by financial institutions in excess of the mandatory dividend payments required under applicable Brazilian law until December 31, 2020 On December 23, 2020, the CMN enacted Resolution 4,885, which is intended to make the payment of dividends or interest on capital more flexible. As a result, financial institutions are not allowed to pay in excess of the greater of (x) the amount corresponding to 30% of the adjusted net profit in accordance with item I of article 202 of the Brazilian Corporate Law; and (y) the amount equivalent to the mandatory dividends as set forth in article 202 of the Brazilian Corporate Law.
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, regulatory provisions ~~(such as CMN Resolution No. 4,820 of May 29, 2020) and~~.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. (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 in reais 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 for reais into U.S. dollars.
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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, 2021, 2020 ~~2019~~ and ~~2018.~~2019:
For the year ended December 31,
2021 2020 2019
(in millions of R$)
Net Income under Brazilian GAAP 14,996 14,056 14,088
(-) Legal Reserve 750 703 704
(=) Amounts Available for distribution 14,246 13,353 13,384
Mandatory Dividends – 25.0% 3,561 3,338 3,346
Interest on Shareholder’s Equity 3,649 3,325 4,010
Dividends 6,000 512 6,790
Total (Interest on Shareholder’s Equity and Dividends) 9,649 3,837 10,800
Dividends distributed in excess of the Mandatory Dividend 7,388 499 7,454

For the year ended December 31,
2020 2019 2018
(in millions of R$)
Net Income under Brazilian GAAP 14,056 14,088 12,166
(-) Legal Reserve 703 704 608
(=) Amounts Available for distribution 13,353 13,384 11,558
Mandatory Dividends – 25.0% 3,338 3,346 2,890
Interest on Shareholder’s Equity 3,325 4,010 4,080
Dividends 512 6,790 2,520
Total (Interest on Shareholder’s Equity and Dividends) 3,837 10,800 6,600
Dividends distributed in excess of the Mandatory Dividend 499 7,454 3,710
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History of Payment of Dividends and Interest Attributable to Shareholders’ Equity
In ~~2020,~~2021, we declared dividends and interest on shareholders’ equity in the gross amount of R$~~3,837~~9,649 million, of which R$~~1,000~~3,000 million was paid on ~~April 29, 2019,~~June 2, 2021, R$~~1,000~~3,400 million on ~~July 31, 2019,~~September 3, 2021, R$~~1,000~~3,000 million on ~~October 30, 2019~~December 3, 2021 and R$~~7,800~~249 million on February ~~21, 2020.~~3, 2022. The table below shows the amounts paid to our shareholders in the periods indicated.
For the year ended December 31, For the year ended December 31,
2020 2019 2018 2017 2016 2021 2020 2019 2018 2017
(in millions of R$, except per share figures) (in millions of R$, except per share figures)
Dividends 512 6,790 2,520 2,500 1,400 6,000 512 6,790 2,500 1,400
Interest attributable to shareholders’ equity 3,325 4,010 4,080 3,800 3,850 3,649 3,325 4,010 3,800 3,850
Total 3,837 10,800 6,600 6,300 5,250 9,649 3,837 10,800 6,300 5,250
Dividends and interest on capital per 1,000 shares
Common shares 490 1,379 842 776 666 1,397.75 489.83 1,379 776.17 666.21
Preferred shares 539 1,517 926 854 733 1,537.54 538.82 1,517 853.79 732.83

8B. Significant Changes
There has been no significant change since the date of our last audited financial statements.
ITEM 9. THE OFFER AND LISTING
9A. Offering and Listing Details
Market Price and Volume Information
On September 18, 2009, our Board of Directors approved the implementation of the Global Public Offering, which included the issue of 525,000,000 Units (each representing, at that date, 55 common shares and 50 preferred shares), which were all registered, without par value, free and clear of any liens or encumbrances. This offering consisted of the simultaneous initial public offering of (i) Units in Brazil on the over-the-counter market, in accordance with CVM Instruction 400 of December 29, 2003, as amended, and (ii) Units abroad, including in the form of ADRs representing ADSs registered with the SEC under the Securities Act.

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On October 6, 2009, the Global Public Offering priced shares at R$23.50 per unit and U.S. ~~$13.40~~$13.40 per ADR. The Units have been traded on the B3 and since October 7, 2009, and our ADRs have been traded on the NYSE since October 7, 2009.
On April 29, 2014, Santander Spain, our indirect controlling shareholder, announced its intention to launch voluntary exchange offers in Brazil and in the United States to acquire up to all of our shares that were not held by the Santander Group, representing approximately 25% of our share capital, with payment in Brazilian depositary receipts or ADRs representative of Santander Spain’s common shares.
On October 30, 2014, the Brazilian Exchange Offer and the U.S. Exchange Offer were concluded. As a result of these offers, the Santander Group’s shareholding increased to 88.3% of our total share capital. Further, as a result of the offer in Brazil, our Units were delisted from the Level 2 Segment and are now traded at the basic listing segment of B3.
The uncertainties caused by the outbreak of the COVID-19 pandemic had an adverse impact on the global economy and global capital markets and in Brazil, including markets volatility, which resulted in the B3’s circuit breaker mechanism being triggered eight times during March 2020.
The price of our units and ADSs may experience volatility, which could negatively impact holders of our Units and ADSs.
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The following table shows our outstanding publicly traded common shares and preferred shares as of February ~~24, 2021:~~22, 2022:
Free Float B3 NYSE B3 NYSE
Common shares 210,515,193 145,127,657 208,185,207 149,747,122
Preferred shares 234,266,896 145,127,657 235,899,621 149,747,122
Total 444,782,089 290,255,314 444,084,828 299,494,244

Units, Common and Preferred Shares Traded on B3
The table below sets forth the high, low and last daily sales prices in reais for our common shares on the B3 for the periods indicated.
Reais per share – SANB3 (Common Shares)
High Low Last
2015 Annual 10.80 6.10 8.83
2016 Annual 19.46 6.60 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
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
Last 6 Months 22.35 12.51 18.93
September 2020 14.70 12.51 13.05
October 2020 16.69 12.71 14.60
November 2020 18.91 14.62 17.84
December 2020 22.35 18.00 21.66
January 2021 22.25 18.00 18.93
February 2021 (through to February 24, 2021) 20.80 18.50 18.90
Reais per share – SANB3 (Common Shares)
High Low Last
2017 Annual 22.92 13.01 18.49
1st Quarter 22.92 16.00 16.13
2nd Quarter 17.60 13.01 14.75
3rd Quarter 17.40 14.30 15.10
4th Quarter 20.03 14.90 18.49
2018 Annual 24.60 14.06 22.22
1st Quarter 23.00 16.91 23.00
2nd Quarter 24.60 14.16 15.05
3rd Quarter 21.05 14.06 19.40
4th Quarter 23.72 19.01 22.22
2019 Annual 28.99 20.30 25.45
1st Quarter 26.65 20.49 21.94
2nd Quarter 23.71 20.50 23.00
3rd Quarter 24.60 20.30 23.77
4th Quarter 28.99 22.27 25.45
2020 Annual 25.90 10.50 21.66
1st Quarter 25.90 11.29 12.99
2nd Quarter 16.57 10.50 13.97
3rd Quarter 15.62 12.51 13.05
4th Quarter 22.35 12.71 21.66
2021 Annual 22.45 15.67 15.76
1st Quarter 22.25 17.13 18.75
2nd Quarter 22.45 17.84 19.61
3rd Quarter 21.09 15.77 16.64
4th Quarter 17.90 15.67 15.76
Last 6 Months 21.09 14.00 14.92
June 2021 21.09 18.60 20.42
July 2021 21.07 15.77 16.64
August 2021 17.90 15.75 16.16
September 2021 21.07 15.77 16.64
October 2021 17.90 15.75 16.16
November 2021 17.43 15.19 15.50
December 2021 16.09 14.00 14.21
January 2022 16.24 14.22 15.60
February 2022* 15.65 14.82 15.05

* Through February 22, 2022.
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The table below sets forth the high, low and last daily sales prices in reais for our preferred shares on the B3 for the periods indicated.
Reais per share – SANB4 (Preferred Shares)
High Low Last
2015 Annual 10.80 6.10 8.83
2016 Annual 19.46 6.60 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
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
Last 6 Months 25.00 13.96 20.28
September 2020 16.05 13.96 14.90
October 2020 19.75 14.56 17.16
November 2020 23.20 16.97 21.06
December 2020 24.28 21.40 23.49
January 2021 25.00 19.96 20.28
February 2021 (through to February 24, 2021) 22.30 20.21 20.66
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B3
Units – SANB11
High Low Last
R$ per share
2015 Annual 10.80 6.10 8.83
2016 Annual 19.46 6.60 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
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
Last 6 Months 47.20 26.22 39.26
September 2020 30.51 26.22 27.72
October 2020 35.96 27.00 31.78
November 2020 41.34 31.48 39.15
December 2020 46.60 40.10 44.83
January 2021 47.20 38.38 39.26
February 2021 (through to February 24, 2021) 43.12 38.80 39.44
Reais per share – SANB4 (Preferred Shares)
High Low Last
2017 Annual 22.92 13.01 18.49
1st Quarter 22.92 16.00 16.13
2nd Quarter 17.60 13.01 14.75
3rd Quarter 17.40 14.30 15.10
4th Quarter 20.03 14.90 18.49
2018 Annual 24.60 14.06 22.22
1st Quarter 23.00 16.91 23.00
2nd Quarter 24.60 14.16 15.05
3rd Quarter 21.05 14.06 19.40
4th Quarter 23.72 19.01 22.22
2019 Annual 28.99 20.30 25.45
1st Quarter 26.65 20.49 21.94
2nd Quarter 23.71 20.50 23.00
3rd Quarter 24.60 20.30 23.77
4th Quarter 28.99 22.27 25.45
2020 Annual 24.28 11.42 23.49
1st Quarter 24.25 12.00 13.87
2nd Quarter 16.46 11.42 14.22
3rd Quarter 16.19 13.96 14.90
4th Quarter 24.28 14.56 23.49
2021 Annual 25.00 17.62 18.11
1st Quarter 25.00 18.20 20.82
2nd Quarter 24.26 19.25 21.06
3rd Quarter 21.85 18.52 18.77
4th Quarter 20.53 17.62 18.11
Last 6 Months 21.84 15.90 16.87
June 2021 21.84 20.29 21.19
July 2021 21.44 18.52 18.77
August 2021 20.53 17.62 18.16
September 2021 21.44 18.52 18.77
October 2021 20.53 17.62 18.61
November 2021 19.53 17.52 17.82
December 2021 18.36 15.95 15.95
January 2022 18.49 15.90 17.89
February 2022* 17.94 16.61 16.79

* Through February 22, 2022.
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B3
Units – SANB11
High Low Last
R$ per share
2017 Annual 22.92 13.01 18.49
1st Quarter 22.92 16.00 16.13
2nd Quarter 17.60 13.01 14.75
3rd Quarter 17.40 14.30 15.10
4th Quarter 20.03 14.90 18.49
2018 Annual 24.60 14.06 22.22
1st Quarter 23.00 16.91 23.00
2nd Quarter 24.60 14.16 15.05
3rd Quarter 21.05 14.06 19.40
4th Quarter 23.72 19.01 22.22
2019 Annual 28.99 20.30 25.45
1st Quarter 26.65 20.49 21.94
2nd Quarter 23.71 20.50 23.00
3rd Quarter 24.60 20.30 23.77
4th Quarter 28.99 22.27 25.45
2020 Annual 48.21 21.54 44.83
1st Quarter 48.21 22.75 26.00
2nd Quarter 32.47 21.54 27.59
3rd Quarter 31.41 26.22 27.72
4th Quarter 46.60 27.00 44.83
2021 Annual 47.20 33.24 33.76
1st Quarter 47.20 35.34 39.60
2nd Quarter 46.80 37.36 40.50
3rd Quarter 42.59 34.22 35.37
4th Quarter 38.15 33.24 33.76
Last 6 Months 42.59 29.84 31.43
June 2021 42.59 39.23 41.94
July 2021 42.40 34.22 35.37
August 2021 38.15 33.24 34.40
September 2021 42.40 34.22 35.37
October 2021 38.15 33.24 34.40
November 2021 36.97 32.63 32.96
December 2021 34.46 29.84 29.98
January 2022 34.82 30.08 32.87
February 2022* 33.60 31.32 31.61
* Through February 22, 2022.
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For information on the rights attaching to our common shares and to our preferred shares, please see “Item 10. Additional Information—B. By-Laws—Rights of Common Shares and Preferred Shares.”
ADRs Traded on NYSE
Our ADRs have been listed and traded on the NYSE since October 7, 2009. Our Units abroad, including in the form of ADRs representing ADSs, are registered with the SEC under the Exchange Act.
The deposit agreement pursuant to which ADRs have been issued is between us and The Bank of New York Mellon, as depositary, and all the holders from time to time of ADRs. For further information on our arrangements with The Bank of New York Mellon, please see “Item 12. Description of Securities other than Equity Securities—D. American Depositary ~~Receipts.~~Receipts,”
Since certain of our shares and our ADRs are held by nominees, the number of record holders may not be representative of the number of beneficial owners.
NYSE
ADR – BSBR
High Low Last
U.S.$ per ADR
2017 Annual 22.92 13.01 18.49
1st Quarter 22.92 16.00 16.13
2nd Quarter 17.60 13.01 14.75
3rd Quarter 17.40 14.30 15.10
4th Quarter 20.03 14.90 18.49
2018 Annual 24.60 14.06 22.22
1st Quarter 23.00 16.91 23.00
2nd Quarter 24.60 14.16 15.05
3rd Quarter 21.05 14.06 19.40
4th Quarter 23.72 19.01 22.22
2019 Annual 28.99 20.30 25.45
1st Quarter 26.65 20.49 21.94
2nd Quarter 23.71 20.50 23.00
3rd Quarter 24.60 20.30 23.77
4th Quarter 28.99 22.27 25.45
2020 Annual 12.68 3.69 8.64
1st Quarter 12.68 4.55 5.17
2nd Quarter 6.74 3.69 5.22
3rd Quarter 6.11 4.76 4.94
4th Quarter 8.95 4.80 8.64
2021 Annual 9.27 5.81 5.95
1st Quarter 8.84 6.34 7.05
2nd Quarter 9.27 6.62 8.20
3rd Quarter 8.34 6.39 6.54
4th Quarter 6.99 5.81 5.95
Last 6 Months 8.30 5.19 5.79
June 2021 8.30 7.27 8.05
July 2021 8.17 6.39 6.54
August 2021 6.99 5.81 6.11
September 2021 8.17 6.39 6.54
October 2021 6.99 5.81 6.11
November 2021 6.57 5.74 5.82
December 2021 6.05 5.19 5.37
January 2022 6.50 5.33 6.27
February 2022* 6.34 5.90 6.25
* Through February 22, 2022.
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NYSE
ADR – BSBR
High Low Last
U.S.$ per ADR
2015 Annual 10.80 6.10 8.83
2016 Annual 19.46 6.60 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
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
Last 6 Months 8.95 4.76 7.22
September 2020 5.78 4.76 4.94
October 2020 6.17 4.80 5.54
November 2020 7.69 5.52 7.28
December 2020 8.95 7.66 8.64
January 2021 8.83 7.09 7.22
February 2021 (through to February 24, 2021) 7.93 7.05 7.26

9B. Plan of Distribution
Not applicable.
9C. Markets
Our Units and common and preferred shares are traded on the B3. The regulation of Brazilian securities markets which affects these securities is discussed below. In addition, we also have ADRs which have been listed and traded on the NYSE since October 7, 2009. For further information, see “—A. Offering and Listing Details.”
Regulation of Brazilian Securities Markets
The Brazilian securities market is regulated by the CVM, as provided for byin the Brazilian Capital Markets Law ~~6,385 of December 7, 1976, or the “Brazilian Securities Market Law,”~~ and by the Brazilian Corporate Law, as well as the CMN and the Brazilian Central Bank.
Under Brazilian Corporate Law, a corporation is either publicly held (~~companhia aberta~~)(companhia aberta) or privately held (~~companhia fechada~~)(companhia fechada) and unlisted. All publicly held companies must be registered with the CVM and are subject to reporting and other regulatory requirements. A company registered with the CVM may list its securities either on the Brazilian stock exchange market or on Brazilian over-the-counter markets. The shares of a publicly held company may also be traded privately.
In Brazil, the over-the-counter market is divided into two categories: (i) organized over-the-counter markets, in which the transactions are supervised by self-regulating entities authorized by the CVM; and (ii) non-organized over-the-counter markets, in which the transactions are not supervised. In either case, the over-the-counter markets consist of direct trades, outside of the stock exchange market, through a financial institution registered with the CVM, which serves as an intermediary. No special application, other than registration with the CVM (and, in case of organized over-the-counter markets, registration with the applicable one), is necessary for securities of a public company to be traded in these markets.
To be listed on the B3, a company must apply for registration with the CVM and the B3.
Trading on the B3
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. This after-market trading is subject to regulatory limits on price volatility of securities traded by investors operating on the internet.
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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.
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In addition, in order to maintain control over the fluctuation of the B3 index, the B3 has adopted a “circuit breaker” system 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 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 listed on the B3. The most up-to-date version of the B3’s Issuer Manual became effective as of October 22, 2020.
Corporate Governance Practices
In 2000, the B3 introduced three special listing segments, Levels 1 and 2 of Corporate Governance and Novo Mercado, which were aimed at fostering a secondary market for securities issued by Brazilian companies that voluntarily abide by corporate governance practices and disclosure requirements in addition to those already imposed by Brazilian law.
Our Units were initially listed on the Level 2 Segment. However, as a result of the Brazilian Exchange Offer and the U.S. Exchange Offer launched by Santander Spain in Brazil for the acquisition of our shares, our Units were delisted from the Level 2 Segment and are now traded at the basic listing segment of the B3.
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 3946 companies, the company’s performance is evaluated 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.
The new rules established by this ruling apply to companies (i) which are registered as category “A” issuers, (ii) whose securities have been traded on the B3 since January 1, 2018, and (iii) which, on the publication date of CVM Instruction 586,, had at least one of their securities included in the Brazil Index 100 – IBrX-100 (Í(Índice Brasil ~~100~~)100) or within the Bovespa Index – IBOVESPA (Índice Bovespa). We fulfill all three of these criteria and are therefore subject to the new CVM rules.
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Investment in Our Units by Non-Residents of Brazil
Investors residing outside Brazil, including institutional investors, may either register their investments in securities in Brazil, as a foreign direct investment under Law 4,131/62, or as a portfolio investment under the applicable regulation enacted by CMN and CVM. Foreign investors, regardless of whether their investments are made as direct investments or portfolio investments, must be enrolled with the Brazilian Internal Revenue. This registration process is undertaken by a financial institution or an institution authorized to operate by the Brazilian Central Bank as the investor’s legal representative in Brazil.
Since March 30, 2015, portfolio investments are regulated by CMN Resolution 4,373, enacted on September 29, 2014, or “CMN Resolution 4,373,” which superseded CMN Resolution 2,689, which had been in force for about 15 years.
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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 in reais but issued abroad.
With certain limited exceptions, CMN Resolution 4,373 allows investors to carry out any type of transaction in the Brazilian capital markets involving a security traded on a Brazilian stock or futures exchange, or through an organized over-the-counter market, but investors may not transfer the ownership of investments made under such regulation to other non-Brazilian holders through private transactions. Investments and remittances outside Brazil for gains, dividends, profits or other payments under our Units are made through the foreign exchange market.
For further information on the requirements for the registration of foreign portfolio investments, see “Item 10. Additional Information—D. Exchange Controls—Foreign Investment in Brazil—Capital Markets Investment.”
Foreign direct investors under Law 4,131/62 may sell their shares in both private and open market transactions, but these investors are currently subject to a less favorable tax treatment on gains, apart from being subject to taxation on the execution of foreign exchange transactions. For more information on foreign direct investors, see “Item 10. Additional Information—D. Exchange Controls—Foreign Investment in Brazil—Foreign Direct Investment.”
Since March 30, 2015, CMN Resolution 4,373 also deals with investments of foreign capital in Brazil through Depositary Receipts, or “DRs,” and superseded the former rule (CMN Resolution 1,927 of May 18, 1992).
We filed an application to have the ADRs approved under the former rule by the Brazilian Central Bank and the CVM, and we received final approval on October 1, 2009.
If a holder of ADRs decides to exchange such ADRs for the underlying Units, the holder will be entitled to (i) sell the Units on the B3 and rely on the depositary’s electronic registration for five business days from the date of exchange to obtain and remit U.S. dollars abroad upon the holder’s sale of our Units, (ii) convert its investment into a foreign portfolio investment under CMN Resolution 4,373, or (iii) convert its investment into a foreign direct investment under Law 4,131/62. See “Item 10. Additional Information—E. Taxation—Brazilian Tax Considerations” for a description of the tax consequences for an investor residing outside Brazil of investing in our Units in Brazil.
If a holder of ADRs wishes to convert its investment into either a foreign portfolio investment under CMN Resolution 4,373 or a foreign direct investment under Law 4,131/62, it should begin the process of obtaining its own foreign investor registration with the Brazilian Central Bank or with the CVM, as the case may be, in advance of exchanging the ADRs for Units.
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The custodian is authorized to update the depositary’s electronic registration to reflect conversions of ADRs into foreign portfolio investments. If a holder of ADRs elects to convert its ADRs into a foreign direct investment under Law 4,131/62, the conversion will be 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 to be converted into shares.
If a foreign direct investor under Law 4,131/62 wishes to deposit its Units into the ADR program in exchange for ADRs, such holder will be required to present to the custodian evidence of payment of capital gains taxes. The conversion will be 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 into shares.
The Brazilian federal constitution permits foreign individuals or companies to invest in the voting shares of Brazilian financial institutions only if they have specific authorization by the President of Brazil based on national interest or reciprocity. A presidential decree issued on November 13, 1997, in respect of Banco Meridional do Brasil S.A. (a predecessor entity) allows up to 100% foreign participation in our capital stock. Foreign investors may acquire our Units or ADRs as a result of this decree. In addition, foreign investors may acquire publicly traded nonvoting shares of Brazilian financial institutions traded on a stock exchange or depositary receipts offered abroad representing 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.”
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9D. Selling Shareholders
Not applicable.
9E. Dilution
Not applicable.
~~9E. Dilution~~
~~Not applicable.~~
9F. Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
10A. Share Capital
Not applicable.
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.
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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.
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 a financial institution, we are subject to certain limitations set forth by the Banking Reform Law, as amended Law 13,506/17, as well as related regulations. For more information in relation to such limitations, see “Item 4. Information on the Company—B. Business Overview—Regulation and Supervision—Principal Limitations and Obligations of Financial 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) 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.
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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
·● the appraisal of assets to be contributed to increase our capital stock.
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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.
Nevertheless, these rights can only be exercised by the holders of shares who maintained their holding for at least three months before the date of the annual shareholders’ meeting. The Brazilian Corporate Law also permits a multiple vote procedure to be adopted, upon request by shareholders representing at least 10% of our voting capital. Pursuant to CVM Instruction 282 of June 26, 1998, the percentage needed to call for a multiple vote to elect members of the board of directors, in public companies with capital stock exceeding R$100 million, is 5% of the voting capital per request of multiple vote.
The holders of preferred shares are entitled to the following rights according to our By-Laws:
·● dividends and interest on shareholders’ own equity in an amount 10% higher than those attributed to common shares, as well as priority in the distribution;
·● participation on equal terms with the common shares conditions, in capital increases arising from the capitalization of reserves and income, as well as in the distribution of bonus shares created by the capitalization of accrued income, reserves or any other resources;
·● priority in reimbursement of capital, without payment of premium, in the case of liquidation; and
·● tag-along rights in the event of a change in our control, under the same terms and conditions extended to our controlling shareholders.
Common shares not belonging to the controlling shareholders also give their holders tag-along rights in the event that our control is transferred on the same terms and conditions as those granted to our controlling shareholders.
The shareholders’ general meeting may decide on conversion of the preferred shares into common shares.
The Brazilian Corporate Law sets forth that shares without voting rights or shares with restricted rights, including our preferred shares, shall be granted unrestricted voting rights if the company ceases to distribute, during three consecutive fiscal years, any fixed or minimum dividend granted to these shares, until the respective distributions are made.
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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 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:
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·● the right to vote at general meetings, in the case of holders of common shares;
·● the right to share in the distribution of dividends and interest on shareholders’ equity, and to share in the surplus assets in the event of our liquidation;
·● preemptive rights in subscribing for shares or convertible securities in specific circumstances;
·● the right to monitor the management; and
·● the right of withdrawal in the circumstances established by law, including our consolidation, merger and spin-off.
Description of Units
The Units are share deposit certificates, each representing one common share and one preferred share, all of them free and unencumbered. The shares represented by the Units shall be registered in a trust account linked to the Units, and their ownership can only be transferred by means of transfer of the corresponding Units, upon written instructions from the holder. Earnings from the Units and the amount received in the case of redemption or repayment shall only be paid to the holder of the Units registered in the books of the custodian.
None of the shares underlying the Units, the earnings thereon or the corresponding redemption or repayment amounts may be pledged, encumbered or in any other way given in guarantee by the holder of the Units, nor may they be subject to attachment (penhora), seizure (arresto), impounding (sequestro), search and apprehension (busca e apreensão), or to any other lien or encumbrance.
The Units are held by us (except units that underlie the ADSs which are held by our affiliate, Santander Caceis Brasil Distribuidora de Títulos e Valores Mobiliários S.A.), as the custodian, in book-entry form in an account opened in the holder’s name. The transfer of ownership is effected by debiting the seller’s Unit account and crediting the buyer’s Unit account according to a written transfer order issued by the seller or a court authorization or transfer order delivered to the custodian, all of which are retained by the custodian. Dividends, interest on shareholders’ equity and/or cash bonuses shall be paid to the custodian and the custodian shall then transfer the amount to the custody agents for payment to the Unit holders. The pledge, usufruct, right of succession, fiduciary transfer in guarantee and any other conditions, onus or encumbrances on the Units must be registered in the custodian’s records, as well as noted in the corresponding statement of account of Units.
The custodian shall provide Unit holders with a statement of account at the end of each month in which there is movement and, when there is no movement, at least once a year. The statement shall show the date and place of issue, the name and details of the holder of the Unit account, an indication that it is a statement of Unit account, details of the shares deposited, a statement that the shares deposited, their earnings and any amounts received in the event of redemption or repayment shall only be paid to the holder of the Unit account or to the holder’s order in writing, our charge for the deposit, if any, and the addresses where Unit holders may obtain assistance.
Upon a written order issued by the holder of the Unit account to a broker authorized by the stock exchange where the Units are traded, the custodian shall block the corresponding Units and transfer them to the buyer upon receipt of a confirmation of the sale from the stock exchange.
The Unit holder shall have the right, at any time, to instruct a broker to cancel Units and transfer the underlying shares. The broker must request to us, as the agent, to transfer the Units to the share deposit accounts held by the custodian in the holder’s name. The Unit holder shall bear any transfer and cancellation costs involved. Similarly, the holder may instruct a broker to assemble Units by transferring the number of shares that jointly represent a Unit, which shall be registered by the custodian in a trust account linked to the Units.
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The right to cancel Units may be suspended in the event of a public offering for distribution of Units, either in the domestic or the international market, in which case the suspension may not last longer than 180 days. Units subject to any lien or encumbrance may not be cancelled.
The following rules apply to the exercise of the rights granted to the shares represented by Units:
·● Dividends and share redemption or repayment amounts delivered to us, as depository of the shares, shall be paid by us to the Unit holder;
·● Only the Unit holder shall have the right to attend our general meetings and to exercise all prerogatives conferred on our shareholders by the shares represented by the Units;
·● In the event of a stock split, cancellation or reverse stock split or new issuances of shares by us while the Units are in existence, the following rules will be observed:
(1)       In the event there is a change in the number of shares represented by Units as a result of a reverse stock split or cancellation of shares, we will debit the number of cancelled shares from each Unit holder’s account and proceed with the automatic cancellation of Units, observing the ratio of one common share and one preferred share issued by us to each Unit. We will deliver to the shareholders the shares which are insufficient to constitute a Unit in the form of shares, rather than Units; and
(2)       In the event there is a change in the number of shares represented by the Units as a result of a stock split or new issuances of shares, the custodian will register the deposit of the new shares and issue new Units, registering them in the accounts of their respective holders, so as to reflect the new number of shares held by unit holders. In this way, the accounts will maintain a ratio of one common share and one preferred share issued by us and represented by Units, and the custodian will deliver to holders the shares which are insufficient to constitute a Unit in the form of shares rather than Units;
(1) In the event there is a change in the number of shares represented by Units as a result of a reverse stock split or cancellation of shares, we will debit the number of cancelled shares from each Unit holder’s account and proceed with the automatic cancellation of Units, observing the ratio of one common share and one preferred share issued by us to each Unit. We will deliver to the shareholders the shares which are insufficient to constitute a Unit in the form of shares, rather than Units; and
(2) In the event there is a change in the number of shares represented by the Units as a result of a stock split or new issuances of shares, the custodian will register the deposit of the new shares and issue new Units, registering them in the accounts of their respective holders, so as to reflect the new number of shares held by unit holders. In this way, the accounts will maintain a ratio of one common share and one preferred share issued by us and represented by Units, and the custodian will deliver to holders the shares which are insufficient to constitute a Unit in the form of shares rather than Units;
In the event of a capital increase, by means of the issuance of shares that may be converted into new Units, Unit holders may exercise the ~~preemption~~preemptive rights belonging to the shares represented by their Units. We shall create new Units in the register of book-entry Units and credit them to their holders so as to reflect the new number of common and preferred shares issued by us, subject to the current proportion of ordinary and preferred shares to constitute the ~~Units.~~Units, Shares that are too few to constitute a Unit shall be delivered to the shareholders as shares, rather than Units. There shall be no automatic credit of Units in the event of the exercise of ~~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 Council are, as a general rule, elected at annual general meetings unless for an exceptional reason they have to be elected at an extraordinary general meeting.
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.
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Quorum of General Meetings
As a general rule, the Brazilian Corporate Law sets forth that a general meeting can be held if shareholders holding at least 25% of the voting capital stock are present, at the first call, and at the second call if any number of holders of voting shares are present. If the shareholders have been convened to resolve on amendments to the By-Laws, the quorum at the first call must be at least two-thirds of the voting shares and, at the second call, any number of holders of voting shares.
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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.
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 of the voting shares is needed for the approval of the following matters, among others: (i) reduction of the mandatory dividend to be distributed to our shareholders; (ii) changes in our business purpose; (iii) our merger, spin-off or incorporation; (iv) our participation in a corporate group (as defined by the Brazilian Corporate Law); (v) the termination of a state of liquidation; and (vi) our dissolution.
Call Notice of 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 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.
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)
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shareholders representing a minimum of 5% of our capital stock, if our Board of Directors 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 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.
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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 (who will be responsible for transferring the voting pronouncements to us), pursuant to the terms of the applicable ~~regulation.~~
regulations.
Policy on Trading in Our Own Securities
The objective of our Policy on Trading in Our Own Securities, prepared in accordance with CVM ~~Instruction 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:
(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;
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(2) During the period between our decision to increase capital stock, issue securities, distribute dividends, pay bonuses, or execute a stock split or a reverse stock split, and the publication of the corresponding notices or announcements;
(3) When it is intended to carry out a takeover, a total or partial spin-off, transformation or corporate reorganization; and
(4) During the 30-day period prior to the publication of annual or six-monthly financial statements, or quarterly financial information. However, exceptionally in the case of issues of fixed-rate securities by us by means of a public offer overseas, in order to raise funds for us in the ordinary course of our business, including medium term notes issued by us, this period shall be reduced to 15 days before the publication of such statements.
Our policy also establishes that our controlling shareholders, officers, and members of our Board of Directors, members of our Fiscal Council (when there is an active one) and members of any other bodies with technical or consulting functions created by a provision in the By-Laws, shall not trade securities issued by us or their respective derivatives on the same day that we, our controlled or associated companies or any other company under their common control are selling shares held in treasury or purchasing shares to be held in treasury, or while holding open orders to deal in our shares. However, such prohibition shall not apply if the acquisition or sale of our shares by us has the specific purpose of managing the risk arising out of our activities as market maker of certain funds indexes.
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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~~wholly-owned subsidiary; or (ix) the acquisition of control of another company at a price exceeding the legal limits.
The Brazilian Corporate Law also provides that a spin-off of a company shall entitle its shareholders to withdraw only if it results in: (i) a change in the corporate purpose, unless the assets spun off are transferred to a company whose principal activity coincides with the business purpose of the spun-off company; (ii) a reduction in the mandatory dividend; or (iii) becoming part of a group of companies, as defined in the Brazilian Corporate ~~Law.~~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 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,
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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.
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Purchase of Our Own Shares
Our By-Laws authorize our Board of Directors to approve the purchase of our own shares. In any of the following circumstances, the decision will only become effective upon prior approval at a shareholders meeting: (i) acquisition on an organized securities market involving more than 5% of our outstanding shares of a certain type or class in less than 18 months; (ii) acquisition on an organized securities market for prices 10% above the market price; (iii) acquisition aiming at changing or preserving our share control composition or our management structure; or (iv) where the counterparty in an acquisition out of the organized securities markets is related to us (according to the applicable accounting rules). The decision to purchase our shares will be disclosed to the markets and the respective trade will be settled within 18 months from the approval.
The decision to acquire our shares is also subject to certain restrictions. It may not, among 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, 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 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.
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We may purchase our shares on the stock exchange, but not for a price above the market value. Acquisitions by means of private transactions must observe the applicable limitations and the approval by the shareholders meeting may be required. We may also buy our own shares in the event that we should cease to be a publicly held company., We may also purchase or issue put or call options on our shares.
On September 18, 2017, our shareholders approved the cancellation of 64,551,366 shares held in treasury, representing 32,275,683 common shares and 32,275,683 preferred shares. Such treasury shares corresponded, as of that date, to the totality of the shares then held in treasury.
On November 1, 2019, our Board of Directors approved the Unit repurchase program to cover the acquisition of up to 37,256,072 Units or ADRs, representing 37,256,072 common shares and 37,256,072 preferred shares by us or our branch in Cayman, corresponding to approximately 1% of the totality of our corporate capital. The repurchase program ~~ends~~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 Cayman, of up to 36,956,402 Units or ADRs, representing 36,956,402 common shares and 36,956,402 preferred shares, corresponding to approximately 1% of the totality of our corporate capital. The repurchase program ends on August 2, 2022.
Cancellation of Registration as a Publicly Held Company
We may cancel our registration as a publicly held company and, for this purpose, our controlling shareholders must necessarily make a public offer to acquire all our shares in the market, according to the Brazilian Corporate Law and the regulations issued by the CVM. The minimum offer price must be at least equal to the economic value of our shares, as valued by a specialized company using any generally accepted and recognized valuation method, or any other criteria defined by the CVM.
The valuation report must be prepared by a specialized and experienced appraiser, who is independent of Santander Brasil, our management team and our controlling shareholders and who shall be chosen by the board of directors. The controlling shareholder shall bear the costs of preparing the valuation report.
Disposal of Control
Our By-Laws state that disposal of control of our company, either in a single transaction or in a series of transactions, must be subject to the condition, whether a suspensive or resolutory condition, that the acquirer is obligated to make a public offer to acquire all the shares held by our other shareholders, both common and preferred. This is further pursuant to the conditions and deadlines required by the current legislation, ensuring that they receive equal treatment with respect to the controlling shareholder in the disposal.
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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.
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).
According to CVM Instruction 480, of December 7, 2009, as amended, the reference form (~~formulá~~(formulário de referê~~ncia~~)ncia) must be filed with the CVM annually, within five months of the closing date of the reporting period, in the form established by the regulation. The reference form (~~formulá~~(formulário de 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.
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CVM Instruction 457, of July 13, 2007, as amended, or “CVM Instruction 457,” provides that we are also subject to the disclosure of our consolidated financial statements based on IFRS within four months of the end of each reporting period. The financial statements mentioned by CVM Instruction 457 must be disclosed in their entirety, together with (i) the management report, (ii) explanatory note expressly stating without reservation that the consolidated financial statements are in accordance with IFRS as issued by the IASB and Brazilian GAAP, and (iii) the opinion of the independent auditors. Within 15 days following the term established by Brazilian law for disclosure of our quarterly information, we must: (i) disclose our full quarterly information translated into 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 Trading by Our Managers and Related Persons
Our Officers, members of our Board of Directors, Fiscal Council, if in operation, and any technical or consulting body created by our By-Laws must disclose to us the securities issued by us, our controlling or controlled companies, when publicly held, and the derivatives and other securities referenced by such securities that are held by them, as well as the trades with such securities. This obligation includes the securities held by the spouses, companions and any dependents of the aforementioned persons, as well as the companies directly or indirectly controlled by them.
We are obliged to send such information to CVM and B3 within 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 also became mandatory to provide the CVM and B3 within the same time period the information related to the securities traded by us, our entities and affiliated companies.
Disclosure of Information 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) or the National Register of Legal Entities (CNPJ); (ii) the reason for the participation and aimed quantity of shares, containing, if it were the case, a declaration by the acquiring party that it does not intend to alter the composition of its control or the structure of the company’s administration; (iii) the number of shares and other securities or other financial instruments referenced in such shares, of physical or financial settlement, specifying the number, class and type of such shares; (iv) indication of any agreements ruling the exercise of voting rights or the purchase and sale of our securities; and (v) if the shareholder is resident or domiciled abroad, the name and the registration number in the Natural Persons Registry (CPF) or the National Register of Legal Entities (CNPJ) of its agent or legal representative in Brazil for the purposes of article 119 of the Brazilian Corporate Law.
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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.
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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.
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10C. Material Contracts
For the two years immediately preceding the publication of this annual report, we were not a party to any material contract outside the ordinary course of business.
10D. Exchange Controls
Foreign Investment in Brazil
Foreign Direct Investment
Foreign direct investment in Brazil is regulated by Law No. 4,131, ~~and Law 4,390,~~ enacted on September 3, 1962, ~~and August 29, 1964, respectively,~~ as ~~amended.~~amended, including by the New Foreign Exchange Law. A foreign direct investor under Law No. 4,131/62 must:
·● register as a foreign direct investor with the Brazilian Central Bank;
·● obtain a taxpayer identification number from the Brazilian tax authorities;
·● appoint a tax representative in Brazil; and
·● appoint a representative in Brazil for service of process in respect of suits based on the Brazilian Corporate Law.
Foreign capital must be registered with the Brazilian Central Bank through the Electronic Registration System – Foreign Direct Investment, or the “Registro Declaratório Eletrônico – Investimento Externo Direto,” within 30 days of the flow of funds into Brazil in accordance with Law No. 4,131. The registration of foreign capital is required for the remittance of profits abroad, the repatriation of capital and the registration of reinvestments. Investments will always be registered in the foreign currency in which they are made, or in Brazilian currency, if the funds are derived from a non-resident account properly held in Brazil.
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On December 28, 2006, Law No. 11,371 allowed the registration of the foreign capital invested in Brazilian companies but not yet duly registered and not subject to other types of registration. For the purposes of such registration the amount of foreign capital 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, 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—Other Applicable Laws and Regulations—Foreign Exchange Market.”
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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 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 in reais but issued abroad.
With certain limited exceptions, under CMN Resolution 4,373 investors are permitted to carry out any type of transaction in the Brazilian capital markets involving a security traded on a stock or futures exchange or an organized over-the-counter market, but may not transfer the ownership of investments made under such regulation to other non-Brazilian holders through private transactions. Investments and remittances outside Brazil of gains, dividends, profits or other payments under Santander Brasil’s shares are made through the commercial rate exchange market.
Under CMN Resolution 4,373, an investor residing outside Brazil must:
·● appoint at least one financial institution or an institution authorized to operate by the Brazilian Central Bank as representative in Brazil that will be responsible for complying with the registration and reporting requirements and reporting procedures of the Brazilian Central Bank and the CVM;
·● register as a foreign investor with the CVM;
·● 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.
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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
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.
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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.
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
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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.
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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
·● If the Non-Resident Holder is located in a Tax Haven, the tax rate will be 25%.
The tax must be withheld and paid by the buyer or, in cases where the buyer and seller are domiciled abroad, a legal representative of buyer shall be designated for the payment of the tax.
(ii)       Taxation of the Capital Gains Earned in the Country in a Transaction Carried Out on the Brazilian Stock Exchange (Or Similar Exchange)
There could also be the levy of income tax on net gains earned by a Non-Resident Holder on the disposition of units sold on the Brazilian stock exchange, commodities or futures exchange (or similar exchange). The tax rate will vary according to the type of investment registration made by the Non-Resident Holder at the Brazilian Central Bank, as well as the location of the beneficiary:
·● Capital gains earned by a Non-Resident Holder who (i) has its investment registered in Brazil with the Brazilian Central Bank under the rules of CMN Resolution 4,373, or “Registered Holder,” and (ii) is not a Tax Haven resident are exempt from income tax; and
·● Capital gains earned by a Non-Resident Holder who is not a Registered Holder or is a Tax Haven resident (Registered Holder or not) are currently subject to income tax at a rate of 15%. In this case, withholding income tax of 0.005% will be levied by the intermediary institution (that is, a broker) that receives the order directly from the Non-Resident Holder, which can be later offset against the 15% income tax due on the capital gain, which will be paid by the Non-Resident Holder’s tax representative in Brazil.
Any other gains realized on a disposition of units that is not carried out in an exchange
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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.
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(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, 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.
Gains on the Exchange of ADRs for 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 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 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 of 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
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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 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%.
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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.
Moreover, there are arguments to support the position that there should be no withholding tax on this transaction, because: (i) the deposit of units would not have represented the disposal of the investment; and (ii) the transaction is registered on the stock exchange. Given the uncertainty of these two positions, we recommend that you consult your tax advisors.
Tax on Foreign Exchange Transactions (IOF/Exchange)
The Tax on Foreign Exchange Transactions, or “IOF/Exchange,” is due on the conversion of Brazilian or foreign currency, or any document that represents it, into an available equivalent amount. Currently, for most foreign exchange transactions, the IOF/Exchange rate is 0.38%.
However, 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~~4,373 are generally subject to the IOF/Exchange at a rate of zero.
Under the provisions of the Law, the Brazilian government may increase any of these rates at any time, up to 25%. However, any increase in rates may only apply to future transactions.
Tax on Transactions Involving Bonds and Securities and Derivatives
Brazilian law imposes a Tax on Transactions Involving Bonds and Securities, known as “IOF/Bonds Tax.”
Currently, the IOF Bonds Tax is due at a daily rate of 1.0%, limited to 96.0% of the income generated by fixed income bonds, on the redemption amount or the amount received from assignment or renegotiation. The rate is reduced to zero as from the thirtieth day.
The rate of IOF/Bonds Tax applicable to transactions of variable income securities, including those traded in stock, commodities or futures markets that involve shares, or units composed of shares, is reduced to zero.
The IOF Derivatives Tax was established by Decree 7,563 of September 16, 2011, with the original levy of 1% on the notional value of the adjusted purchase sale or maturity of financial derivative contract in 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.
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Other Brazilian Taxes
The inheritance and gift tax, or ~~“ITCMD,”~~“ITCMD” is applicable to the transfer of any goods or rights by gift or bequest. The transfer of shares, or units comprised of shares, that are abroad to individuals who are 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 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;
ii. insurance companies;
iii. dealers and traders in securities that use a mark-to-market method of tax accounting;
iv. persons holding ADRs or units as part of a hedge, “straddle,” conversion transaction or integrated transaction;
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v. holders whose “functional currency” is not the U.S. dollar;
vi. holders liable for the alternative minimum tax;
vii. tax exempt entities, including “individual retirement accounts” and “Roth IRAs”;
viii. partnerships or other entities classified as partnerships for U.S. federal income tax purposes;
ix. holders that own or are deemed to own 10% or more of our shares by vote or value;
x. persons holding ADRs or units in connection with a trade or business conducted outside the United States; and
xixi. persons who acquired ADRs or units pursuant to the exercise of an employee stock option or otherwise as compensation.
If an entity that is classified as a partnership for U.S. federal income tax purposes holds units or ADRs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and upon the activities of the ~~partnership.~~partnership, Partnerships holding units or ADRs and partners in such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of holding and disposing of the units or ADRs.
The summary is based upon the Internal Revenue Code of 1986, as amended, or the ~~“Code,”~~“Code” administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, all as of the date hereof, changes to any of which may affect the tax consequences described herein, possibly with retroactive effect. In addition, the summary is based in part on representations of the depositary and assumes that each obligation provided for in, or otherwise contemplated by, the deposit agreement or any other related document will be performed in accordance with its ~~terms.~~terms, U.S. Holders are urged to consult their tax advisors as to the U.S. federal income tax consequences of the acquisition, ownership and disposition of ADRs or units in their particular circumstances.
As used herein, a “U.S. Holder” is, for U.S. federal income tax purposes, a beneficial owner of ADRs or units that is:
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(1) an individual who is a citizen or resident of the United States;
(2) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
(3) an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
(4) a trust if (a) a court within the United States is able to exercise primary supervision for the administration of the trust, and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has validly elected under applicable Treasury Regulations to be treated as a U.S. person.
In general, for U.S. federal income tax purposes, U.S. Holders of ADRs will be treated as the owners of the underlying units represented by those ~~ADRs.~~ADRs, Accordingly, no gain or loss will be recognized if a U.S. Holder exchanges ADRs for the underlying units represented by those ADRs.
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 the reais received, 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 any reais 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 of reais 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.
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Subject to applicable limitations (including the requirement that the ADRs be readily tradable on an established securities market in the United States) 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
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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.
Foreign Tax Credits
Subject to certain generally applicable limitations, which may vary depending upon a U.S. Holder’s circumstances, a U.S. Holder will be entitled to a credit against its U.S. federal income tax liability for Brazilian income taxes withheld from dividends on ADRs or units. A U.S. Holder will be entitled to use these foreign tax credits to offset only the portion of its U.S. tax liability that is attributable to foreign-source income. This limitation on foreign taxes eligible for credit is calculated separately with regard to specific classes of income. In addition, a U.S. Holder must satisfy minimum holding period requirements in order to be eligible to claim a foreign tax credit for foreign taxes withheld on dividends.
Because a U.S. Holder’s gains from the sale or exchange of ADRs or units will generally be treated as U.S. source income, the limitation described above may preclude a U.S. Holder from claiming a credit for all or a portion of the foreign taxes imposed on any such gains. U.S. Holders should consult their tax advisors as to whether these Brazilian taxes may be creditable against the U.S. Holder’s U.S. federal income tax liability on foreign-source income from other sources. Instead of claiming a credit, a U.S. Holder may, at its election, deduct such otherwise creditable Brazilian income taxes in computing taxable income, subject to generally applicable limitations under U.S. law. An election to deduct foreign taxes instead of claiming foreign tax credits applies to all foreign taxes paid or accrued in the taxable year.
The Brazilian IOF/Exchange Tax imposed on the purchase of units and the IOF/Bonds Tax on the deposit of units in exchange for ADRs (as discussed above under “—Brazilian Tax Considerations”) will not be treated as creditable foreign tax for U.S. federal income tax purposes. U.S. Holders should consult their tax advisors as to whether those taxes would be deductible for U.S. federal income tax purposes.
The rules governing foreign tax credits are complex and, therefore, U.S. Holders are urged to consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to make effective use of foreign tax credits.
Passive Foreign Investment Company Rules
Based on proposed Treasury Regulations, including regulations which are proposed to be effective for taxable years beginning after December 31, 1994, we believe we were not a passive foreign investment company (a “PFIC”) for our taxable year ended December 31, ~~2020.~~2021. However, because the proposed Treasury Regulations may not be finalized in their current form, because the application of the proposed regulations is not entirely clear and because the composition of our income and assets will vary over time, there can be no assurance that we will not be a PFIC for any taxable year. The determination of whether we are a PFIC is made annually and is based upon the composition of our income and assets (including, among others, entities in which we hold at least a 25.0% interest), and the nature of our activities.
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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
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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.
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.
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10F. Dividends and Paying Agents
Not applicable.
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10G. Statement by Experts
Not applicable.
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 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 website that contains reports and other information about issuers, like us, that file electronically with the ~~CVM.~~CVM, The address of that website is http://www.cvm.gov.br. We also file consolidated financial statements and other periodic information with the B3. The address of the B3 website is http://www.bmfbovespa.com.br.
10I. Subsidiary Information
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Overview
In addition to establishing and applying our local risk management policies and procedures, we have incorporated the Santander Group’s global risk management functions at various levels of our organization, including financial, credit, market, operational and compliance risk, to ensure a consistent approach worldwide.
In addition, committees led by senior management are responsible for controlling risks by overseeing credit approval and compliance with the exposure policies defined and approved by the Bank’s board of directors.
The Control department and Risk Consolidation department provided their respective Risk management reports to senior management. Likewise, the reports for senior management of the Santander Group’s financial entities and foreign branches are generated mainly by the risk control departments of each of those entities and branches.
The presentation of such information to senior management is designed to enhance the understanding and management of risks for the Santander Group’s administrative bodies and branches. The type of information and highlights in each report varies depending on the intended audiences within senior management, such as the Santander Group, its financial entities, or its foreign branches. Information can be transmitted to senior management through our intranet risk reporting tool, by e-mail or through live presentations.
Information, analyses and decisions are also disseminated through the channels described below, fostering communication among all areas of the organization:
i. internal department mailboxes, which allow for the exchange of information within groups and areas;
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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;
iv. e-mail;
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v. video and teleconferences with Santander Spain; and
vi. risk committees, including the executive risk committee for Brazil and the Risk control committee.
Information is prepared with the goal of improving risk management and is classified into two groups:
i. Standard information: this information is generated on a regular basis and with fixed content, subject to revision, made available to senior management for select target areas, depending on the type of information included in the report. The reports are used to facilitate knowledge about the risk for which the Risk Management department is responsible, including credit use, instrument valuation and results, as well as the analyses needed to manage these risks and optimize capital.
ii. Non-standard information: this includes presentations and information not included in the reports above prepared for our senior management on an ad hoc basis or upon specific request. When the request for certain information becomes more regular, such reporting is integrated into automated “Standard ~~information”.~~information.”
iii. Each report varied by the nature of the information and its frequency. The nature of the information provided is either quantitative or qualitative.
Quantitative Information. Quantitative information includes risk metrics that permit our senior management to better analyze situations, trends and developments in each segment, activity or portfolio, relating to planned scenarios or defined limits, with emphasis on any scenarios falling outside such limits. Quantitative information primarily addressed the liquidity and market risk (trading and banking book) which includes, among other items, measurements of positions, mark-to-market valuations, sensitivity analyses, volume analyses, measures of liquidity gaps and country risk models, impacts of risks on results, economic risks, stress test simulations and back-testing.
Qualitative Information. Qualitative information includes internal and external events relating to the economic, financial or competitive environment, and an evaluation and analysis of the causes and known or foreseeable consequences of such events. These also include measures used to prepare such models.
The frequency with which quantitative and qualitative risk management information is prepared depends on the information provided, as follows:
Daily information:
i. liquidity and market risk: includes data on treasury limits (VaR, positions, sensitivity of linear and non-linear econometric models) and the principal changes in the treasury portfolio. Also includes short-term liquidity and liquidity buffer calculation.
Weekly information:
i. focuses on generating updated high-level information in different segments (focused on solvency risk) or portfolios (focused on market risk), as well as a summary of the relevant facts and expected short-term changes;
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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.
Monthly information:
i. liquidity and market risk: 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 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 and monitor the Strategic Business Plan main indicators; · ● Vice President Executive Officer of Private Banking and Wealth Management
· ● Authorize management tools, improvement initiatives, follow up on projects and any other relevant activities related to risk management;
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· ● Approve the policy and standards of methodological models and validate their effectiveness; ●
· ● Be aware of and take the necessary measures regarding risk to comply with the recommendations and directions issued by supervisory authorities in the exercise of its functions and the internal audit of the Bank; ●
· ● Provide information to the board of directors and to the executive committee and assistance, if needed, in order to execute the tasks assigned to risk management by applicable law, the by-laws, the board of directors´ rules of procedure and the regulation of the Risk Executive Committee; and ●
· ● Approve the creation, modification and termination of other committees or decision bodies and their regulations and delegate to those committees or people empowerment on decision-making and risk ~~management.~~management, ●
~~Committee~~
~~Main Responsibilities~~
~~Members~~
~~Meeting Frequency~~

Risk Control Committee · ● Oversee the Risk Identification and Assessment (RIA) exercise; · ● Chief Financial Officer Biweekly
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· ● 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 appetite, the commercial and strategic plan and the budget approved by the board of directors; ●
· Chief Risk Officer

· Chief IT ~~Officer~~Officer·

Vice President Executive Officer of Communication and Marketing

· ● Conduct an independent and periodic control report on risk management activities, which includes: · ● Executive Superintendent of- Enterprise Risk 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; · ● Executive Superintendent of GIR and Relationship with Supervisors
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· ●Monitor the observance of appetite and risk policies, advising the board risk committee on these issues;
· ●Approve the secondary metrics of Risk ~~Appetite.~~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
· ●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.~~reported,
· ●Approve and review the Strategic, Financial, Business Continuity and Recovery Plans
· ●Vice President Executive Officer of Finance and ~~Strategy.~~Strategy,
· ●Chief Compliance Officer
●Vice President Executive Officer of Legal and Corporate Affairs
●Chief Data Officer
●Audit Director
●Chief Information Security Officer

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· ●Support and assist the board in carrying out stress tests, in particular by evaluating the scenarios and assumptions to be used in these tests, valuing the results and analyzing the measures proposed by the risk function as a consequence of the results;
· ●Validate the information on risks that must be submitted to the board of directors when so required and without prejudice to the direct access to the person responsible for the risk function (Chief Risk Officer) to the board;
· ●Supervise measures taken regarding risks to comply with the recommendations and directions issued by the supervisory authorities in the exercise of its function and Santander Brasil’s audit;
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· ●Provide the board of directors, through the board risk committee, and the executive committee the information and assistance needed regarding risks for the fulfillment of its functions in risk management matters assigned to it by law, the board of directors´ rules of procedure and the regulation of the Risk Control Committee – RCC; and
· ●Approve the operation of hierarchically lower-risk control committees and their respective regulations;
●aspects related to capital management, including:
●Present the impact of new regulations and the results of the elaboration of QIS (Quantitative Impact Study);
●Review and evaluate responses to additional requests made by regulators regarding capital management issues;
●Carry out the analysis and supervision of the results of the capital adequacy assessment exercises and their main components (schedule, assumptions, economic scenarios, methodologies, results, capital buffer, contingency plans and other relevant aspects) of the following processes: ICAAP, TEBU (Bottom-up Stress Test), Strategic.

The Executive Risk Committee and Risk Control Committee, which are described 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 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.
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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.
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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 in 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 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 evaluate if approval should be granted is based on internally-developed credit risk approval limits, 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 both individuals and SMEs are granted based on creditworthiness, as determined by our scoring criteria. Credit limits are managed based on the performance of the customers, considering each customer’s risk profile.
Credit authorization limits are established and these are automatically applied to all credit requests. When an automatic credit decision results in the customer’s needs, the commercial area has the authority to submit a request for manual approval. Such approvals are subjected to review by analysts or committees, depending on the value of the 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) ~~For individuals, the maximum value is R$200,000. For SMEs the maximum is R$500,000.~~
~~(2)~~ Members of risk decision-making centers include superintendents and other representatives of the risk area.
~~(3)~~(2) Members of the higher Risk Committee include, among others, the Chief Executive Officer of the group, the officers of Wholesale, Retail, Market Risk, Recovery and representatives of the Risk and Compliance Departments.

~~265~~ There is also a more robust model called Rating Plus which is addressed to mid-size companies a few other retail clients. This model combines the clients’ internal and external financial behavior, information obtained from their balance sheets and a questionnaire that is adapted in accordance with the companies’ individualities.
~~Table of Contents~~The evaluation made by Rating Plus seeks to attribute an internal classification for the costumers defining their risk level in comparison with their creditworthiness. The classification as well as the credit analyses for these clients are usually made manually through specific proposals or limits.
Wholesale Lending
In wholesale banking, each customer is analyzed on an individual ~~basis.~~basis, Commercial and risk areas analyze the client’s needs and indicators, analyzing profitability, creditworthiness and adequacy to the risk metrics of Santander Group RAS – Risk Appetite Statement, in order to determine and 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 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
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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$170 million
Wholesale Committee Up to R$~~340~~350 million
Executive Risk Committee Up to R$~~680 million~~1 billion

Credit Monitoring
Credit lines to retail banking SME customers are reviewed weekly, whereas individual customers are systematically reviewed daily, based on the client’s credit rating. This process allows improvements in credit exposure to customers who present good credit quality. 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.
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 Lower than 2.1%
Medium-low Greater than 2.1% and Lower than 4.1%
Medium Greater than 4.1% and Lower than 6.3%
Medium-high Greater than 6.3% and Lower than 10.0%
High Greater than 10.0%
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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—Short-Term Borrowings—Internal Risk Rating.”
Recovery
Our business recovery area is responsible for all nonperforming portfolios. This area uses statistical tools to study the behavior of 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 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:
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·● Internal teams specialized in restructuring and debt recovery work directly with defaulting customers with loans of higher values and/or are overdue more than 60 days.
·● We use specialized external firms to collect, report and assess high-risk customers. These firms are remunerated according to pre-established percentages applied to the amounts recovered.
·● In addition, we use digital channels as a mean of increasing the availability of renegotiation offers to our customers.
Once we have exhausted all of the credit recovery resources available to us, we conduct sales of any remaining nonperforming loans. These sales are held periodically through an auction process, with the aim of obtaining optimal prices in the markets and thereby reducing the impact on us.
Assets and Liabilities Committee
Our asset and liability management strategy is defined by our assets and liabilities committee (ALCO), which operates under the guidelines and procedures established by the Santander Group. Members of the committee include our Chief Executive Officer, Chief Risk Officer, Vice President Executive Officer - Finance and Strategy, Vice President Executive Officer - CFO, Director - Financial Management and the Chief Economist. The assets and liabilities committee establishes strategies, policies and procedures with the objective of managing our balance sheet and risk structure.
Market Risk
Types of market risk
Interest rate risk
Interest rate risk is the possibility that changes in interest rates could adversely affect the value of a financial instrument, a portfolio or our operations as a whole. We are exposed to interest rate risk whenever there is a mismatch between interest rate sensitive assets and liabilities, subject to any hedging we have engaged in using interest rate swaps or other off-balance sheet derivative instruments. Interest rate risk arises in connection with both our trading and non-trading activities.
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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 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 the real 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. Our exposure to this risk is mostly concentrated in derivative operations involving commodities for customers.
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Inflation risk
Inflation risk is the risk that changes in inflation rates may adversely affect the value of a financial instrument, a portfolio or Santander Group as a whole.
Volatility risk
Volatility risk is the sensitivity of a portfolio to volatility in a number of risk factors, including interest rates, exchange rates, share prices and commodity prices. This risk is applicable to financial instruments which have volatility as a variable in their valuation model.
Other, more complex, risks to which we may be exposed include:
Correlation risk
Correlation risk is the sensitivity to changes in the relation between risk factors, whether of the same type (for example, between two exchange rates) or of a different nature (for example, between an interest rate and the price of a commodity).
Market liquidity risk
Market liquidity risk is the possibility of a Bank entity or the Santander Group as a whole finding itself unable to exit or close a position in time without affecting the market price or the cost of the transaction. This risk can be caused by a decrease in the number of market participants or institutional investors, the execution of large volumes of operations, market instability or increases of the concentration existing in certain products and currencies. Market depth is the main liquidity driver in our trading portfolio, even though our policy is to trade the most liquid ~~assets.~~assets, Our liquidity risk also arises in non-trading activity, due to the maturity gap between assets and liabilities mostly in the retail banking business.
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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.
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.
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:
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Trading book
The trading book includes financial services to customers and purchase-sale and positioning mainly in fixed income, equity and currency products. The trading book comprises our proprietary positions in financial instruments held for resale and/or bought to take advantage of current and/or expected differences between purchase and sale prices. This portfolio also includes positions in financial instruments deriving from market-making and sales activities. As a result of trading fixed income, equity, commodities and foreign exchange products, we are exposed to their respective market risks. We are also exposed to volatility when non-linear derivatives are used.
Non-trading book (banking/structural)
The non-trading book consists of market risks inherent in the balance sheet, excluding the trading portfolio. These include:
i. Structural interest rate risks. This arises from mismatches in the maturities and re-pricing of all assets and liabilities.
ii. Structural exchange rate risk/hedging of results and offshore investments. Exchange rate risk occurs when the currency in which the investment is made is different from the real in 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 the real (hedging of results).
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~~In addition, exchange rate hedging of future results generated in currencies other than the~~ ~~real~~ ~~(hedging of results).~~
Market Risk Management Framework
Our board of directors is responsible for establishing our policies, procedures and limits with respect to market risk, including which businesses to invest in and maintain. The risk committee monitors our overall performance in relation the risks we assume. Together with the local and global assets and liabilities committees, each market risk unit measures and monitors our market and liquidity risk and provides figures to the assets and liabilities committees to use in managing such risks.
Market risk is regulated and controlled through certain policies, set forth in our market and liquidity risk management policies manual, as well as through specific exposure limits established for the entire Santander Group. In addition, authorized products are listed and reviewed periodically.
These policies, procedures and limits on market risk are applicable to all units, businesses or portfolios susceptible to market risk, and are built on five basic pillars, which we believe are vital for correct management of market risks:
i. Market and structural risk measurement, analysis and control;
ii. Calculation, analysis, explanation and reconciliation of profit and loss (P&L);
iii. Definition, capture, validation and distribution of market data;
iv. Definition of limits, products and underlyings; and
v. Consolidation of ~~information.~~information,
In turn, our market risk management is guided by the following basic principles:
i. Independence of the trading and balance sheet activities;
ii. Global overview of the risks taken;
iii. Definition of limits and empowerment;
iv. Control and oversight;
v. Homogeneous aggregated metrics;
vi. Homogeneous and documented methodologies;
vii. Measuring risk;
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viii. Information consolidation; and
ix. Contingency plans and technical ~~capability.~~capability,
Structure of Limits Regarding Market Risk
The market risk limit structure represents Santander Brasil’s risk appetite and is aligned with our global market risk management policies, which encompass all of our business units and serve to:
i. identify and define the main types of risk incurred in a manner consistent with our business strategy;
ii. quantify and report to our business segments with respect to appropriate risk levels and risk profile in line with senior management’s assessment of risks to help avoid any of our business segments taking undesired risks;
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iii. provide flexibility to our business segments to timely and efficiently establish risk positions that are responsive to market changes and our business strategies, and always within risk levels acceptable to Santander Brasil;
iv. allow the individuals and teams originating new business to take prudent risks that will help attain budgeted results;
v. establish investment alternatives by limiting equity requirements; and
vi. define the range of products and underlying assets within which each unit of treasury can operate, taking into consideration our risk modeling and valuation systems and our liquidity tools. This will help to constrain market risk within our defined risk strategy.
Global market risk management policies define our risk limit structure while the risk committee reviews and approves such policies. Business managers administer their activities within these limits. The risk limit structure covers both our trading and non-trading portfolios and includes limits on fixed income instruments, equity securities, foreign exchange and derivative instruments.
Limits considered to be global limits refer to the business unit level. 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. The principal limits include:
Trading limits
i. i.       VaR limits;
ii. limits of equivalent positions and/or nominal;
iii. sensitivity limits to interest rates;
iv. vega limits; and
v. limits aimed at reducing the volume of effective losses or protecting results already generated during the period:
·● loss trigger; and
·● stop loss.
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Structural limits
i. structural interest rate risk of the balance sheet:
·● sensitivity limit of net interest margin (“NIM”) over a one year horizon; and
·● sensitivity limit of market value of equity (“MVE”);
ii. structural exchange rate risk comprised of the net position in each currency; and
iii. liquidity risk: limits defined for short, long and concentration metrics and considering BAU and Stress scenario.
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Market Risk Statistical Tools
Locally, we use a variety of mathematical and statistical models, including VaR models, historical simulations and stress testing to measure, monitor, report and manage market risk. Such numbers, produced locally, also serve as input for global activities such as evaluations of RORAC, and to allocate economic capital to various activities in order to evaluate the RORAC of such activities.
Trading Activity
·● VaR: as calculated by us, our internal VaR model is an estimate of the expected maximum loss in the market value of a given portfolio over a one-day time horizon at a 99% confidence level, subject to certain assumptions and limitations discussed below. Our standard methodology is based on historical simulation of 520 days and is calculated using the VaR methodology “full revaluation.” In order to capture recent market volatility in the model, the reported VaR is the higher between the 1% percentile and the 1% weighted percentile of the simulated PnL distribution. The first VaR figure gives the same weight to all observed values, and the second one applies an exponential declining factor to give a higher weight for the most recent observations. This methodology makes our VaR numbers react very quickly to changes in current volatility, significantly reducing the likelihood of back testing exceptions. We use VaR estimates to alert senior management whenever the statistically estimated losses in our portfolios exceed prudent levels.
1. Assumptions and limitations: our VaR methodology should be interpreted in light of the limitations that (i) a one-day time horizon may not fully capture the market risk of positions that cannot be liquidated or hedged within one day and (ii) at present, we compute VaR at the close of business and trading positions may change substantially during the course of the trading day.
2. Calibration measures: in order to calibrate our VaR model, we use back testing, which is a comparative analysis between VaR estimates and the daily clean Profit and Loss (theoretical result generated assuming the mark-to-market daily variation of the portfolio considering only the movement of the market variables). The purpose of these tests is to verify and measure the precision of the models used to calculate VaR.
·● Stressed VaR: our stressed VaR model uses the same calculation methodology as VaR with the following two exceptions: (i) the stressed VaR uses a window of ~~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.
·● 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.
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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 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.
·● 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 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.
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· ~~Analysis~~Table of scenarios/contingency plan: includes the local and external activities and consists of a formal set of preventive and corrective actions taken in times of liquidity crises. Using analysis of historical scenarios and simulations of impacts on bank liquidity, we define action plans and contingencies to establish roles and responsibilities and levels to trigger the contingency plan. Each unit should prepare its contingency plan. Additionally, Santander Spain must be periodically informed about the contingency plan of each subsidiary. The frequency with which this plan must be updated depends on market liquidity conditions.Contents
Quantitative Analysis
Trading Activity
Quantitative Analysis of Daily VaR in ~~2020~~
2021
Our risk performance with regard to trading activity in financial markets between ~~2018~~2019 and ~~2020,~~2021, 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 ~~2020,~~2021, VaR ~~presented a high volatility, fluctuating~~fluctuated between R$~~9.6~~30 million and R$~~120.9~~40 million, ~~(on March 20, 2020 when the WHO declared the COVID-19 epidemic to be a pandemic),~~ with an average of R$~~26.3~~34.5 million. The histogram below shows the distribution of average risk in terms of VaR in ~~2020~~2021 where the accumulation of days with VaR levels between R$20 million and R$40 million can be observed in ~~88.1%~~79.8% of the distribution.
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VaR by Risk Factor
The minimum, maximum, average and year-end ~~2020~~2021 VaR values by risk factor were as follows:
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2019 2020 2020 2021
Period End Low Average High Period End Period End Low Average High Period End
(in millions of R$) (in millions of R$)
Trading VaR 20.9 9.6 26.3 120.9 31.6 31.6 16.7 34.5 63.1 34.4
Diversification Effect (10.7 ) (2.1 ) (12.0 ) (33.7 ) (33.7 ) (33.7 ) (5.2 ) (27.6 ) (54.4 ) (12.8 )
Interest Rate VaR 16.7 9.9 23.0 109.5 26.6 26.6 12.7 31.8 72.3 34.9
Equity VaR 7.4 1.2 5.8 34.0 2.8 2.8 2.6 7.5 21.5 6.4
Foreign Exchange VaR 7.5 1.4 9.3 42.4 35.6 35.6 4.0 19.0 48.9 5.9
Commodity VaR - 0.0 0.2 2.5 0.3 0.3 0.1 3.8 21.4 0.1

The average VaR for ~~2020~~2021 was R$~~26.3~~34.5 million, with most of the risk due to interest rate positions. Santander Brasil was relatively conservative in equity and commodities trading activity in line with the approach taken over the last few years.
The average VaR of the ~~three~~four main risk factors, interest rates, equity prices, ~~and~~ exchange rates and commodities were R$~~23.0~~31.8 million, R$~~5.8~~7.5 million, R$19.0 million and R$~~9.3~~3.8 million respectively, with a negative average diversification effect of R$~~12.0~~27.6 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.

Risk Management of Structured Derivatives
Our structured derivatives activity is mainly focused on designing investment products and managing hedging risks for 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.
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The chart below shows the VaR Vega performance of our structured derivatives business in 2021, 2020 ~~2019~~ and ~~2018.~~2019. In the most recent year, this figure fluctuated around an average of R$~~5.73~~8.23 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 ~~2020.~~2021, A correlation break scenario generated the results presented below.
Worst Case Scenario
The table below shows the maximum daily losses for each risk factor (fixed-income, equities and currencies) as of December 31, ~~2020,~~2021, in a scenario that uses historical volatilities and simulates variations of the risk factors for +/-3 and +/-6 standard deviations on a daily ~~basis.~~basis, From this group of scenarios, we generate a table of stress test results, which identifies the largest loss per risk ~~factor.~~factor, The sum of the largest losses of each risk factor is the result of the Worst Case Scenario, which considers the break of correlation between risk factors.
Worst Case Stress Test Exchange Rate Fixed Income Equity Total Exchange Rate Fixed Income Equity Total
(in millions of R$) (in millions of R$)
Total trading (59.4) (93.4 ) (27.4 ) (180.2 ) (14.5) (19.7 ) (14.8 ) (49.0 )

The stress test shows that the economic loss suffered by the group in the marked-to-market result would be, if this scenario materialized in the market, R$180.2 million.
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Non-trading Activity
Quantitative Analysis of Interest Rate Risk in ~~2020~~
2021
Convertible Currencies
At the end of ~~2020,~~2021, the sensitivity of NIM at one year, to a parallel rise of 100 basis points in the local yield curve was R$~~432~~553 million.
In addition, at the end of ~~2020,~~2021, the sensitivity of MVE to parallel rises of 100 basis points in the yield curves was R$~~1,771.0~~1,678.0 million in the local currency yield curve.
Structural Gap
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The following table shows the managerial gaps between the re-pricing dates of our assets and liabilities as of December 31, ~~2020~~2021 in millions of ~~reais~~.reais.
Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive
(in millions of R$)
Structural Gap
Money Market 309,426 115,341 859 1,347 21,303 18,675 37,938 20,504 93,459
Loans 470,730 138,528 62,721 50,867 60,773 56,304 54,350 47,394 (208 )
Permanent 15,836 -   -   -   -   -   -   -   15,836
Other 199,895 35,519 -   23 -   2 -   -   164,351
Total Assets 995,886 289,388 63,580 52,237 82,076 74,981 92,288 67,898 273,437
Money Market (126,572 ) (73,371 ) (1,934 ) (2,839 ) (4,595 ) (18,206 ) (7,959 ) (13,862 ) (3,807 )
Deposits (498,828 ) (305,888 ) (16,114 ) (6,422 ) (10,091 ) (13,844 ) (15,886 ) (93,436 ) (37,147 )
Equity and Other (370,486 ) (63,009 ) (23,483 ) (16,556 ) (23,913 ) (1,462 ) (5,224 ) (3,319 ) (233,521 )
Total Liabilities (995,886 ) (442,267 ) (41,531 ) (25,817 ) (38,599 ) (33,512 ) (29,069 ) (110,617 ) (274,474 )
– Balance Gap 0 (152,879 ) 22,049 26,420 43,478 41,469 63,219 (42,719 ) (1,037 )
Off-Balance Gap 18,976 22,280 (4,189 ) 496 (957 ) (23,496 ) 4,750 3,164 16,929
Total Structural Gap 18,976 (130,599 ) 17,860 26,916 42,520 17,973 67,969 (39,556 ) 15,892
Accumulated Gap 18,976 (111,623 ) (93,763 ) (66,847 ) (24,327 ) (6,354 ) 61,615 22,060 37,951

Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive
(in millions of R$)
Structural Gap
Money Market 342,642 39,835 7,668 9,289 25,582 41,157 45,305 22,399 151,407
Loans 375,398 37,443 63,756 53,904 53,128 102,741 34,298 29,136 993
Permanent 14,836 - - - - - - - 14,836
Other 266,285 41,946 561 613 1,555 7,221 3,931 2,196 208,262
Total Assets 999,161 119,223 71,985 63,805 80,265 151,119 83,535 53,731 375,498
Money Market (97,764 ) (5,830 ) (10,188 ) (11,409 ) (11,192 ) (42,543 ) (8,138 ) (5,547 ) (2,917 )
Deposits (546,675 ) (57,293 ) (44,200 ) (38,971 ) (58,035 ) (97,008 ) (30,490 ) (76,972 ) (143,706 )
Equity and Other (354,723 ) (68,312 ) (22,833 ) (8,024 ) (8,447 ) (1,094 ) (3,992 ) 834 (242,854 )
Total Liabilities (999,161 ) (131,435 ) (77,220 ) (58,404 ) (77,674 ) (140,645 ) (42,620 ) (81,685 ) (389,477 )
– Balance Gap (0 ) (12,212 ) (5,235 ) 5,401 2,591 10,474 40,915 (27,954 ) (13,980 )
Off-Balance Gap 17,157 20 221 179 380 1,691 744 443 �� 13,479
Total Structural Gap 17,157 (12,192 ) (5,015 ) 5,580 2,971 12,165 41,659 (27,511 ) (501 )
Accumulated Gap 17,157 4,965 (50 ) 5,530 8,501 20,666 62,325 34,814 34,313

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$~~305~~121 million during ~~2020,~~2021, reaching a maximum of R$~~640~~607 million in ~~December.~~June, The sensitivity of the market value ~~increased~~decreased R$~~451~~93 million during ~~2020,~~2021, reaching a maximum of R$~~2.514~~1,882 million in ~~October.~~September, The main factors in
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~~2020~~ 2021 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 ~~2020.~~2021.
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Interest Rate Risk Profile as of December 31, ~~2020~~
2021
The currency gap tables below show the managerial distribution of risk by maturity and currency in Brazil as of December 31, ~~2020~~2021 in millions of reais.

Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive
Gaps in local currency
Money Market 301,612 37,972 7,581 7,693 25,190 37,819 31,111 20,307 133,939 268,082 112,019 823 1,060 18,672 15,816 22,730 18,170 78,792
Loans 331,054 29,062 50,829 45,608 46,552 101,121 30,096 29,128 (1,341 ) 382,313 90,863 49,412 41,903 52,908 54,584 53,957 43,028 (4,344 )
Permanent 14,836 - - - - - - - 14,836 15,804 -   -   -   -   -   -   -   15,804
Others 173,576 30,292 367 (1,080 ) 1,139 3,882 (10,262 ) 104 149,134 128,760 18,923 -   23 -   2 -   -   109,812
Total Assets 821,077 97,326 58,777 52,221 72,881 142,821 50,945 49,539 296,567 794,960 221,806 50,235 42,986 71,580 70,402 76,687 61,198 200,064
Money Market (73,868 ) (5,123 ) (6,141 ) (10,116 ) (10,527 ) (29,003 ) (4,494 ) (5,547 ) (2,917 ) (99,888 ) (71,740 ) (1,006 ) (1,901 ) (3,868 ) (3,020 ) (6,747 ) (7,986 ) (3,620 )
Deposits (510,807 ) (49,418 ) (36,985 ) (37,317 ) (55,060 ) (89,012 ) (27,239 ) (74,319 ) (141,457 ) (463,227 ) (290,333 ) (5,332 ) (4,382 ) (7,209 ) (8,943 ) (11,999 ) (89,470 ) (45,558 )
Equity and Other (201,819 ) (38,196 ) (41 ) (61 ) (122 ) (490 ) (469 ) 834 (163,273 ) (214,666 ) (24,490 ) (44 ) (66 ) (132 ) (264 ) 3,149 (3,319 ) (189,499 )
Total Liabilities (786,494 ) (92,736 ) (43,167 ) (47,495 ) (65,709 ) (118,505 ) (32,202 ) (79,032 ) (307,648 ) (777,780 ) (386,563 ) (6,383 ) (6,349 ) (11,209 ) (12,227 ) (15,597 ) (100,775 ) (238,677 )
Off-Balance Gap 40,604 (169 ) 22,675 59 81 4,310 2,033 457 11,160 36,988 23,679 8,421 (585 ) (1,113 ) (21,346 ) 5,925 3,083 18,923
Gap 75,188 4,420 38,285 4,785 7,252 28,626 20,776 (29,036 ) 80 54,167 (141,078 ) 52,274 36,052 59,258 36,829 67,016 (36,494 ) (19,690 )

Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive
Gaps in foreign currency
Money Market 41,344 3,322 36 287 2,631 2,859 15,208 2,334 14,667
Loans 88,417 47,664 13,309 8,964 7,865 1,720 393 4,366 4,135
Permanent 31 -   -   -   -   -   -   -   31
Others 71,135 16,595 -   -   -   -   -   -   54,539
Total Assets 200,927 67,582 13,345 9,251 10,496 4,579 15,600 6,700 73,373
Money Market (26,684 ) (1,630 ) (928 ) (938 ) (727 ) (15,186 ) (1,212 ) (5,876 ) (187 )
Deposits (35,601 ) (15,555 ) (10,782 ) (2,040 ) (2,882 ) (4,901 ) (3,887 ) (3,966 ) 8,411
Equity and Other (155,821 ) (38,519 ) (23,439 ) (16,490 ) (23,781 ) (1,198 ) (8,373 ) -   (44,022 )
Total Liabilities (218,106 ) (55,704 ) (35,148 ) (19,468 ) (27,390 ) (21,285 ) (13,472 ) (9,842 ) (35,797 )
Off-Balance Gap (18,012 ) (1,399 ) (12,610 ) 1,081 156 (2,150 ) (1,175 ) 81 (1,994 )
Gap (35,192 ) 10,479 (34,413 ) (9,136 ) (16,738 ) (18,857 ) 953 (3,061 ) 35,582

Total 0-1 month 1-3 months 3-6 months 6-12 months 1-3 years 3-5 years > 5 years Not Sensitive
Gaps in foreign currency
Money Market 41,030 1,863 87 1,595 392 3,339 14,194 2,092 17,468
Loans 44,344 8,381 12,927 8,296 6,576 1,620 4,202 8 2,334
Permanent 1 - - - - - - - 1
Others 92,709 11,653 194 1,693 416 3,339 14,194 2,092 59,128
Total Assets 178,084 21,897 13,208 11,584 7,384 8,298 32,589 4,192 78,930
Money Market (23,895 ) (707 ) (4,047 ) (1,292 ) (666 ) (13,540 ) (3,644 ) - -
Deposits (35,868 ) (7,875 ) (7,215 ) (1,654 ) (2,974 ) (7,996 ) (3,251 ) (2,653 ) (2,249 )
Equity and Other (152,904 ) (30,117 ) (22,792 ) (7,963 ) (8,325 ) (604 ) (3,523 ) - (79,581 )
Total Liabilities (212,667 ) (38,698 ) (34,054 ) (10,909 ) (11,965 ) (22,140 ) (10,418 ) (2,653 ) (81,830 )
Off-Balance Gap (23,448 ) 189 (22,454 ) 120 300 (2,619 ) (1,288 ) (14 ) 2,319
Gap (58,031 ) (16,612 ) (43,300 ) 796 (4,281 ) (16,461 ) 20,883 1,525 (581 )
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Market Risk: VaR Consolidated Analysis
Our total daily VaR as of December 31, ~~2019~~2020 and December 31, ~~2020,~~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.

2020 2019 2021 2020
Low Average High Period End Period End Low Average High Period End Period End
(in millions of R$) (in millions of R$)
Trading 9.6 26.3 120.9 31.6 20.9 16.7 34.5 63.1 34.4 31.6
Non-trading 941.9 2,044.2 2,875.6 1,364.7 1,755.1 1,663.4 2,451.7 4,274.1 -   1,755.1
Diversification effect - - - - - -   -   -   -   -
Total 951.5 2,070.5 2,996.5 1,396.3 1,776.0 1,680.1 2,486.2 4,337.2 34.4 1,786.7

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

Our daily VaR estimates of interest rate risk, foreign exchange rate risk and equity price risk were as set forth below:
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Interest Rate Risk
2020 2019 2021 2020
Low Average High Period End Period End Low Average High Period End Period End
(in millions of R$) (in millions of R$)
Interest rate risk
Trading 9.9 23.0 109.5 26.6 16.7 12.7 31.8 72.3 34.9 26.6
Non-trading 941.9 2,044.2 2,875.6 1,364.7 1,755.1 1,663.4 2,451.7 4,274.1 -   1,364.7
Diversification effect - - - - - -   -   -   -   -
Total 951.8 2,067.2 2,985.1 1,391.3 1,771.8 1,676.1 2,483.5 4,346.4 34.9 1,391.3

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

Foreign Exchange Rate Risk
2020 2019 2021 2020
Low Average High Period End Period End Low Average High Period End Period End
(in millions of R$) (in millions of R$)
Exchange rate risk
Trading 1.4 9.3 42.4 35.6 7.5 4.0 19.0 48.9 5.9 35.6
Non–trading - - - - N.A. - - - - -
Diversification effect - - - - - - - - - -
Total 1.4 9.3 42.4 35.6 7.5 4.0 19.0 48.9 5.9 35.6

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

Equity Price Risk
2021 2020
Low Average High Period End Period End
(in millions of R$)
Equity price risk
Trading 2.6 7.5 21.5 6.4 2.8
Non–trading -   -   -   -   -
Diversification effect -   -   -   -   -
Total 2.6 7.5 21.5 6.4 2.8

2020 2019
Low Average High Period End Period End
(in millions of R$)
Equity price risk
Trading 1.2 5.8 34.0 2.8 7.4
Non–trading - - - - N.A.
Diversification effect - - - - -
Total 1.2 5.8 34.0 2.8 7.4
Note: VaR figures for trading and non-trading portfolios were added, thus disregarding the diversification effect.
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Commodity Price Risk

At December 31,
2021 2020
Low Average High Period End Period End
(in millions of R$)
Commodity price risk
Trading 0.1 3.8 21.4 0.1 0.3
Non-trading N.A. N.A. N.A. N.A. N.A
Diversification effect -   -   -   -   -
Total 0.1 3.8 21.4 0.1 0.3

At December 31st,
2020 2019
Low Average High Period End Period End
Commodity price risk (in millions of R$)
Trading 0.0 0.2 2.5 0.3 0.0
Non-trading N.A. N.A. N.A. N.A. N.A.
Diversification effect - - - - -
Total 0.0 0.2 2.5 0.3 0.0
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Our daily VaR estimates by activity were as set forth below:
2020 2019 2021 2020
Low Average High Period End Period End Low Average High Period End Period End
(in millions of R$) (in millions of R$)
Trading
Interest rate risk 9.9 23.0 109.5 26.6 16.7 26.8 12.7 31.8 72.3 34.9
Exchange rate risk 1.4 9.3 42.4 35.6 7.5 2.8 2.6 7.5 21.5 6.4
Equity price risk 1.2 5.8 34.0 2.8 7.4 35.6 4.0 19.0 48.9 5.9
Commodity price risk 0.0 0.2 2.5 0.3 0 0.3 0.1 3.8 21.4 0.1
Total Trading 12.5 38.3 188.4 65.3 31.6 31.6 16.7 34.5 63.1 34.4
Non-trading
Interest rate risk 941.9 2,044.2 2,875.6 1,364.7 1,755.1 1,663.4 2,451.7 4,274.1 -   1,755.1
Exchange rate risk N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Equity price risk N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Commodity price risk N.A. N.A. N.A. N.A. N.A.
N.A.

N.A.

N.A.

N.A.

N.A.

Total Non-Trading 941.9 2,044.2 2,875.6 1,430.0 1,755.1 1,663.4 2,451.7 4,274.1 -   1,755.1
Total (Trading + Non-Trading) 954.4 2,082.5 3,064.0 1,430.0 1,786.7 1,663.4 2,451.7 4,274.1 -   1,755.1
Interest rate risk 951.9 2,067.2 2,985.1 1,391.3 1,771.8 1,663.4 2,451.7 4,274.1 -   1,755.1
Exchange rate risk 1.4 9.3 42.4 35.6 7.5 1.4 9.3 42.4 35.6 7.5
Equity price risk 1.2 5.8 34.0 2.8 7.4 1.2 5.8 34.0 2.8 7.4
Commodity price risk 0.0 0.2 2.5 0.3 0.0 -   0.2 2.5 0.3 -

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

Operational Risk
We have adopted the definition of the Basel Committee and Brazilian Central Bank for operational risk, which defines operational risk as the possibility of losses resulting from inadequate processes, people and systems, failures, or from external events. This definition includes 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 events might result in financial losses, adverse effects on the continuity of our business, and negative effects on public image and customer experience.
To accomplish our operational risk objectives, we have established a risk model based on three lines of defense, aimed at continuously improving and developing our management and control of operational risks. The three lines of defense are:
·● First line of defense: all business and support areas within Santander Brasil are responsible for identifying, managing, mitigating and reporting operational risks related to its activities.
·● Second line of defense: the operational risk and internal control departments is responsible for monitoring and ensuring control over operational and technological risk management practices throughout the ~~organization.~~or ganization. It is also responsible for implementing and communicating our operational risk culture, defining methodologies, policies, tools, training, applicable procedures and requirements for the effective management of operational risk.
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·● Third line of defense: the Internal Audit department is responsible for undertaking independent reviews of the risk management activities carried out by the first and second lines of defense, and for promoting continuous improvements in both lines.
The objectives of 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, and non-financial impacts;
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~~impacts;~~
·● to provide support to decision-makers within Santander Brasil;
·● to ensure there is sufficient coverage to cover the 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): a committee which aims to perform a holistic and periodic monitoring of the risks to which Santander Brasil is exposed and to exercise independent control on the risk management activities;
·● Senior Forum of Internal Control and Operational Risk (Fórum Sênior de Controle Interno e Risco Operacional): a senior forum aimed at ensuring and fostering the adequate monitoring, control and mitigation of operational ~~risks.~~risks;
·● Operational Risk Meeting (Reunião de Riscos Operacionais): an 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 seeking to reduce operational risk exposure and losses. It is compliant with the applicable regulatory requirements.
Social and Environmental Risk
Since 2002, we have remained at the forefront of social and environmental risk analysis in Brazil. We consider social and environmental risk when deciding whether to extend credit. Our Social and Environmental Responsibility Policy, or “PRSA,” complies with National Monetary Council Resolution 4,327/2014 and the SARB 14 self-regulation issued by Febraban. Our PRSA establishes guidelines for social-environmental practices applicable to business and stakeholder relations, such as relations with suppliers. These practices include social and environmental risk assessment in granting or using credit. This is carried out through the analysis of the socio-environmental practices of wholesale and Empresas Nucleo (Core Companies) SME customers, which have limits or credit risk greater than R$5 million and belong to one of 14 social and environmental focuses.
Furthermore, the Brazilian Central Bank has recently issued new regulations and standards applicable to us relating to the management and governance of social, environmental and climate risks by financial institutions. These rules relate both to risks resulting from our products, services and activities, and to risks arising out of the activities of our counterparties, controlled entities, suppliers and outsourced service providers. One such regulation is National Monetary Council Resolution 4,945/2021, which will revoke Resolution 4,327/2014 and institute new guidelines applicable to the PRSA. The majority of these regulations will enter into effect in July 2022. See “Item 4. B Information on the Company—B, Business Overview—Regulation and Supervision—Other Applicable Laws and Regulations—Environmental, Social and Governance (ESG) requirements applicable to financial institutions.”
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We have been signatories of the Equator Principles since 2009. The Equator Principles are a framework used by financial institutions to determine, assess and manage environmental and social risk in projects, and are based on the Performance Standards on Social and Environmental Sustainability of International Finance Corporation (IFC) and the World Bank Group.

In 2016, we started to take into account climate change related matters in the credit rating of wholesale customers. In 2020, we began to use a water stress calculator in our socio-environmental assessments. This tool considers the client’s economic activity, hydrographic basin location and measures adopted to save water. It was developed considering the customer’s vulnerability to climate change in general, including as a result of changes in legislation or consumer preferences.
We believe that assessing the socio-environmental risk in our operations, also enables us to mitigate issues of operational, capital, credit and reputational risk. In ~~2020,~~2021, we screened ~~1,120~~911 wholesale corporate customers, ~~1,108~~1,049 Empresas Nucleo (Core Companies) customers, and 4328 major new projects (including both those that are and that are not subject to the Equator Principles). Furthermore, wholesale segment customers are screened for environmental and social concerns by the new customer acceptance
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department, when they begin their commercial relationship with us.
See “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—Social and environmental risks may have a material adverse effect on us.”
Cybersecurity Risk
We have ~~extensive~~ 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. 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 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.
See “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us. We are also subject to increasing scrutiny and regulation governing cybersecurity risks.”
Other Information
Volatile market conditions arising from the COVID-19 pandemic may result in significant changes in macroeconomic conditions, foreign exchange rates, interest rates, and the prices of our securities, which may adversely affect ~~us.~~us, see “Item 3. Key Information—D. Risk Factors—Risks Relating to the Brazilian Financial Services Industry and Our Business—The ~~current~~ global COVID-19 pandemic has materially impacted our business, and the continuance of this pandemic or any future outbreak of any other highly contagious diseases or other public health emergency, could materially and adversely impact our business, financial condition, liquidity and results of operations,” “Item 4. Information on the Company—A. History and Development of the Company—~~Important Events—~~Impact of COVID-19” and “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Principal Factors Affecting Our Financial Condition and Results of Operations—Impact of COVID-19.”
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
12A. Debt Securities
Not applicable.
12B. Warrants and Rights
Not applicable.
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12C. Other Securities
Not applicable.
~~12C. Other Securities~~
~~Not applicable.~~
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.
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Fees and Expenses
BNYM, as depositary, may charge the following fees and expenses to the ADR holders, any party depositing or withdrawing Units or any party surrendering ADRs or to whom ADRs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or the deposited securities or a distribution of ADRs), as applicable:
·● a fee of U.S.$5.00 or less for each 100 ADRs (or portion thereof) issued, delivered or surrendered, as the case may be;
·● a fee of U.S.$0.05 or less per ADR (or portion thereof) for any cash distribution made pursuant to the deposit agreement;
·● a fee of U.S.$0.05 or less per ADR (or portion thereof) per annum for depositary services;
·● a fee for the distribution of securities or of rights (where the depositary will not exercise or sell those rights on behalf of the ADR holders), such fee being in an amount equal to the fee for the execution and delivery of ADRs which would have been charged as a result of the deposit of such securities under the deposit agreement entered into with BNYM (for these purposes treating all such securities as if they were Units) but which securities are instead distributed by the depositary to the ADR holders;
·● such registration fees as may from time to time be in effect for the registration of transfers of Units generally on the registrar’s unit register and applicable to transfers of Units to or from the name of the depositary or its nominee or the name of the custodian for the depositary or its nominee on the making of deposits or withdrawals;
·● certain other cable and facsimile transmission fees and expenses;
·● such expenses as are incurred by the depositary in the conversion of foreign currency;
·● stock transfer or other taxes and other governmental charges; and
·● any other charges payable by the depositary or the custodian of the depositary, any of the depositary’s or such custodian’s agents or the agents of the depositary’s or such custodian’s agents, in connection with the servicing of Units or other deposited securities (which charges shall be assessed against the ADR holders as of the date or dates set by the depositary in accordance with the deposit agreement which we have entered into with BNYM and shall be payable at the sole discretion of the depositary by billing those ADR holders for those charges or by deducting those charges from one or more cash dividends or other cash distributions).
The depositary may collect any of its fees by deduction from any cash distribution payable, or by selling a portion of any securities to be distributed, to ADR holders that are obligated to pay those fees.
We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time between us and the depositary. The fees described above may be amended from time to time.
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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, ~~2020,~~2021, such reimbursements amounted to U.S.$~~2.9~~3.2 million.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
No matters to report.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
No matters to report.
ITEM 15. CONTROLS AND PROCEDURES
15A. Disclosure Controls and Procedures
As of December 31, ~~2020,~~2021, with the supervision and participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), we performed an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). As described below, there are inherent limitations to the effectiveness of any control system, including disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives.
Based on such evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective in ensuring that information we are required to disclose in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures.
In addition, as required by the Brazilian Central Bank through CMN Resolution ~~2,554/98~~4,968/21 and Brazilian Central Bank Circular ~~3,467/09,~~130/21, the report related to the quality and adequacy of the internal controls will be issued within 45 days after the expected date of publication of the Brazilian GAAP financial statements, which is scheduled to be March ~~19, 2021~~18, 2022 (Brazilian Central Bank -– GAAP).
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 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.
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, ~~2020,~~2021, based on the framework set by the COSO Integrated Framework 2013.
Based on this assessment, which was carried out through February ~~26, 2021,~~24, 2022, our management concluded that as of December 31, ~~2020,~~2021, its internal control over financial reporting was effective based on those criteria.
PricewaterhouseCoopers Auditores Independentes Ltda. which has audited our consolidated financial statements for the year ended December 31, ~~December 2020,~~2021, has also audited the effectiveness our internal 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.~~18, Financial Statements.”
15C. ~~Audit~~Attestation Report of the Registered Public Accounting Firm
For the report, dated February ~~26, 2021,~~24, 2022, from PricewaterhouseCoopers Auditores Independentes Ltda., our registered public accounting firm, on the effectiveness of our internal control over financial reporting as of December 31, ~~2020,~~2021, see “Item 18. Financial Statements.”
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]
~~ITEM~~ 16A. ~~AUDIT COMMITTEE FINANCIAL EXPERT~~
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
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under the applicable Brazilian law and the regulations of the SEC and NYSE.
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.”
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~~ITEM~~ 16B. ~~SANTANDER BRASIL’S CODE OF ETHICAL CONDUCT~~
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 customers.
The full version of the Santander Code of Ethical Conduct, which does not form part of this annual report on Form 20-F, is available on our website at https://www.santander.com.br/~~ri.~~ri/estatuto-codigo-politicas.
~~ITEM~~ 16C. ~~PRINCIPAL ACCOUNTANT FEES AND SERVICES~~
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, 2021, 2020 ~~December 31,~~and 2019, ~~and December 31, 2018,~~ as follows:
For the year ended December 31, For the year ended December 31,
2020 2019 2018 2021 2020 2019
(in R$ millions) (in R$ millions)
Audit of the annual financial statements of the companies audited (constant scope of consolidation) 24.0 25.2 19.9 26.3 24.0 25.2
Audit related 0.4 0.1 0.5 0.2 0.4 0.1
Tax - - -
All other - 0.3 0.1 0,4 -   0.3
Total 24.4 25.6 20.5 26.9 24.4 25.6

The approximate value of withholding taxes in respect of the audit fees for the year ended December 31, ~~2020~~2021 according to applicable law totaled R$~~1.5~~1.9 million.
The services commissioned from our auditors meet the independence requirements stipulated by the Brazilian Central Bank and CVM regulation and by the Sarbanes-Oxley Act of 2002, and they did not involve the performance of any work that is incompatible with the audit function.
If we are required to engage an auditing firm for audit and audit-related services, those services and any fees paid to the auditing firms must be pre-approved by the audit committee.
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Our Audit Committee pre-approves all audit and non-audit services to be performed by our registered public accounting firm.
~~ITEM~~ 16D. ~~EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES~~
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.”
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Our Audit Committee 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 are 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 by 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.
16E. Purchases of Equity Securities by the Issuer and performs the same functions of an American company. Our Audit Committee is able to act independently in carrying out the responsibilities of an Audit Committee under the Sarbanes-Oxley Act, meets the exemption requirements of Rule 10A-3(c)(3) and therefore is in compliance with Rule 10A-3 of the Securities Exchange Act.
~~ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS~~
Affiliated Purchasers
The following table reflects purchases of our equity securities, including in the form of ADRs, by us or our affiliates in ~~2020.~~
2021.
Santander Brasil – Buyback Program Units
Months Total Number of Units Purchased (3) Average Price Paid per Unit in U.S.$ (4) Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1) (5) Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (2)
November 2020
December 2020
January 2021
February 2021 447 4.9208 447 -
March 2021 -   -   -   -
April 2021 -   -   -   -
May 2021 -   -   -   -
June 2021 -   -   -   -
July 2021 868,600 8.0397 868,600 -
August 2021 -   -   -   -
September 2021 -   -   -   -
October 2021 -   -   -   -
November 2021 -   -   -   -
December 2021 -   -   -   -
Total 869,047 12.96 869,047 36,956,402

Months Total Number of Units Purchased (3) Average Price Paid per Unit in U.S.$ (4) Total Number of Units Purchased as Part of Publicly Announced Plans or Programs (1) (5) Maximum Number of Units that May Yet Be Purchased Under the Plans or Programs (2)
November 2019 199,000 10.6889 199,000 -
December 2019 -
January 2020 531,500 9.8979 531,500 -
February 2020 2,377,300 9.7177 2,377,300 -
March 2020 2,143,900 6.5997 2,143,900 -
April 2020 - - - -
May 2020 - - - -
June 2020 - - - -
July 2020 15,710 5 15,710 -
August 2020 - - - -
September 2020 - - - -
October 2020 - - - -
November 2020 - - - -
December 2020 - - - -
Total 5,267,410 42 5,267,410 37,753,760
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(1) The buyback program, as approved by our board of directors on November ~~3, 2016 for the period from November 4, 2016 to November 3, 2018; on November~~ 1, 2019 for the period from November 6,5, 2019 to November 5,4, 2020, and on February 2, ~~2020~~2021 for the period from February 3, ~~2020~~2021 to August 2, 2022. ~~A new buyback program was approved by our board of directors on February 2, 2021 for the eighteen (18)-month period starting in February 2, 2021.~~
~~(2)~~ The number entered in the “Total” row of the column “Maximum Number (or Approximate Dollar Value) of Units that May Yet Be Purchased Under the Plans or Programs” refers to the number of Units which may be repurchased in the period from November 2019 to November 2020 as approved by our board of directors. The number of Units that may be repurchased for the period from February 3, 2020 to August 2, 2022 as approved by our board of directors is 36,956,402.
~~(3)~~ ~~The “Total Number of Units Purchased” was 0.00 in November 2020 and 0.00 in December 2020.~~
~~(4)~~ ~~The “Average Price Paid per Unit in U.S.$” was 0.00 in November 2020 and U.S.$0.00 in December 2020~~
~~(5)~~ ~~The “Total Number of Units Purchased as Part of Publicly Announced Plans or Programs” was 0.00 November 2020 and 0.00 in December 2020.~~
~~(6)~~ The repurchase plans define ~~an annual~~a maximum of Units to be repurchased within its term but without a monthly limit.
(2) The number entered in the “Total” row of the column “Maximum Number (or Approximate Dollar Value) of units that May Yet Be Purchased Under the Plans or Programs” refers to the number of Units which may be repurchased in the periods as approved by our board of directors. The total number of Units that may be repurchased for the period from February 3, 2021 to August 2, 2022 as approved by our board of directors is 36,956,402.
For further information on our buyback program, please see “Item 4. Information on the Company—A. History and Development of the Company—Important Events—Buyback Program.”
~~ITEM~~ 16F. ~~CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT~~
Change in Registrant’s Certifying Accountant
Not applicable.
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~~ITEM~~ 16G. ~~CORPORATE GOVERNANCE~~
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.
As a result of the precedence given to local legal requirements in the framework itself and in our
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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 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 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 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
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a member of our Board of Directors. There is no requirement that our non-management directors meet regularly without management. As a result, the non-management directors on our board do not typically meet in executive session.
Committees
NYSE rules require that listed companies have a Nominating/Corporate Governance Committee and a Remuneration Committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. As a company whose majority of voting shares is held by another group, we are not required to comply with this rule. The responsibilities of the Nominating/Corporate Governance Committee include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. The responsibilities of the Remuneration Committee, in turn, include, among other things, reviewing corporate goals relevant to the Chief Executive Officer’s compensation, evaluating the Chief Executive Officer’s performance, approving the Chief Executive Officer’s compensation levels and recommending to the board non-chief executive officer compensation, incentive compensation and equity-based plans.
In February 2017, our Board of Directors approved the terms for the establishment of our Nomination and Governance Committee. The Nomination and Governance Committee also oversees corporate governance at Santander Brasil.
CMN rules require us to have a Compensation Committee composed of at least three members. We have created the 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.
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.
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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.
Corporate Governance Guidelines
NYSE rules require that listed companies adopt and disclose corporate governance guidelines. We
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comply with the corporate governance guidelines under applicable Brazilian law. The corporate governance guidelines applicable to us under Brazilian law are consistent with the guidelines established by the NYSE.
Pursuant to the practices of corporate governance guidelines, on September 22, 2010, our Board of Directors approved a policy that regulates related party transactions, which was last revised on March 27, 2019. This policy provides rules which aim to ensure that all decisions, in particular those involving related parties and other situations with potential conflict of interests will be aligned with our interests and those of our shareholders. The policy applies to all employees, Directors and Executive Officers of Santander Brasil.
Code of Business Conduct and Ethics
NYSE rules require that listed companies adopt and disclose a code of conduct and ethics for Directors, Officers and employees, and promptly disclose any waivers of the code for Directors or Executive Officers. Applicable Brazilian law does not have a similar requirement. We adopted a Code of Ethical Conduct on February 27, 2009, last revised on September 28, 2016, which regulates the set of ethical principles that shall guide the conduct of our employees, officers and directors of Santander Brasil, as well as of its affiliates. Our Code of Ethical Conduct complies with the requirements of the Sarbanes-Oxley Act and the NYSE rules.
Internal Audit Function
NYSE rules require that listed companies maintain an internal audit function to provide management and the ~~Audit Committee~~audit committee with ongoing assessments of the company’s risk management processes and system of internal controls.
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~~anywebsite directly or indirectly linked to these websites is not part, of and is not incorporated by reference in, this annual report.
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~~ITEM~~ 16H. ~~MINE SAFETY DISCLOSURE~~
Mine Safety Disclosure
Not applicable.
16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
ITEM 17. FINANCIAL STATEMENTS
We have responded to Item 18 in lieu of this item.
ITEM 18. FINANCIAL STATEMENTS
Consolidated Financial Statements are filed as part of this annual report, ~~see pages F-1 to F-152.~~starting on page F-1.
ITEM 19. EXHIBITS
(a)       Index to Consolidated Financial Statements

Page
Independent auditor’s Report ~~of PricewaterhouseCoopers Auditores Independentes~~ F-3
Consolidated Balance Sheets as of December 31, 2021, 2020 and 2019 F-4
Consolidated Statement of Income for the years ended December 31, 2021, 2020 and 2019 ~~and 2018~~ ~~F-4~~
~~Consolidated Income Statements for the years ended December 31, 2020, 2019 and 2018~~ F-6
Consolidated ~~Statements~~Statement of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019 ~~and 2018~~ ~~F-8~~F-7
Consolidated ~~Statements~~Statement of Changes in Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019 ~~and 2018~~ ~~F-9~~F-8
Consolidated Statement of Cash ~~Flow Statements~~Flows for the years ended December 31, 2021, 2020 and 2019 ~~and 2018~~ F-11
~~Explanatory~~ Notes to the Consolidated Financial Statements for the years ended December 31, 2021, 2020 and 2019 ~~and 2018~~ F-13

(b)       List of Exhibits.
We are filing the following documents as part of this annual report on Form 20-F:
Exhibit Number
Description
1.1 English translation of the By-laws of Santander Brasil, amended and restated on ~~June 10, 2020~~March 31, 2021 (incorporated by reference to our Form 6-K (file no. 001-34476) filed with the SEC on ~~June 11, 2020)~~April 01, 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.
4.1 Option Plan to Purchase Share 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 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).
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4.5 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).*
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.
13.2 Section 906 Certification by the Chief Financial Officer.

*     Certain information has been omitted from this exhibit pursuant to Item 4 of the Instructions As To Exhibits of Form 20-F because it is both not material and is the type that the registrant treats as private or confidential. The registrant hereby agrees to furnish an unredacted copy of the exhibit and its materiality and privacy or confidentiality to the U.S. Securities and Exchange Commission upon request.
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
BANCO SANTANDER (Brasil) S.A.
By: /s/ ~~Sergio Agapito Lires Rial~~Mario Roberto Opice Leão
Name: ~~Sergio Agapito Lires Rial~~Mario Roberto Opice Leão
Title: Chief Executive Officer

Date: February ~~26, 2021~~
28, 2022
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Banco Santander (Brasil) S.A.

Consolidated Financial Statements
Prepared in accordance with International Financial Reporting
Standards - IFRS

December 31, ~~2020~~2021

~~Consolidated Financial Statements | December 31, 2020~~
~~Table of Contents~~
BANCO SANTANDER (BRASIL) S.A.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX ~~Page~~
Report of independent registered public accounting firm
Consolidated Balance Sheet ~~F-3~~F-4
Consolidated ~~Balance Sheets~~Statement of Income ~~F-4~~F-6
Consolidated Statement of Comprehensive Income ~~Statements~~ ~~F-6~~F-7
Consolidated ~~Statements~~Statement of ~~Comprehensive Income~~Changes in Stockholders’ Equity ~~F-7~~F-8
~~Consolidated Statements~~Statement of ~~Changes in Stockholders' Equity~~Cash Flows ~~F-8~~F-11
~~Consolidated Cash Flow Statements~~ ~~F-11~~
1.   Introduction, basis of presentation of the consolidated financial statements and other information F-13
2.   Accounting policies and method of measurement ~~F-18~~F-16
3.   Basis of consolidation ~~F-40~~F-37
4.   Cash and balances with the Brazilian Central Bank ~~F-42~~F-41
5.   Loans and amounts due from credit institutions ~~F-42~~F-41
6.   Debt instruments ~~F-43~~F-42
7.   Equity instruments ~~F-44~~F-43
8.   Derivative financial instruments and Short positions ~~F-45~~F-44
9.   Loans and advances to clients ~~F-53~~F-52
10.   Non-current assets held for sale ~~F-58~~F-57
11.   Investments in associates and joint ventures ~~F-58~~F-57
12.   Tangible assets ~~F-62~~F-61
13.   Intangible assets - Goodwill ~~F-64~~F-62
14.   Intangible assets - Other intangible assets ~~F-65~~F-64
15.   Other assets ~~F-66~~F-65
16.   Deposits from the Brazilian Central Bank and Deposits from credit institutions ~~F-67~~F-65
17.   Client deposits ~~F-68~~F-65
18.   Marketable debt securities ~~F-69~~F-66
19.   Debt Instruments Eligible to Compose Capital ~~F-70~~F-67
20.   Other financial liabilities ~~F-71~~F-68
21.   Provisions for pensions and similar obligations ~~F-71~~F-68
22.   Provisions for judicial and administrative proceedings, commitments and other provisions ~~F-80~~F-76
23.   Tax assets and liabilities ~~F-84~~F-82
24.   Other liabilities ~~F-87~~F-85
25.   Other Comprehensive Income ~~F-87~~F-85
26.   Non-controlling interests ~~F-88~~F-86
27.   Shareholders’ equity ~~F-90~~F-87
28.   Earnings per share ~~F-92~~F-90
29.   Fair value of financial assets and liabilities ~~F-93~~F-91
30.   Operational Ratios ~~F-100~~F-97
31.   Interest and similar income ~~F-100~~F-98
32.   Interest expense and similar charges ~~F-101~~F-98
33.   Income from equity instruments ~~F-101~~F-98
34.   Fee and commission income ~~F-101~~F-99
35.   Fee and commission expense ~~F-102~~F-99
36.   Gains or losses on financial assets and liabilities ~~F-103~~F-100
37.   Exchange differences (net) ~~F-103~~F-100
38.   Other operating income and expenses ~~F-103~~F-100
39.   Personnel expenses ~~F-104~~F-100
40.   Other general administrative expenses ~~F-105~~F-102
41.   Gains or losses on non financial assets and investments, net ~~F-106~~F-103
42.   Gains (losses) on disposal and expenses of non-current assets held for sale not classified as discontinued operations ~~F-106~~F-103
43.   Other disclosures ~~F-106~~F-103
44.   Business segment reporting ~~F-112~~F-109
45.   Related party transactions ~~F-114~~F-112
46.   Risk management ~~F-123~~F-120
47.   Subsequent Events ~~F-149~~
~~APPENDIX I – RECONCILIATION OF STOCKHOLDERS’ EQUITY AND NET INCOME - BRGAAP vs IFRS~~ ~~F-149~~
~~APPENDIX II – STATEMENTS OF VALUE ADDED~~ ~~F-152~~F-147
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Banco Santander (Brasil) S.A.
Report of independent registered public
accounting firm
December 31, 2021

Table of Contents
~~Report of Independent Registered Public Accounting Firm~~

Report of independent registered public accounting firm
To the Board of Directors and Stockholders of
Banco Santander (Brasil) S.A.
Opinions on the ~~Financial Statements~~financial statements and ~~Internal Control~~
internal control over ~~Financial Reporting~~financial reporting
We have audited the accompanying consolidated balance sheets of Banco Santander (Brasil) S.A. and its subsidiaries (the ~~“Company”~~"Company") as of December 31, 2021, 2020 ~~2019~~ and ~~2018,~~2019, and the related consolidated ~~income statements,~~ statements of income, comprehensive income, ~~statements of~~ changes in ~~stockholders’~~stockholders' equity and cash ~~flow statements~~flows for each of the three years in the period ended December 31, ~~2020,~~2021, including the related notes (collectively referred to as the ~~“consolidated~~"consolidated financial ~~statements”~~statements"). We also have audited the ~~Company’s~~Company's internal control over financial reporting as of December 31, ~~2020,~~2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021, 2020 ~~2019~~ and ~~2018,~~2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2020~~2021 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2020,~~2021, based on criteria established in Internal Control - Integrated Framework(2013) issued by the COSO.
~~Change in Accounting Principle~~
~~As discussed in Note 1.c.2.1.iii to the consolidated financial statements, the Company changed the manner in which it accounts for financial instruments in 2018.~~
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Item 15B –- Management´s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the ~~Company’s~~Company's consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
PricewaterhouseCoopers, Av. Francisco Matarazzo 1400, Torre Torino, São Paulo, SP, Brasil, 05001-903, Caixa Postal 60054,
T: +55 (11) 3674 2000, www.pwc.com.br
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Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Supplemental Information
The reconciliation of stockholders' equity and net income –- BRGAAP vs IFRS as of and for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019 and the statements of value added for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018,~~2019, included in APPENDIX I and II respectively, have been subjected to audit procedures performed in conjunction with the audit of the ~~Company’s~~Company's consolidated financial statements. This supplemental information is the responsibility of the ~~Company’s~~Company's management. Our audit procedures included determining whether the supplemental information reconciles to the consolidated financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with Brazilian Corporate Law. In our opinion, the reconciliation of stockholders' equity and net income –- BRGAAP vs IFRS as of and for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019 and the statements of value added for the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019 are fairly stated, in all material respects, in relation to the consolidated financial statements as a whole.
Definition and ~~Limitations~~limitations of ~~Internal Control~~internal
control over ~~Financial Reporting~~financial reporting
A ~~company’s~~company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A ~~company’s~~company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the ~~company’s~~company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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~~Critical Audit Matters~~

Table of Contents
Critical audit matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Measurement of expected credit losses
As described in Notes ~~1.c.2.1.iv,~~1.c.2.1.ii, 2.h, 9, 43.h and 46.b to the consolidated financial statements, management measures the expected credit losses at the probability-weighted estimate of credit losses, that involves ~~management’s~~management's judgment, as set forth in IFRS 9 - Financial Instruments. At December 31, ~~2020,~~2021, the impairment losses on loans and receivables was BRL ~~24,053,989~~28,510,660 thousand on total loans and receivables at amortized cost of BRL ~~417,822,026~~493,354,702 thousand. Management calculates expected credit losses (‘~~ECL’~~ECL') using three main components: a probability of default (‘~~PD’~~PD'), loss given default (‘~~LGD’~~LGD') and exposure at default (‘~~EAD’~~EAD') including individual and collective models. The ECL measurement is based on ~~management’s~~management's estimate of present value expected to be received, including the use of a variety of assumptions such as historical loss experience, credit quality, portfolio size, concentration, economic factors and estimated future cash flows. Additionally, management has assessed the Covid-19 pandemic impact in the estimation of credit losses process. In this assessment, management has considered forward-looking information, including changes in macroeconomic scenarios, impacting the calculation model for provisioning expected credit losses.
The principal considerations for our determination that performing procedures relating to the measurement of expected credit losses is a critical audit matter are (i) there was significant judgment used by management in determining the expected credit losses, in particular the assumptions used in determining the PD and LGD, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating audit evidence obtained relating to these assumptions; (ii) the audit effort involved use of professionals with specialized skill and knowledge to assist in evaluating those assumptions; and (iii) the consideration of the Covid-19 pandemic impacts in measuring then expected credit losses with the current scenario of uncertainty.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included understanding and testing the effectiveness of controls relating to ~~management’s~~management's measurement of expected credit losses, which included controls over the assumptions used. These procedures also included, among others: (i) the involvement of professionals with specialized skill and knowledge to assist in testing ~~management’s~~management's process for determining the expected credit losses, including evaluating the appropriateness of the methodology and models, testing the accuracy and completeness of data used, and evaluating the reasonableness of significant assumptions; (ii) the analysis of ~~management’s~~management's accounting policies in comparison with IFRS 9; (iii) analysis over ~~management’s~~management's disclosures in the financial statements; and (iv) understanding of the procedures adopted by management in considering the impacts of Covid-19 in the estimation of additional expected credit loss, evaluating the reasonableness of the estimation considering models, assumptions and data used.
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Provisions for judicial and administrative proceedings
As described in Notes ~~1.c.2.1.vi, 2.r~~1.c.2.1.iv, 2.q and 22 to the consolidated financial statements, Provisions for judicial and administrative proceedings are recorded when their risk of loss are considered probable and the amounts can be reliably measured, based on the nature, complexity and history of lawsuits and the opinion of legal counsel. At December 31, ~~2020,~~2021, the Company has recorded provisions for judicial and administrative proceedings of BRL ~~8,648,892~~7,668,914 thousand. The Company also discloses the contingency in circumstances where management concludes no loss is probable or reasonably estimable, but it is reasonably possible that a loss may be incurred.
The principal considerations for our determination that performing procedures relating to provisions for judicial and administrative proceedings is a critical audit matter are there was significant judgment by management when assessing the likelihood of a loss being incurred and the potential amount of the judicial and administrative proceedings. This in turn led to a high degree of auditor judgment and effort in evaluating ~~management’s~~management's assessment of the provisions for judicial and administrative proceedings, including the involvement of professionals with specialized skills and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included the understanding and testing the design and the effectiveness of controls relating to identifying, assessing, monitoring, measuring, recording, and disclosing the provisions for judicial and administrative proceedings, including the completeness and accuracy of the data used. Our procedures also included testing the recognition and measurement of the ~~Company’s~~Company's provisions for judicial and administrative proceedings and performing external confirmation procedures with law firms responsible for a sample of the judicial and administrative proceedings to evaluate the reasonableness of ~~management’s~~management's assessment of the provisions. With the assistance of our professionals with specialized skill and knowledge, we evaluated the reasonableness ~~management’s~~management's assessment of a sample of proceedings taking into account the individual progress of similar proceedings.
São Paulo, February 24, 2022
/s/PricewaterhouseCoopers Auditores Independentes Ltda.
~~São Paulo, Brazil~~
~~February 26, 2021~~
We have served as the ~~Company’s~~Company's auditor since 2016.

~~Consolidated Financial Statements | December 31, 2020 | F-3~~
Table of Contents
~~Table of Contents~~

* Values expressed in thousands, except when indicated.

Consolidated Balance ~~Sheets~~Sheet

Assets Note 2020 2019 2018 Note 2021 2020 2019

Cash and Balances With The Brazilian Central Bank 4 20,148,725 20,127,364 19,463,587
Cash 4 16,657,201 20,148,725 20,127,364

Financial assets measured at fair value through profit or loss 18,858,842 60,900,466 32,342,306
Debt instruments 6 3,122,017 3,545,660 3,735,076
Balances with the Brazilian Central Bank 15,736,825 57,354,806 28,607,230

Financial Assets Measured At Fair Value Through Profit Or Loss 60,900,466 32,342,306 43,711,800
Debt instruments 6 3,545,660 3,735,076 3,171,746
Balances With The Brazilian Central Bank 57,354,806 28,607,230 40,540,054

Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 98,466,232 57,020,903 68,852,314
Financial assets measured at fair value through profit or loss held for trading 70,570,665 95,843,126 55,396,069
Debt instruments 6 68,520,799 34,885,631 50,066,469 6 47,752,595 68,520,799 34,885,631
Equity instruments 7 1,818,276 2,029,470 766,333 7 2,020,610 1,818,276 2,029,470
Trading derivatives 8. a 28,127,157 20,105,802 18,019,512 8.a 20,797,460 25,504,051 18,480,968

Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 499,720 171,453 917,477
Non-trading financial assets mandatorily measured at fair value through profit or loss 870,162 499,720 171,453
Equity instruments 7 438,912 171,453 298,297 7 477,707 438,912 171,453
Loans and advances to customers 9 60,808 - 619,180 9 392,455 60,808 —

Financial Assets Measured At Fair Value Through Other Comprehensive Income 109,740,387 96,120,233 85,436,677
Financial assets measured at fair value through other comprehensive income 101,241,787 109,740,387 96,120,233
Debt instruments 6 109,668,214 95,962,927 85,395,691 6 101,212,600 109,668,214 95,962,927
Equity instruments 7 72,173 157,306 40,986 7 29,187 72,173 157,306

Financial Assets Measured At Amortized Cost 554,924,796 474,680,904 429,731,475
Financial assets measured at amortized cost 633,241,352 554,924,796 474,680,904
Loans and amounts due from credit institutions 5 112,849,776 109,233,128 91,859,759 5 95,664,754 112,849,776 109,233,128
Loans and advances to customers 9 393,707,229 326,699,480 301,072,207 9 464,451,587 393,707,229 326,699,480
Debt instruments 6 48,367,791 38,748,296 36,799,509 6 73,125,011 48,367,791 38,748,296

Hedging Derivatives 8. a 743,463 339,932 343,934
Hedging derivatives 8.a 342,463 743,463 339,932

Non-Current Assets Held For Sale 10 1,092,909 1,325,335 1,380,231
Assets held for sale 10 816,345 1,092,909 1,325,335

Investments in Associates and Joint Ventures 11 1,094,985 1,070,762 1,053,315
Investments in associates and joint ventures 11 1,232,646 1,094,985 1,070,762

Tax Assets 41,063,782 33,599,178 31,565,767
Tax assets 41,757,332 41,063,782 33,599,178
Current 3,082,084 3,304,116 3,885,189 4,117,035 3,082,084 3,304,116
Deferred 23. d 37,981,698 30,295,062 27,680,578 23.d 37,640,297 37,981,698 30,295,062

Other Assets 15 7,222,411 5,061,337 4,800,467
Other assets 15 6,049,028 7,222,411 5,061,337

Tangible Assets 12 9,537,111 9,781,957 6,588,975
Property, plant and equipment 12 8,783,785 9,537,111 9,781,957

Intangible Assets 30,766,498 30,595,788 30,018,988
Intangible assets 30,786,788 30,766,498 30,595,788
Goodwill 13 28,360,137 28,375,004 28,378,288 13 27,915,469 28,360,137 28,375,004
Other intangible assets 14 2,406,361 2,220,784 1,640,700 14 2,871,319 2,406,361 2,220,784

TOTAL ASSETS 936,201,485 762,237,452 723,865,007
Total assets 931,208,396 933,578,379 760,612,618

The accompanying notes are an integral part of these consolidated financial statements. The accompanying notes are an integral part of these consolidated financial statements.
Consolidated Financial Statements | December 31, 2021 | F-4
Table of Contents

* Values expressed in thousands, except when indicated.
Liabilities and stockholders' equity Note 2021 2020 2019

Financial liabilities measured at fair value through profit or loss  held for trading 36,952,567 75,020,184 44,439,835
Trading derivatives 8.a 24,172,008 29,212,238 20,604,182
Short positions 8.b 12,780,559 45,807,946 23,835,653

Financial Liabilities Measured at Fair Value Through Profit or Loss 7,459,784 7,038,467 5,319,416
Deposits from Brazilian Central Bank and deposits from credit institutions 20 7,459,784 7,038,467 5,319,416

Financial Liabilities at Amortized Cost 750,093,694 707,288,791 575,230,401
Deposits from Brazilian Central Bank and deposits from credit institutions 16 121,005,909 131,656,962 99,271,415
Customer deposits 17 468,961,069 445,813,972 336,514,597
Marketable debt securities 18 79,036,792 56,875,514 73,702,474
Debt instruments eligible to compose capital 19 19,641,408 13,119,660 10,175,961
Other financial liabilities 20 61,448,516 59,822,683 55,565,954

Hedging derivatives 8.a 446,973 144,594 200,961

Provisions 11,604,482 13,814,978 16,331,825
Provisions for pensions funds and similar obligations 21 2,728,126 3,929,265 4,960,620
Provisions for judicial and administrative proceedings, commitments and other provisions 22 8,876,356 9,885,713 11,371,205

Tax liabilities 8,175,023 10,130,248 10,960,075
Current 5,949,833 5,583,653 5,419,202
Deferred 23.d 2,225,190 4,546,595 5,540,873

Other liabilities 24 10,501,378 14,051,245 10,920,944

Total liabilities 825,233,901 827,488,507 663,403,457

Stockholders' equity 27 109,046,574 106,205,067 96,736,290
Share capital 55,000,000 57,000,000 57,000,000
Reserves 48,880,561 40,414,981 34,877,493
Treasury shares (713,039 ) (791,358 ) (681,135 )
Option for acquisition of equity instrument —   —   (67,000 )
Profit for the year attributable to the parent 15,528,052 13,418,529 16,406,932
Less: dividends and remuneration (9,649,000 ) (3,837,085 ) (10,800,000 )

Other Comprehensive Income (3,406,428 ) (428,080 ) (85,710 )

Stockholders' Equity Attributable to the Parent 105,640,146 105,776,987 96,650,580

Non - controlling interests 26 334,349 312,885 558,581

Total stockholders' equity 105,974,495 106,089,872 97,209,161
Total liabilities and stockholders' equity 931,208,396 933,578,379 760,612,618
The accompanying Notes are an integral part of these consolidated financial ~~statements,~~
statements.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-4~~F-5
~~Table of Contents~~
Table of Contents

* Values expressed in thousands, except when indicated.
Consolidated Statement of Income

Liabilities and Stockholders' Equity Note 2020 2019 2018

Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading 77,643,290 46,064,669 50,938,992
Trading derivatives 8. a 31,835,344 22,229,016 18,243,315
Short positions 8. b 45,807,946 23,835,653 32,695,677

Financial Liabilities Measured At Fair Value Through Profit Or Loss 7,038,467 5,319,416 1,946,056
Other Financial Liabilities 20 7,038,467 5,319,416 1,946,056

Financial Liabilities at Amortized Cost 707,288,791 575,230,401 547,295,169
Deposits from Brazilian Central Bank and deposits from credit institutions 16 131,656,962 99,271,415 99,022,806
Customer deposits 17 445,813,972 336,514,597 304,197,800
Marketable debt securities 18 56,875,514 73,702,474 74,626,232
Subordinated debts - - 9,885,607
Debt Instruments Eligible to Compose Capital 19 13,119,660 10,175,961 9,779,944
Other financial liabilities 20 59,822,683 55,565,954 49,782,780

Hedging Derivatives 8. a 144,594 200,961 223,520

Provisions 13,814,978 16,331,825 14,695,898
Provisions for pensions funds and similar obligations 21 3,929,265 4,960,620 3,357,654
Provisions for judicial and administrative proceedings, commitments and other provisions 22 9,885,713 11,371,205 11,338,244

Tax Liabilities 10,130,248 10,960,075 8,074,764
Current 5,583,653 5,419,202 5,043,375
Deferred 23. d 4,546,595 5,540,873 3,031,389

Other Liabilities 24 14,051,245 10,920,944 9,095,148

Total Liabilities 830,111,613 665,028,291 632,269,547

Stockholders' Equity 27 106,205,067 96,736,290 91,944,333
Share capital 57,000,000 57,000,000 57,000,000
Reserves 40,414,981 34,877,493 30,440,288
Treasury shares (791,358 ) (681,135 ) (461,432 )
Option for Acquisition of Equity Instrument - (67,000 ) (1,017,000 )
Profit for the year attributable to the Parent 13,418,529 16,406,932 12,582,477
Less: dividends and remuneration (3,837,085 ) (10,800,000 ) (6,600,000 )

Other Comprehensive Income (428,080 ) (85,710 ) (878,863 )

Stockholders' Equity Attributable to the Parent 105,776,987 96,650,580 91,065,470

Non - Controlling Interests 26 312,885 558,581 529,990

Total Stockholders' Equity 106,089,872 97,209,161 91,595,460
Total Liabilities and Stockholders' Equity 936,201,485 762,237,452 723,865,007

Note 2021 2020 2019

Interest and similar income 31 77,987,308 62,774,940 72,841,060
Interest expense and similar charges 32 (26,668,842 ) (18,332,228 ) (28,519,953 )
Net interest income 51,318,466 44,442,712 44,321,107
Income from equity instruments 33 90,040 33,754 18,933
Income from companies accounted for by the equity method 11 144,184 112,261 149,488
Fee and commission income 34 20,388,089 20,606,707 20,392,458
Fee and commission expense 35 (5,114,788 ) (4,378,493 ) (4,679,306 )
Gains (losses) on financial assets and liabilities (net) 36 221,782 12,998,060 2,462,545
Financial assets at fair value through profit or loss 1,555,837 711,949 252,253
Financial assets measured at fair value through profit or loss held for trading 3,519,626 12,122,794 2,391,080
Non-trading financial assets mandatorily measured at fair value through profit or loss 205,016 172,828 11,501
Financial instruments not measured at fair value through profit or loss (665,853 ) (239,054 ) (57,522 )
Other (4,392,844 ) 229,543 (134,767 )
Exchange differences (net) 37 (2,002,286 ) (24,700,962 ) (2,788,537 )
Other operating expense (net) 38 (1,119,380 ) (872,510 ) (1,107,719 )
Total income 63,926,107 48,241,529 58,768,969
Administrative expenses (17,316,419 ) (17,114,960 ) (16,941,526 )
Personnel expenses 39 (9,025,702 ) (8,871,482 ) (9,327,714 )
Other administrative expenses 40 (8,290,717 ) (8,243,478 ) (7,613,812 )
Depreciation and amortization (2,433,921 ) (2,579,127 ) (2,391,857 )
Tangible assets 12 (1,850,780 ) (2,039,805 ) (1,870,836 )
Intangible assets 14 (583,141 ) (539,322 ) (521,021 )
Provisions (net) (2,179,417 ) (1,656,547 ) (3,681,586 )
Impairment losses on financial assets (net) (17,112,734 ) (17,450,188 ) (13,369,905 )
Financial assets measured at amortized cost and contingent commitments (17,112,734 ) (17,450,188 ) (13,369,905 )
Impairment losses on other assets (net) (165,799 ) (84,908 ) (131,435 )
Other intangible assets 14 (30,160 ) (66,269 ) (103,924 )
Other assets (135,639 ) (18,639 ) (27,511 )
Gains (losses) on disposal of assets not classified as assets held for sale 41 (15,113 ) 230,713 10,646
Gains (losses) on assets held for sale not classified as discontinued operations 42 47,625 77,463 9,843
Operating income before tax 24,750,329 9,663,975 22,273,149
Income taxes 23 (9,191,005 ) 3,786,778 (5,641,699 )
Consolidated net income for the period 15,559,324 13,450,753 16,631,450
Profit attributable to the parent 15,528,052 13,418,529 16,406,932
Profit attributable to non-controlling interests 26 31,272 32,224 224,518
The accompanying Notes are an integral part of these consolidated financial statements.

The accompanying Notes are an integral part of these consolidated financial statements.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-5~~F-6
~~Table of Contents~~
Table of Contents

* Values expressed in thousands, except when indicated.
Consolidated Statement of Comprehensive Income

2021 2020 2019

Consolidated Profit for the Year 15,559,324 13,450,753 16,631,450

Other comprehensive income that will be reclassified subsequently to profit or loss when specific conditions are met: (3,245,041 ) (897,996 ) 1,468,651
Financial assets measured at fair value through other comprehensive income (2,389,705 ) (1,003,155 ) 1,352,702
Financial assets measured at fair value through other comprehensive income (4,255,996 ) (1,976,013 ) 2,926,285
Income taxes 1,866,291 972,858 (1,573,583 )
Cash flow hedges (855,335 ) 105,159 115,949
Valuation adjustments (1,628,393 ) 168,015 270,119
Amounts transferred to income statement —   —   6,767
Income taxes 773,058 (62,856 ) (160,937 )

Other comprehensive income that will not be reclassified to net income: 266,692 555,624 (675,497 )
Defined benefits plan 266,692 555,624 (675,497 )
Defined benefits plan 592,967 1,110,034 (1,358,578 )
Income taxes (326,275 ) (554,410 ) 683,081

Total comprehensive income 12,580,976 13,108,381 17,424,604

Attributable to the parent 12,549,704 13,076,157 17,200,086
Attributable to non-controlling interests 31,272 32,224 224,518
Total comprehensive income 12,580,976 13,108,381 17,424,604
The accompanying Notes are an integral part of these consolidated financial statements.
Consolidated Financial Statements | December 31, 2021 | F-7
Table of Contents

* Values expressed in thousands, except when indicated.
Consolidated ~~Income Statements~~Statement of Changes in Stockholders’ Equity

Note 2020 2019 2018

Interest and similar income 31 62,774,940 72,841,060 70,478,393
Interest expense and similar charges 32 (18,332,228 ) (28,519,953 ) (28,557,051 )
Net interest income 44,442,712 44,321,107 41,921,342
Income from equity instruments 33 33,754 18,933 32,623
Income from companies accounted for by the equity method 11 112,261 149,488 65,958
Fee and commission income 34 20,606,707 20,392,458 17,728,452
Fee and commission expense 35 (4,378,493 ) (4,679,306 ) (3,596,293 )
Gains (losses) on financial assets and liabilities (net) 36 12,998,060 2,462,545 (2,782,802 )
Financial Assets At Fair Value Through Profit Or Loss 711,949 252,253 (138,673 )
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 12,122,794 2,391,080 (2,764,859 )
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 172,828 11,501 61,239
Financial instruments not measured at fair value through profit or loss (239,054 ) (57,522 ) (138,104 )
Other 229,543 (134,767 ) 197,595
Exchange differences (net) 37 (24,700,962 ) (2,788,537 ) (2,806,471 )
Other operating expense (net) 38 (872,510 ) (1,107,719 ) (1,055,850 )
Total Income 48,241,529 58,768,969 49,506,959
Administrative expenses (17,114,960 ) (16,941,526 ) (16,792,138 )
Personnel expenses 39 (8,871,482 ) (9,327,714 ) (9,206,007 )
Other administrative expenses 40 (8,243,478 ) (7,613,812 ) (7,586,131 )
Depreciation and amortization (2,579,127 ) (2,391,857 ) (1,739,959 )
Tangible assets 12 (2,039,805 ) (1,870,836 ) (1,216,704 )
Intangible assets 14 (539,322 ) (521,021 ) (523,255 )
Provisions (net) (1,656,547 ) (3,681,586 ) (1,999,604 )
Impairment losses on financial assets (net) (17,450,188 ) (13,369,905 ) (12,713,435 )
Financial Assets Measured At Amortized Cost and contingent commitments (17,450,188 ) (13,369,905 ) (12,713,532 )
Gains (losses) due to derecognition of financial assets measured at amortized cost - - 97
Impairment losses on other assets (net) (84,908 ) (131,435 ) (508,310 )
Other intangible assets 14 (66,269 ) (103,924 ) (300,865 )
Other assets (18,639 ) (27,511 ) (207,445 )
Gains (losses) on disposal of assets not classified as non-current assets held for sale 41 230,713 10,646 (25,476 )
Gains (losses) on non-current assets held for sale not classified as discontinued operations 42 77,463 9,843 181,734
Operating Income Before Tax 9,663,975 22,273,149 15,909,771
Income taxes 23 3,786,778 (5,641,699 ) (3,109,853 )
Consolidated Net income for the period 13,450,753 16,631,450 12,799,918
Profit attributable to the Parent 13,418,529 16,406,932 12,582,477
Profit attributable to non-controlling interests 26 32,224 224,518 217,441

Earnings Per Share (Brazilian Reais) 28

Basic earnings per 1,000 shares
Common shares 1,713.45 2,094.83 1,604.34
Preferred shares 1,884.80 2,304.32 1,764.78
Diluted earnings per 1,000 shares
Common shares 1,713.45 2,094.83 1,604.34
Preferred shares 1,884.80 2,304.32 1,764.78
Net Profit attributable - Basic
Common shares 6,511,367 7,965,194 6,108,349
Preferred shares 6,907,162 8,441,738 6,474,128
Net Profit attributable - Diluted
Common shares 6,511,367 7,965,194 6,108,349
Preferred shares 6,907,162 8,441,738 6,474,128

Weighted average shares outstanding (in thousands) - Basic
Common shares 3,800,140 3,802,303 3,807,386
Preferred shares 3,664,666 3,663,444 3,668,527
Weighted average shares outstanding (in thousands) - Diluted
Common shares 3,800,140 3,802,303 3,807,386
Preferred shares 3,664,666 3,663,444 3,668,527

Stockholders´ Equity Attributable to the Parent

Note Share
Capital Reserves Treasury
shares Option for acquisition of equity instrument Profit
attributed
to the parent Dividends and
remuneration Total stockholders´
equity Financial assets measured at fair value through other comprehensive income Defined benefits plan Adjustments investment abroad Gains and losses - cash flow hedge and investment Total Non-controlling
interests Total
stockholders'
Balance on december 31, 2018 57,000,000 30,440,288 (461,432 ) (1,017,000 ) 12,582,477 (6,600,000 ) 91,944,333 1,992,581 (3,071,040 ) 859,370 (659,774 ) 91,065,470 529,990 91,595,460
Total comprehensive income — — — — 16,406,932 — 16,406,932 1,352,702 (675,497 ) — 115,949 17,200,086 224,518 17,424,604
Net profit — — — — 16,406,932 — 16,406,932 — — — — 16,406,932 224,518 16,631,450
Other comprehensive income — — — — — — — 1,352,702 (675,497 ) — 115,949 793,154 — 793,154
Financial assets measured at fair value through other comprehensive income — — — — — — — 1,352,702 — — — 1,352,702 — 1,352,702
Employee benefit plan — — — — — — — — (675,497 ) — — (675,497 ) — (675,497 )
Gain and loss - cash flow and investment hedge — — — — — — — — — — 115,949 115,949 — 115,949
Appropriation of net income from prior years — 12,582,477 — — (12,582,477 ) — — — — — — — — -
Option to acquire own instrument (1,598,336 ) — 950,000 — — (648,336 ) — — — — (648,336 ) — (648,336 )
Dividends and interest on capital 27. b — (6,600,000 ) — — — (4,200,000 ) (10,800,000 ) — — — — (10,800,000 ) — (10,800,000 )
Share based compensation 39. b — 50,886 — — — — 50,886 — — — — 50,886 — 50,886
Treasury shares 27. d — — (219,703 ) — — — (219,703 ) — — — — (219,703 ) — (219,703 )
Treasury shares income 27. d — 5,796 — — — — 5,796 — — — — 5,796 — 5,796
Other — (3,618 ) — — — — (3,618 ) — — — — (3,618 ) (195,927 ) (199,545 )
Balance on december 31, 2019 57,000,000 34,877,493 (681,135 ) (67,000 ) 16,406,932 (10,800,000 ) 96,736,290 3,345,283 (3,746,537 ) 859,370 (543,825 ) 96,650,580 558,581 97,209,161

Consolidated Financial Statements | December 31, 2021 | F-8
Table of Contents

* Values expressed in thousands, except when indicated.

Stockholders´ Equity Attributable to the Parent

Note Share
Capital Reserves Treasury
Shares Option for Acquisition of Equity Instrument Profit
Attributed
to the Parent Dividends and
Remuneration Total Stockholders´
Equity Financial Assets Measured at Fair Value Through Other Comprehensive Income Defined Benefits plan Adjustments investment abroad Gains and losses - Cash flow hedge and Investment Total Non-controlling
Interests Total
Stockholders'
Equity
Balance on December 31, 2019 57,000,000 34,877,493 (681,135 ) (67,000 ) 16,406,932 (10,800,000 ) 96,736,290 3,345,283 (3,746,537 ) 859,370 (543,825 ) 96,650,580 558,581 97,209,161

Total comprehensive income —   —   —   —   13,418,529 —   13,418,529 (1,003,154 ) 555,624 —   105,159 13,076,158 32,224 13,108,382
Net profit —   —   —   —   13,418,529 —   13,418,529 —   —   —   —   13,418,529 32,224 13,450,753
Other comprehensive income —   —   —   —   —   —   —   (1,003,154 ) 555,624 —   105,159 (342,371 ) —   (342,371 )
Financial Assets Measured at Fair Value Through Other Comprehensive Income —   —   —   —   —   —   —   (1,003,154 ) —   —   —   (1,003,154 ) —   (1,003,154 )
Employee benefit plan —   —   —   —   —   —   —   —   555,624 —   —   555,624 —   555,624
Gain and loss - Cash flow and investment hedge —   —   —   —   —   —   —   —   —   —   105,159 105,159 —   105,159
Appropriation of net income from prior years —   16,406,932 —   —   (16,406,932 ) —   —   —   —   —   —   —   —   —
Option to Acquire Own Instrument —   (67,000 ) —   67,000 —   —   —   —   —   —   —   —   —   —
Dividends and interest on capital from prior years 27.b —   (10,800,000 ) —   —   —   10,800,000 —   —   —   —   —   —   —   —
Dividends and interest on capital 27.b —   —   —   —   —   (3,837,085 ) (3,837,085 ) —   —   —   —   (3,837,085 ) —   (3,837,085 )
Treasury shares 27.d —   —   (110,223 ) —   —   —   (110,223 ) —   —   —   —   (110,223 ) —   (110,223 )
Other —   (2,443 ) —   —   —   —   (2,443 ) —   —   —   —   (2,443 ) (277,920 ) (280,363 )
Balance on December 31, 2020 57,000,000 40,414,981 (791,358 ) —   13,418,529 (3,837,085 ) 106,205,067 2,342,129 (3,190,913 ) 859,370 (438,666 ) 105,776,987 312,885 106,089,872
Consolidated Financial Statements | December 31, 2021 | F-9
Table of Contents

* Values expressed in thousands, except when indicated.

Stockholders´ Equity Attributable to the Parent

Note Share
Capital Reserves Treasury
Shares Option for Acquisition of Equity Instrument Profit
Attributed
to the Parent Dividends and
Remuneration Total Stockholders´
Equity Financial Assets Measured at Fair Value Through Other Comprehensive Income Defined Benefits plan Adjustments investment abroad Gains and losses - Cash flow hedge and Investment Total Non-controlling
Interests Total
Stockholders'
Equity
Balance on December 31, 2020 57,000,000 40,414,981 (791,358 ) —   13,418,529 (3,837,085 ) 106,205,067 2,342,129 (3,190,913 ) 859,370 (438,666 ) 105,776,987 312,885 106,089,872

Total comprehensive income —   —   —   —   15,528,052 —   15,528,052 (2,389,705 ) 266,692 —   (855,335 ) 12,549,704 31,272 12,580,976
Net profit —   —   —   —   15,528,052 —   15,528,052 —   —   —   —   15,528,052 31,272 15,559,324
Other comprehensive income —   —   —   —   —   —   —   (2,389,705 ) 266,692 —   (855,335 ) (2,978,348 ) —   (2,978,348 )
Financial Assets Measured at Fair Value Through Other Comprehensive Income —   —   —   —   —   —   —   (2,389,705 ) —   —   —   (2,389,705 ) —   (2,389,705 )
Employee benefit plan —   —   —   —   —   —   —   —   266,692 —   —   266,692 —   266,692
Gain and loss - Cash flow and investment hedge —   —   —   —   —   —   —   —   —   —   (855,335 ) (855,335 ) —   (855,335 )
Appropriation of net income from prior years —   13,418,529 —   —   (13,418,529 ) —   —   —   —   —   —   —   —   —
Spin-Off 27.a & 27.c (2,000,000 ) (1,167,674 ) —   —   —   —   (3,167,674 ) —   —   —   —   (3,167,674 ) —   (3,167,674 )
Dividends and interest on capital from prior years 27.b —   (3,837,085 ) —   —   —   3,837,085 —   —   —   —   —   —   —   —
Dividends and interest on capital 27.b —   —   —   —   —   (9,649,000 ) (9,649,000 ) —   —   —   —   (9,649,000 ) —   (9,649,000 )
Treasury shares 27.d —   —   78,319 —   —   —   78,319 —   —   —   —   78,319 —   78,319
Other —   51,810 —   —   —   —   51,810 —   —   —   —   51,810 (9,808 ) 42,001
Balance on December 31, 2021 55,000,000 48,880,561 (713,039 ) —   15,528,052 (9,649,000 ) 109,046,574 (47,576 ) (2,924,221 ) 859,370 (1,294,001 ) 105,640,146 334,349 105,974,495
The accompanying Notes are an integral part of these consolidated financial ~~statements,~~
statements.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-6~~F-10
~~Table of Contents~~
Table of Contents

* Values expressed in thousands, except when indicated.

Consolidated ~~Statements~~Statement of ~~Comprehensive Income~~Cash Flows
Note 2021 2020 2019
1. Cash Flows From Operating Activities
Consolidated profit for the year 15,559,324 13,450,753 16,631,450
Adjustments to profit (13,898,808 ) (31,268,076 ) 14,654,879
Depreciation of tangible assets 12.a 1,850,780 2,039,805 1,870,836
Amortization of intangible assets 14 583,141 539,322 521,021
Impairment losses on other assets (net) 165,799 84,908 131,435
Provisions and impairment losses on financial assets (net) 19,292,151 19,106,735 17,051,491
Net gains (losses) on disposal of tangible assets, investments and non-current assets held for sale 41&42 (32,512 ) (308,176 ) (20,489 )
Income from companies accounted by the equity method 11.a (144,184 ) (112,261 ) (149,488 )
Changes in deferred tax assets and liabilities 23.d 2,265,227 (8,232,869 ) (2,912,279 )
Monetary adjustment of escrow deposits (433,629 ) (219,447 ) (574,399 )
Recoverable taxes (217,820 ) (120,220 ) (182,469 )
Effects of changes in foreign exchange rates on cash and cash equivalents —   —   99
Effects of changes in foreign exchange rates on assets and liabilities (35,669,654 ) (44,250,466 ) (2,609,679 )
Other (1,558,107 ) 204,593 1,528,800
Net (increase) decrease in operating assets 22,502,791 (139,525,961 ) (42,332,510 )
Financial assets measured at fair value through profit or loss 42,041,624 (26,198,034 ) 11,080,730
Financial assets measured at fair value through profit or loss held for trading 50,833,925 (43,070,163 ) 11,831,411
Non-trading financial assets mandatorily measured at fair value through profit or loss (370,442 ) (328,267 ) 746,024
Financial assets measured at fair value through other comprehensive income 4,094,548 (14,905,798 ) (8,835,552 )
Financial assets measured at amortized cost (86,179,125 ) (80,800,357 ) (60,461,392 )
Other assets 12,082,261 25,776,658 3,306,269
Net increase (decrease) in operating liabilities (12,821,626 ) 200,930,390 41,219,165
Financial liabilities measured at fair value through profit or loss held for trading (38,067,617 ) 33,203,455 (4,874,323 )
Financial liabilities measured at fair value through profit or loss 421,317 1,516,522 3,373,359
Financial liabilities at amortized cost 30,512,246 165,920,919 40,961,046
Other liabilities (5,687,572 ) 289,494 1,759,083
Tax paid 23.a (4,534,538 ) (1,269,150 ) (5,301,184 )
Total net cash flows from operating activities (1) 6,807,143 42,317,956 24,871,800

2. Cash Flows From Investing Activities
Investments (2,679,473 ) (2,019,278 ) (3,500,499 )
Acquisition of subsidiary, less net cash in the acquisition (13,746 ) (13,570 ) (746 )
Tangible assets 12.a (1,162,774 ) (1,235,923 ) (1,924,783 )
Intangible assets (1,202,416 ) (769,785 ) (1,519,725 )
Corporate Restructuring (300,537 ) —   (55,245 )
Disposal 752,781 856,181 987,164
Tangible assets 12.a 37,576 47,096 29,911
Non - current assets held for sale 563,205 663,067 808,980
Dividends and interest on capital received 152,000 146,018 148,273
Total net cash flows from investing activities (2) (1,926,692 ) (1,163,097 ) (2,513,335 )

3. Cash Flows From Financing Activities
Acquisition of own shares 27.d 78,319 (110,223 ) (219,703 )
Issuance of Instruments Eligible to Compose Capital
19 5,500,000 —   —
Issuance of  other long-term financial liabilities 18 101,784,961 60,047,656 53,017,039
Dividends and interest on capital paid (9,907,319 ) (10,280,430 ) (6,953,718 )
Payments of other long-term financial liabilities 18 (97,220,580 ) (82,900,914 ) (61,914,716 )
Payments of subordinated liabilities 19 —   —   (9,885,607 )
Payments of interest of Debt Instruments Eligible to Compose Capital 19 (911,306 ) (914,645 ) (328,892 )
Net increase in non-controlling interests 17,415 6,842 (14,266 )
Capital Increase in Subsidiaries, by Non-Controlling Interests —   —   100,000
Total net cash flows from financing activities (3) (658,510 ) (34,151,714 ) (26,199,863 )
Exchange variation on Cash and Cash Equivalents (4) —   —   (99 )
Net Increase in Cash (1+2+3+4) 4,221,941 7,003,145 (3,841,497 )
Cash and cash equivalents at beginning of year 28,446,808 21,443,663 25,285,160
Cash and cash equivalents at end of year 32,668,749 28,446,808 21,443,663
The accompanying Notes are an integral part of these consolidated financial statements.

2020 2019 2018

Consolidated Profit for the Year 13,450,753 16,631,450 12,799,918

Other Comprehensive Income that will be reclassified subsequently to profit or loss when specific conditions are met: (897,996 ) 1,468,651 558,967
Financial Assets Measured At Fair Value Through Other Comprehensive Income (1,003,155 ) 1,352,702 475,809
Financial Assets Measured At Fair Value Through Other Comprehensive Income (1,976,013 ) 2,926,285 388,481
Gains (Losses) on financial assets previously classified as available-for-sale and reclassified to the income statement (net) - - 7,982
Gains (Losses) on financial assets previously classified as available-for-sale and reclassified to reserves (net) - - 296,802
Income taxes 972,858 (1,573,583 ) (217,456 )
Cash flow hedges 105,159 115,949 83,158
Valuation adjustments 168,015 270,119 140,811
Amounts transferred to income statement - 6,767 (6,767 )
Income taxes (62,856 ) (160,937 ) (50,886 )

Other Comprehensive Income that will not be Reclassified to net Income: 555,624 (675,497 ) (366,660 )
Defined benefits plan 555,624 (675,497 ) (366,660 )
Defined benefits plan 1,110,034 (1,358,578 ) (418,768 )
Income taxes (554,410 ) 683,081 52,108

Total Comprehensive Income 13,108,383 17,424,604 12,992,225

Attributable to the parent 13,076,159 17,200,086 12,774,784
Attributable to non-controlling interests 32,224 224,518 217,441
Total Comprehensive Income 13,108,383 17,424,604 12,992,225
~~The accompanying Notes are an integral part of these consolidated financial statements,~~

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-7~~F-11
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Cash and cash equivalents components Note 2021 2020 2019
Cash 4 16,657,201 20,148,725 20,127,364
Loans and other 5 16,011,548 8,298,083 1,316,299
Total of cash and cash equivalents 32,668,749 28,446,808 21,443,663

Non-cash transactions
Foreclosures loans and other assets transferred to non-current assets held for sale 10 235,904 445,173 735,864
Dividends and interest on capital declared but not paid 27.b 249,000 1,177,085 7,800,000
Supplemental information
Interest received 77,987,308 62,774,940 72,841,060
Interest paid (26,668,842 ) (18,332,228 ) (28,519,953 )

~~Consolidated Statements of Changes in Stockholders' Equity~~
Stockholders´ Equity Attributable to the Parent
Note Share
Capital Reserves Treasury
Shares Option for Acquisition of Equity Instrument Profit
Attributed
to the Parent Dividends and
Remuneration Total Stockholders´
Equity Financial Assets Measured At Fair Value Through Other Comprehensive Income Defined Benefits plan Translation adjustments investment abroad Gains and losses - Cash flow hedge and Investment Total Non-controlling
Interests Total
Stockholders'
Equity
Balance at December 31, 2017 57,000,000 27,721,428 (148,440) (1,017,000) 8,924,064 (6,300,000) 86,180,052 1,516,772 (2,704,380) 859,370 (742,932) 85,108,882
436,894
85,545,776

Total comprehensive income - - - - 12,582,477 - 12,582,477 475,809 (366,660) - 83,158 12,774,784 217,441 12,992,225
Net profit - - - - 12,582,477 - 12,582,477 - - - - 12,582,477 217,441 12,799,918
Other comprehensive income - - - - - - - 475,809 (366,660) - 83,158 192,307 - 192,307
Financial Assets Measured At Fair Value Through Other Comprehensive Income - - - - - - - 475,809 - - - 475,809 - 475,809
Pension plans - - - - - - - - (366,660) - - (366,660) - (366,660)
Gain and loss - Cash flow and investment hedge - - - - - - - - - - 83,158 83,158 - 83,158
Appropriation of net income from prior years - 8,924,064 - - (8,924,064) - - - - - - - - -
Option to Acquire Own Instrument 106,440 - - - - 106,440 - - - - 106,440 (106,440) -
Dividends and interest on capital 27.b - (6,300,000) - - - (300,000) (6,600,000) - - - - (6,600,000) - (6,600,000)
Share based compensation 39.b - (17,854) - - - - (17,854) - - - - (17,854) - (17,854)
Treasury shares 27.d - - (312,305) - - - (312,305) - - - - (312,305) - (312,305)
Capital restructuring 27.d - - (687) - - - (687) - - - - (687) - (687)
Treasury shares income 27.d - (15,868) - - - - (15,868) - - - - (15,868) - (15,868)
Other - (40,517) - - - - (40,517) - - - - (40,517) 44,690 4,173
Balance at December 31, 2018 57,000,000 30,377,693 (461,432) (1,017,000) 12,582,477 (6,600,000) 91,881,738 1,992,581 (3,071,040) 859,370 (659,774) 91,002,875 592,585 91,595,460

~~Consolidated Financial Statements | December 31, 2020 | F-8~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Stockholders´ Equity Attributable to the Parent
Note Share
Capital Reserves Treasury
Shares Option for Acquisition of Equity Instrument Profit
Attributed
to the Parent Dividends and
Remuneration Total Stockholders´
Equity Financial Assets Measured At Fair Value Through Other Comprehensive Income Defined Benefits plan Translation adjustments investment abroad Gains and losses - Cash flow hedge and Investment Total Non-controlling
Interests Total
Stockholders'
Equity
Balance at December 31, 2018 57,000,000 30,377,693 (461,432) (1,017,000) 12,582,477 (6,600,000) 91,881,738 1,992,581 (3,071,040) 859,370 (659,774) 91,002,875 592,585 91,595,460

Total comprehensive income - - - - 16,406,932 - 16,406,932 1,352,702 (675,497) - 115,949 17,200,086 - 17,200,086
Net profit - - - - 16,406,932 - 16,406,932 - - - - 16,406,932 - 16,406,932
Other comprehensive income - - - - - - - 1,352,702 (675,497) - 115,949 793,154 - 793,154
Financial Assets Measured At Fair Value Through Other Comprehensive Income - - - - - - - 1,352,702 - - - 1,352,702 - 1,352,702
Pension plans - - - - - - - - (675,497) - - (675,497) - (675,497)
Gain and loss - Cash flow and investment hedge - - - - - - - - - - 115,949 115,949 - 115,949
Appropriation of net income from prior years - 12,582,477 - - (12,582,477) - - - - - - - - -

Option to Acquire Own Instrument - (1,598,336) - 950,000 - - (648,336) - - - - (648,336) - (648,336)
Dividends and interest on capital 27.b - (6,600,000) - - - (4,200,000) (10,800,000) - - - - (10,800,000) - (10,800,000)
Share based compensation 39.b - 50,886 - - - - 50,886 - - - - 50,886 - 50,886
Treasury shares 27.d - - (219,703) - - - (219,703) - - - - (219,703) - (219,703)
Capital restructuring 27.d - - - - - - - - - - - - - -
Treasury shares income 27.d - 5,796 - - - - 5,796 - - - - 5,796 - 5,796
Other - 58,976 - - - - 58,976 - - - 58,976 (34,004) 24,972
Balance at December 31, 2019 57,000,000 34,877,492 (681,135) (67,000) 16,406,932 (10,800,000) 96,736,289 3,345,283 (3,746,537) 859,370 (543,825) 96,650,580 558,581 97,209,161

~~Consolidated Financial Statements | December 31, 2020 | F-9~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

Stockholders´ Equity Attributable to the Parent
Non-controlling
Interests
Total
Stockholders'
Equity
Note Share
Capital Reserves Treasury
Shares Option for Acquisition of Equity Instrument Profit
Attributed
to the Parent Dividends and
Remuneration Total Stockholders´
Equity Financial Assets Measured At Fair Value Through Other Comprehensive Income Defined Benefits plan Translation adjustments investment abroad Gains and losses - Cash flow hedge and Investment Total
Balance at December 31, 2019 57,000,000 34,877,492 (681,135) (67,000) 16,406,932 (10,800,000) 96,736,289 3,345,283 (3,746,537) 859,370 (543,825) 96,650,580 558,581 97,209,161

Total comprehensive income - - - - 13,418,529 - 13,418,529 (1,003,154) 555,624 - 105,159 13,076,159 32,224 13,108,383
Net profit - - - - 13,418,529 - 13,418,529 - - - - 13,418,529 32,224 13,450,753
Other comprehensive income - - - - - - - (1,003,154) 555,624 - 105,159 (342,371) - (342,371)
Financial Assets Measured At Fair Value Through Other Comprehensive Income - - - - - - - (1,003,154) - - - (1,003,154) - (1,003,154)
Pension plans - - - - - - - - 555,624 - - 555,624 - 555,624
Gain and loss - Cash flow and investment hedge - - - - - - - - - - 105,159 105,159 - 105,159
Appropriation of net income from prior years - 16,406,932 - - (16,406,932) - - - - - - - - -

Own Instrument Acquisition Option - (67,000) - 67,000 - - - - - - - - - -
Dividends and interest on capital from prior years 27.b - (10,800,000) - - - 10,800,000 - - - - - - - -
Dividends and interest on capital 27.b& 47 - - - - - (3,837,085) (3,837,085) - - - - (3,837,085) - (3,837,085)
Treasury shares 27.d - - (110,223) - - - (110,223) - - - - (110,223) - (110,223)
Other - (2,443) - - - - (2,443) - - - - (2,443) (277,920) (280,363)
Balance at December 31, 2020 57,000,000 40,414,981 (791,358) - 13,418,529 (3,837,085) 106,205,067 2,342,129 (3,190,913) 859,370 (438,666) 105,776,987 312,885 106,089,872

~~The accompanying Notes are an integral part of these consolidated financial statements,~~
~~Consolidated Financial Statements | December 31, 2020 | F-10~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
~~Consolidated Cash Flow Statements~~
Note 2020 2019 2018
1, Cash Flows From Operating Activities
Consolidated profit for the year 13,450,753 16,631,450 12,799,918
Adjustments to profit (31,268,076 ) 14,654,879 14,765,404
Depreciation of tangible assets 12 2,039,805 1,870,836 1,216,704
Amortization of intangible assets 14 539,322 521,021 523,255
Impairment losses on other assets (net) 84,908 131,435 508,310
Provisions and Impairment losses on financial assets (net) 19,106,735 17,051,491 14,713,039
Net Gains (losses) on disposal of tangible assets, investments and non-current assets held for sale 41&42 (308,176 ) (20,489 ) (156,258 )
Income from companies accounted by the equity method 11 (112,261 ) (149,488 ) (65,958 )
Changes in deferred tax assets and liabilities 23, d (8,232,869 ) (2,912,279 ) (1,594,440 )
Monetary Adjustment of Escrow Deposits (219,447 ) (574,399 ) (664,003 )
Recoverable Taxes (120,220 ) (182,469 ) (222,402 )
Effects of Changes in Foreign Exchange Rates on Cash and Cash Equivalents —   99 —
Effects of Changes in Foreign Exchange Rates on Assets and Liabilities (44,250,466 ) (2,609,679 ) 1,173,757
Other 204,593 1,528,800 (666,600 )
Net (increase) decrease in operating assets (137,901,127 ) (42,332,510 ) (79,913,313 )
Balance with the Brazilian Central Bank (21,361 ) 855 16,629,126
Financial Assets Measured At Fair Value Through Profit Or Loss (26,198,034 ) 11,080,730 (8,791,116 )
   Other Financial Assets Measured At Fair Value Through Profit Or Loss —   —   1,692,154
Financial Assets Measured At Fair Value Through Profit Or Loss Held for Trading (41,445,329 ) 11,831,411 (16,412,738 )
Non-Trading Financial Assets Mandatorily Measured at Fair Value Through Profit or Loss (328,267 ) 746,024 (419,851 )
Financial Assets Measured At Fair Value Through Other comprehensive Income (14,905,798 ) (8,835,552 ) (4,323,459 )
Financial Assets Measured At Amortized Cost (80,778,996 ) (60,462,247 ) (75,906,801 )
Other assets 25,776,658 3,306,269 7,619,372
Net increase (decrease) in operating liabilities 199,305,556 41,219,165 64,293,936
Financial Liabilities Measured At Fair Value Through Profit Or Loss held for trading 31,578,621 (4,874,323 ) 1,616,446
Financial Liabilities Measured At Fair Value Through Profit Or Loss 1,516,522 3,373,359 1,946,056
Financial liabilities at amortized cost 165,920,919 40,961,046 57,833,935
Other liabilities 289,494 1,759,083 2,897,499
Tax paid 23, a (1,269,150 ) (5,301,184 ) (3,668,571 )
Total net cash flows from operating activities (1) 42,317,956 24,871,800 8,277,374

2, Cash Flows From Investing Activities
Investments (2,019,278 ) (3,500,499 ) (3,157,796 )
Capital increase in Investments in associates and Joint Ventures 11 —   —   (36,051 )
Acquisition of subsidiary, less net cash in the acquisition (13,570 ) (746 ) (111,224 )
Tangible assets 12, a (1,235,923 ) (1,924,783 ) (1,394,299 )
Intangible assets (769,785 ) (1,519,725 ) (1,616,222 )
Non - current assets held for sale 10 —   (55,245 ) —
Disposal 856,181 987,164 797,716
Tangible assets 12&41 47,096 29,911 122,009
Non - current assets held for sale 10 663,067 808,980 563,607
Dividends and interest on capital received 146,018 148,273 112,100
Total net cash flows from investing activities (2) (1,163,097 ) (2,513,335 ) (2,360,078 )

3, Cash Flows From Financing Activities
Acquisition of own shares 27 d (110,223 ) (219,703 ) (312,305 )
Issuance of Debt Instruments Eligible to Compose Capital 19 —   —   9,347,750
Issuance of  other long-term financial liabilities 18 60,047,656 53,017,039 73,765,081
Dividends and interest on capital paid (10,280,430 ) (6,953,718 ) (6,076,073 )
Payments of other long-term financial liabilities 18 (82,900,914 ) (61,914,716 ) (78,903,009 )
Payments of subordinated liabilities 19 —   (9,885,607 ) (544,566 )
Payments of interest of Debt Instruments Eligible to Compose Capital 19 (914,645 ) (328,892 ) (683,783 )
Net increase in non-controlling interests 26 6,842 (14,266 ) 55,869
Capital Increase in Subsidiaries, by Non-Controlling Interests —   100,000 48,000
Total net cash flows from financing activities (3) (34,151,714 ) (26,199,863 ) (3,303,036 )
Exchange variation on Cash and Cash Equivalents (4) —   (99 ) —
Net Increase in Cash (1+2+3+4) 7,003,145 (3,841,497 ) 2,614,258
Cash and cash equivalents at beginning of year 21,443,663 25,285,160 22,670,902
Cach and cash equivalentes at end of year 28,446,808 21,443,663 25,285,160
~~The accompanying notes are an integral part of these consolidated financial statements.~~
~~Consolidated Financial Statements | December 31, 2020 | F-11~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

Notes
2020 2019 2018
Cash components and cash equivalents
Central Bank cash and reserves 4 20,148,725 20,127,364 19,463,587
Loans and other amounts 5 8,298,083 1,316,299 5,821,573
Total cash and cash equivalents 28,446,808 21,443,663 25,285,160

Non-monetary transactions
Loan foreclosures and other assets transferred to non-current assets held for sale 10 445,173 735,864 785,139
Dividends and interest on equity declared but not paid 27. b 665,000 7,800,000 4,800,000

Additional information
Interest received 35,405,636 71,777,476 70,831,205
Interest paid (13,973,268 ) (27,654,965 ) (29,796,455 )

The accompanying Notes are an integral part of these consolidated financial statements.

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* Values expressed in thousands, except when indicated.

1. Introduction, basis of presentation of the consolidated financial statements and other information

a) Introduction

Banco Santander (Brasil) S.A. (Banco Santander or Bank), directly and indirectly controlled by Banco Santander, S.A., headquartered in Spain (Banco Santander Spain), is the lead institution of the Financial and Prudential Conglomerates (Conglomerate Santander) before the Central Bank of Brazil (Bacen), established as a joint-stock corporation, with head office at Avenida Presidente Juscelino Kubitschek, 2041 and 2235 – Building A - Vila Olímpia, in the City of São Paulo, State of São Paulo. Banco Santander operates as a multiple service bank, conducting its operations by means of its commercial, investment, loans, mortgage loans, leasing and foreign exchange portfolios. Through its subsidiaries, also operates in the ~~payment institution, consortium~~segments of payments, management of shares’ club, securities ~~brokerage,~~and insurance brokerage operations, premium bonds, consumer finance, payroll loans, digital platforms, benefit vouchers, management and recovery of non-performing loans and ~~non-performing credit management, capitalization and~~private pension ~~markets private, food and food vouchers, food and other administration.~~products. The operations are conducted inwithin the context of a group of institutions that ~~operate in an integrated manner~~operates in the financial ~~market.~~market on an integrated basis. The corresponding benefits and costs ~~corresponding to the~~of providing services ~~provided~~ are absorbed between them and are ~~realized~~conducted in the normal course of business and ~~commuting~~under commutative conditions.

The Board of Directors authorized the issuance of the Financial Statements for the year ended on December 31, ~~2020,~~2021, at the meeting held on February ~~25, 2021.~~24, 2022.

These Financial Statements and the accompanying documents were the subject of an unqualified report of the Independent Auditors and a recommendation for approval issued by the Company's Audit Committee and a favorable opinion of the Company's Fiscal Council.

b) Basis of presentation of the condensed consolidated financial statements

The ~~Consolidated Financial Statements~~consolidated financial statements have been prepared in accordance with the standards of the International Financial Reporting Standards (IFRS) issued by the International ~~Accounting~~Accountant Standards Board (IASB), and interpretations issued by the ~~IFRSs~~IFRS Interpretations Committee (current name International Financial Reporting Interpretations Committee - IFRIC). All relevant information specifically related to the financial statements of Banco Santander, and only in relation to these, are being evidenced, and correspond to the information used by Banco Santander in its management.

As described in FN 8 a.1), the comparative information for prior periods was adjusted to reflect the remeasurement of the commercialization of electric energy operation.
c) Other information

c.1) Adoption of new standards and interpretations

The following standard changes ~~to standards~~ were adopted for the first ~~adopted~~time for the year beginning January 1, ~~2020:~~2021:

·● ~~Material definition: amendments to IAS 1 / CPC 26 “Presentation of the Financial Statements” and IAS 8 / CPC 23 “Accounting Policies, Change in Estimates and Error Correction”~~
· ~~Business definition: changes to IFRS 3 / CPC 15 “Business Combination”~~
· ~~IBOR reform: amendments~~Amendments to IFRS 9, ~~/ CPC 48,~~ IAS 39, ~~/ CPC 38~~IFRS 7 “Financial Instruments”, IFRS 4 “Insurance Contracts” and IFRS ~~7 / CPC 40 - "Financial instruments"~~16 “Leases”:
The changes provided for in Phase 2 of the IBOR reform address issues that may affect the Financial Statements during the reform of a benchmark interest rate, including the effects of changes in contractual cash flows or hedging relationships arising from the substitution of a rate for a alternative reference rate (replacement issues). The effective date of application of this change was January 1, 2021.
· ~~Revised Conceptual Framework for Financial Reporting~~
· IBOR reform: changes to IFRS9, IAS39 and IFRS 7 - In September 2019, the IASB changed its IFRS 9 and IAS 39 standards as well as the related disclosure standard, IFRS 7, on some requirements for hedge accounting. The amendments are due to be implemented on January 1, 2020. The amendments modify some specific requirements on hedge accounting in order to provide assurance on the potential effects of the uncertainty caused by the IBOR reform project.

The Group's contracts linked to LIBOR were reviewed between the parties and updated by the respective alternative rates disclosed, plus a spread. Management has verified that the updated cash flows are economically equivalent to the original ones, so that there were no material impacts related to this replacement.
Therefore, the implementations above ~~did not have a~~had no significant impact on these Financial Statements.

Rules and interpretations that will come into ~~force~~effect after December 31, ~~2020~~2021

~~As of~~On the date of preparation of these consolidated financial statements, the following ~~rules~~standards that have an effective adoption date after January 1, ~~2021~~2022 and have not yet been adopted by the Bank are:

~~Consolidated Financial Statements | December 31, 2020 | F-13~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
·● Amendments to IFRS 9, IAS 39 and IFRS 7 "Financial Instruments", IFRS 4 "Insurance Contracts"and IFRS 16 “Leases”: the changes provided for in Phase 2 of the IBOR reform address issues that may affect the financial statements during the reform of a reference interest rate, including the effects of changes in contractual cash flows or hedging relationships resulting from the replacement of a rate with an alternative reference rate (substitution issues). The effective date of application of this amendment is 1st. January 2021. The Group's contracts linked to LIBOR are being reviewed between the parties and will be updated by the respective alternative rates disclosed, plus a spread. Management estimates that the updated cash flows will be economically equivalent to the original, and does not expect material impacts related to this replacement.
· Amendment to IAS 16 "Property, plant and equipment": in May 2020, the IASB issued an amendment that prohibits an entity from deducting from the cost of property, plant and equipment the amounts received from the sale of items produced while the asset is being prepared for its intended use. Such revenues and related costs must be recognized in the income for the year. The effective date of application of this amendment is January 1, 2022.
· Amendment to IAS 37 ~~"Provision,~~“Provision, Contingent Liabilities and Contingent ~~Assets"~~Assets”: in May 2020, the IASB issued this amendment to clarify that, for the purpose of assessing whether a contract is onerous, the cost of ~~complying with the~~ contract performance includes the incremental costs of ~~compliance of this~~performance contract and an allocation of other costs that are directly related to ~~the fulfillment of it.~~its performance. The effective date of application of this ~~amendment~~change is the 1st. January 1, 2022.

·● IFRS 17 - In May 2017, the IASB issued the IFRS for insurance contracts that aims to replace IFRS 4. ~~IFRS 17 has its~~The implementation date of IFRS 17 is January 1, 2023. This standard ~~aims~~is intended to demonstrate greater transparency and information useful ~~information~~ in ~~the~~ financial statements, one of the main changes being the recognition of ~~profits~~earnings as the measure of delivery of insurance services, ~~are delivered,~~ in order to assess the performance of insurers over time. Banco Santander is evaluating the possible impacts when adopting the standard.
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* Values expressed in thousands, except when indicated.

·● Amendment to IFRS 3 “Business ~~Combination”~~Combinations”: issued in May 2020, with the aim of replacing the references from the ~~old~~older version of the conceptual framework to the ~~most recent~~newer one. The amendment to IFRS 3 is effective ~~as of~~from January 1, 2022.

·● Annual improvements -– 2018-2020 cycle: in May 2020, the IASB issued the following ~~changes~~amendments as part of the annual improvement process, applicable from ~~the 1st.~~ January 1, 2022:

(i) IFRS 9 - "Financial Instruments" - clarifies which ~~rates~~fees should be included in the 10% test for ~~the write-off of~~writing off financial liabilities.

(ii) IFRS 16 - "Leases" - amendment to example 13 in order to exclude the example of lessor payments related to improvements in the leased property.

(iii) IFRS 1 "Initial Adoption of International Financial Reporting Standards" - simplifies the application of said standard by a subsidiary that adopts IFRS for the first time after its parent, ~~company,~~ in relation to ~~the measurement of~~measuring the accumulated amount of exchange rate variations.
● Classification of Liabilities, amendments to IAS 1 “Presentation of Financial Statements”, considering non-current liabilities those in which the entity has the possibility of deferring payment for more than 12 months from the closing date of the reporting period. The amendments to IAS 1 are effective as of January 1, 2023.
● Modification of IAS 8 – Presentation of Financial Statements and IAS 8 Accounting Policies: changes in accounting estimates and errors, which use a consistent definition of materiality for the purpose of making material judgements and deciding on the information to be included in the financial statements. The amendments to IAS 1 are effective as of January 1, 2023.
● Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 1 January 2023: The amendments to IAS 12 Income Taxes require companies to recognise deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities. The amendments to IAS 12 are effective as of January 1, 2023.

There are no other IFRS standards or IFRIC interpretations that have not yet come into ~~force~~effect that could have a ~~significant~~material impact on the Bank's financial statements.

c.2) Estimates used

The consolidated results and the calculation of consolidated equity are impacted by the accounting policies, assumptions, estimates and measurement methods used by the Bank's directors in the preparation of interim consolidated financial statements. The Bank makes estimates and assumptions that affect the reported amounts of assets and liabilities of future periods. All estimates and assumptions required, in accordance with ~~IFRSs,~~IFRS, are the ~~management's~~ best ~~estimate~~estimates in accordance with the applicable standard.

~~In the consolidated~~
Consolidated financial ~~statements,~~management, as estimates are made by ~~management~~the note of the Bank and the consolidated entities in order to quantify certain assets, liabilities, ~~revenues~~income and expenses and disclosures of explanatory notes.

c.2.1) Critical estimates

The critical estimates and assumptions that have the most significant impact on the accounting balances of certain assets, liabilities, revenues and expenses and in the disclosure of explanatory notes, are described below:

i. ~~Valuation of the fair~~Fair value assessment of certain financial instruments
Financial instruments are initially recognized at fair value and those that are not measured at fair value through profit or loss are adjusted for transaction costs.

Financial assets and liabilities are subsequently measured, at the end of each period, using valuation techniques. This calculation is based on assumptions, which ~~take into account the management's~~consider Management's judgment based on information and market conditions existing at the balance sheet date.

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~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Banco Santander classifies ~~the measurements at~~ fair value measurements using the ~~hierarchy of~~ fair value hierarchy that reflects the model used in the measurement process, segregating ~~the~~ financial instruments ~~between~~into Levels I, II or III.

~~Additional details are in notes~~Notes 2.e ~~and~~& 46.c8 of the ~~consolidated financial statements~~Consolidated Financial Statements as of December 31, ~~2020, which~~2021 present the accounting practice and sensitivity analysis for the Financial ~~Instruments.~~Instruments, respectively.

ii. ~~Provisions~~Allowance for loan losses ~~on credits for~~due to impairment

The carrying amount of non-recoverable financial assets is adjusted ~~through the~~by recording of a provision for ~~loss due~~impairment chargeable to “Losses on financial assets (net) -– Financial assets measured at amortized cost” in the consolidated ~~income statement.~~statement of income. The reversal of previously recorded losses is recognized in the consolidated income statement in the period in which the impairment loss decreases and can be objectively related to a recovery event.
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* Values expressed in thousands, except when indicated.

To individually measure the impairment loss onof loans assessed for impairment, the Bank considers the counterparty's conditions, ~~of the counterparty,~~ such as its economic and financial situation, level of indebtedness, ~~ability~~capacity to generate income, cash flow, ~~management,~~administration, corporate governance and quality of internal controls, payment history, industry experience, contingencies and credit limits, as well as asset characteristics, ~~of assets,~~ such as their nature and purpose, type, sufficiency and guarantees of liquidity level and total credit value , and also based on ~~the~~ historical impairment experience ~~of impairment~~ and other circumstances known at the time of the valuation.

To measure the impairment loss onof loans collectively assessed ~~collectively~~ for impairment, the Bank separates financial assets into groups ~~taking into account~~considering the characteristics and similarities of credit risk, that is, according to the segment, type of assets, guarantees and other factors associated with ~~the~~ historical impairment experience ~~of impairment~~ and other circumstances known at the time of the valuation.

~~iii. IFRS 9 -~~Notes 2.h & 46.b2 to the Consolidated Financial ~~Instruments:~~ ~~issued in its final format in July 2014,~~Statements as of December 31, 2021, present the International Accounting Standards Board (IASB) approved IFRS 9, which replaced IAS 39 Financial Instruments, in accordance with the guidelines defined by the G20 by finance ministers of the world's 20 largest economies) in April 2009, establishing requirementsaccounting practice and measures for ~~the recognition and measurement of financial instruments. This standard was adopted from January 1, 2018.~~measuring credit risk, respectively.

~~iv. Impairment~~
~~The Bank recognizes adjustments for expected credit losses with respect to the following financial instruments that are not measured at fair value through profit or loss:~~
~~- financial assets that are debt instruments;~~
~~- amounts receivable from leasing;~~
~~- financial guarantee contracts issued; and~~
~~- loan commitments issued.~~
~~No impairment loss is recognized in equity instruments.~~
The Bank measures the adjustments for losses at an amount equal to the expected credit losses during the expected life, except for the instruments below, for which they are recorded as expected credit losses in 12 months:
~~- debt instruments that present a low credit risk at the closing date; and~~
~~- other financial instruments (except lease receivables) in which the credit risk has not increased substantially since its initial recognition.~~
~~Adjustments for losses on amounts receivable from leasing are always measured at an amount equal to the expected credit losses during their useful lives.~~
~~Measurement of expected credit losses~~
~~The expected credit losses are an estimate weighted by the probability of credit losses. They are measured as follows:~~
- financial assets not subject to impairment at the closing date: as the present value of all cash shortfalls, that is, the difference between the cash flows due to the entity under the contract and the cash flows that the Bank expects to receive;
~~- financial assets subject to impairment at the closing date: as the difference between the gross book value and the present value of estimated future cash flows;~~
~~- loan commitments: as the present value of the difference between the contractual cash flows due to the Bank if the commitment is used in full and the cash flows that the Bank expects to receive; and~~
~~- financial guarantee contracts: payments expected to reimburse the holder, less any amounts that the Bank expects to recover.~~
~~Modified assets~~
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced by a new asset due to the debtor's financial difficulties, it is necessary to assess whether the financial asset should be written off and expected credit losses are measured as follows:
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* Values expressed in thousands, except when indicated.
- If the expected restructuring does not result in a decrease in the existing asset, the expected cash flows from and the modified financial asset are included in the calculation of the cash shortfalls of the existing asset.
- If the expected restructuring results in a write-off of the existing asset, the expected fair value of the new asset is treated as the final cash flow of the existing financial asset at the time of its write-off.
This amount is included in the calculation of cash shortfalls arising from the existing financial asset discounted from the estimated write-off date until the closing date, using the original effective interest rate of the existing financial asset.
~~Transition:~~ As permitted by the transitional provisions of IFRS 9, the Group chose not to restate comparative figures, upon initial adoption in January 1, 2018. Any adjustments in the carrying amounts of financial assets and liabilities at the transition date were recognized in the initial net income and other reserves of the current period. The Group also opted to continue applying the hedge accounting requirements of IAS 39 in adopting IFRS 9.
~~Determination of significant increases in credit risk~~
On each balance sheet calculation date, the Bank assesses whether financial assets recorded at amortized cost and debt financial instruments recorded at fair value through Other Comprehensive Income are subject to impairment, as well as other financial instruments subject to that assessment.
~~A financial asset is “subject to impairment” when one or more events that have a negative impact on the estimated future cash flows of the financial asset have occurred.~~
~~Evidence that a financial asset is subject to impairment includes the following observable data:~~
~~- significant financial difficulty for the debtor or issuer;~~
~~- delays in contractual obligations;~~
~~- breach of contract, such as default or delay;~~
~~- the restructuring of a loan or advance by the Bank under conditions that the Bank would not consider interesting to carry out;~~
~~- the likelihood that the debtor will enter bankruptcy or other financial reorganization; or~~
~~- the disappearance of an active market for a security due to financial difficulties.~~
A financial instrument that has been renegotiated due to deterioration in the borrower's condition is generally considered to be subject to impairment, unless there is evidence that the risk of not receiving contractual cash flows has been significantly reduced and there is no no other impairment indicator.
~~Presentation of the provision for impairment losses in the balance sheet~~
~~Provisions for impairment losses are presented in the balance sheet as follows:~~
~~- financial assets measured at amortized cost: as a deduction from the gross book value of the assets;~~
~~- loan commitments and financial guarantee contracts: as a provision; and~~
- debt instruments measured at fair value through Other Comprehensive Income: no provision for losses is recognized in the balance sheet, as the book value of these assets corresponds to the fair value.
~~Individual or collective assessment~~
An individual measurement of impairment was based on management's best estimate of the present value of cash flows expected to be received. In estimating these cash flows, management exercised judgment as to the financial situation of a debtor and the net realizable value of any underlying guarantee. Each asset reduced to recoverable value was evaluated in relation to its merits, while the test strategy and the estimated cash flows considered recoverable, were approved by the Bank's credit risk officers.
When assessing the need for a collective provision for losses, management considered factors such as credit quality, portfolio size, concentrations and economic factors. In order to estimate the necessary provision, premises were established to define how the inherent losses were modeled and to determine the necessary data parameters, based on historical experience and current economic conditions.
~~Measurement of impairment~~
Losses on impairment of assets measured at amortized cost were calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the asset's original effective interest rate. Impairment losses on assets measured at fair value through Other Comprehensive Income were calculated as the difference between the book value and the fair value.
~~Reversal of impairment~~
~~For assets measured at amortized cost: If an event that occurred after impairment caused the impairment loss to decrease, the impairment loss was reversed through profit or loss.~~
For debt securities measured at fair value through Other Comprehensive Income: If, in a subsequent period, the fair value of a debt security reduced to recoverable value has increased and this increase could be objectively linked to an event that occurred after recognition from impairment loss, impairment loss was reversed through profit or loss; otherwise, any increase in fair value was recognized through Other Comprehensive Income.
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* Values expressed in thousands, except when indicated.
Any subsequent recovery in the fair value of an equity instrument measured at fair value through Other Comprehensive Income and reduced to recoverable value was recognized at any time in Other Comprehensive Income.
~~Below is the reconciliation of shareholders' equity resulting from the initial adoption of IFRS 9:~~
~~Reconciliation of Shareholders' Equity~~
~~Shareholders' equity before IFRS 9 adjustments - 12/31/2017~~ ~~87,087,601~~
~~Allowance for loan losses~~ ~~(2,149,051~~ )
~~Provisions for contingent commitments~~ ~~(674,513~~ )
~~Remeasurement of assets arising from the new categories~~ ~~17,806~~
~~Others~~ ~~237,867~~
~~Income taxes and deferred social contribution~~ ~~1,026,066~~
~~Shareholders' equity after IFRS 9 adjustments - 01/01/2018~~ ~~85,545,776~~
~~Information, assumptions and techniques used to estimate the impairment~~
~~Classification of financial instruments by stages~~
~~The portfolio of financial instruments subject to impairment is divided into three levels, based on the stage of each instrument related to its level of credit risk:~~
- Stage 1: It is understood that a financial instrument at this stage does not have a significant increase in risk since its initial recognition. The provision on this asset represents the expected loss resulting from possible default over the next 12 months;
- Stage 2: If a significant increase in risk is identified since initial recognition, without materializing deterioration, the financial instrument will be classified within this stage. In this case, the amount referring to the provision for expected loss due to default reflects the estimated loss of the residual life of the financial instrument. To assess the significant increase in credit risk, quantitative measurement indicators used in normal credit risk management will be used, as well as other qualitative variables, such as the indication of being a non-deteriorating operation if considered as refinanced or included operations in a special agreement; and
- Stage 3: A financial instrument is recorded within this stage, when it shows signs of deterioration evident as a result of one or more events that have already occurred and which materialize at a loss. In this case, the amount referring to the provision for losses reflects the expected losses due to credit risk over the expected residual life of the financial instrument.
~~Impairment estimation methodology~~
~~The measurement of impairment loss is performed using the following factors:~~
- Exposure to Default or EAD: is the value of the transaction exposed to credit risk, including the current balance ratio available that could be provided at the time of default. The models developed incorporate assumptions about changes in the payment schedule for operations.
- Probability of Default (PD): is defined as the probability that the counterparty will be able to fulfill 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 in the next 12 months as well as PD - lifetime (Stages 2 and 3), which considers the probability that the counterparty will default between the balance sheet date and the residual maturity date of the operation. The standard requires that future information relevant to the estimation of these parameters must be considered.
- Loss on Default (LGD): is the resulting loss in the event of default, that is, the percentage of exposure that cannot be recovered in the event of default. It mainly depends on the guarantees associated with the transaction, which are considered as risk mitigation factors associated with each financial credit asset and the expected future cash flows to be recovered. As established in the regulations, future information must be taken into account for its estimation.
~~- Discount rate: is the rate applied to the estimated future cash flows over the expected life of the asset, to bring them to present value.~~
In order to estimate the aforementioned parameters, the Bank has applied its experience in the development of internal models for the calculation of parameters for both the regulatory environment and internal management purposes.
~~Definition of default~~
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* Values expressed in thousands, except when indicated.
~~The Bank considers that a financial asset is in default when:~~
~~- it is likely that the debtor will not fully pay its credit obligations to the Bank; or~~
~~- the debtor presents significant credit obligations to the Bank overdue for more than 90 days, as a general rule.~~
~~Overdrafts are considered overdue if the customer breaches a recommended limit or has been granted a limit lower than the current open amount.~~
~~When assessing whether a debtor is in default, the Bank considers indicators:~~
~~- qualitative - for example, violations of covenants;~~
~~- quantitative - for example, overdue status and non-payment of another obligation of the same issuer with the Bank; and~~
~~- based on data collected internally and obtained from external sources.~~
v.iii. Provisions for pension funds

Defined benefit plans are recorded based on an actuarial study, carried out annually by a specialized company, at the end of each year, effective for the subsequent period and are recognized in the consolidated income statement ~~in the~~under Interest and similar expenses and Provisions ~~lines~~ (net).

The present value of ~~the~~a defined benefit obligation is the present value, ~~without deducting~~less any plan assets, ~~from the~~of expected future payments necessary to settle the obligation resulting from ~~the employee's~~employee service in current and past periods.

Additional details ~~are~~can be found in note ~~2.x~~2.w to the Consolidated Financial Statements as of December 31, ~~2020.~~2021.

~~vi.~~ iv. Provisions, assets and contingent liabilities

Provisions for judicial and administrative proceedings are constituted when the risk of loss of the judicial or administrative action is assessed as probable and the amounts involved are measurable with sufficient security, based on the nature, complexity and history of the actions and the opinion of the legal advisors internal and external.
Explanatory note ~~2.r~~2.q to the Bank's consolidated financial statements for the year ended December 31, ~~2020,~~2021, features information on provisions and contingent assets and liabilities. There were no significant changes in provisions and contingent assets and liabilities of the Bank between December 31, ~~2019~~2020 and December 31, ~~2020,~~2021, the date of preparation of these consolidated financial statements.

~~vii.~~v. Goodwill

The goodwill recorded is subject to the impairment test, at least once a year or in a shorter period, in the event of any indication of impairment of the asset.

The basis used for the recoverability test is the value in use and, for this purpose, the cash flow is estimated for a period of 5 years. Cash flow was prepared considering several factors, such as: (i) macroeconomic projections of interest rates, inflation, exchange rate and others; (ii) behavior and growth estimates of the national financial system; (iii) increased costs, returns, synergies and investment plan; (iv) customer behavior; and (v) growth rate and adjustments applied to flows in perpetuity. The adoption of these estimates involves the probability of future events occurring and the alteration of any of these factors could have a different result. The cash flow estimate is based on a valuation prepared by an independent expert annually or whenever there is evidence of a reduction in its recoverable amount, which is reviewed and approved by management.
Further details are in note 13.

~~viii.~~vi.        Expectation of realization of tax credits

Deferred tax assets and liabilities include temporary differences, identified as the amounts expected to be paid or recovered on differences between the book values of assets and liabilities and their respective calculation bases, and accumulated tax credits and losses and the negative CSLL base. These amounts are measured at the rates expected to be applied in the period in which the asset is realized or the liability is settled. Deferred tax assets are only recognized for temporary differences to the extent that it is considered probable that the consolidated entities will have sufficient future taxable profits against which the deferred tax assets can be used, and the deferred tax assets do not result from the initial recognition (except in a business combination) of other assets and liabilities in an operation that affects neither taxable income nor taxable income. Other deferred tax assets (tax credits and accumulated tax losses) are only recognized if it is considered probable that the consolidated entities will have sufficient future taxable profits to be used.

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* Values expressed in thousands, except when indicated.
Deferred tax assets and liabilities recognized are revalued on the date of each balance sheet, making appropriate adjustments based on the findings of the analyzes carried out. The expectation of realization of the Bank's deferred tax assets is based on projections of future results and based on a technical study.

For further details, see note ~~2.aa~~2.z to the Consolidated Financial Statements of December 31, ~~2020.~~2021.

2. Accounting policies and method of measurement

The accounting policies and method of measurement applied in preparing the consolidated financial statements were as follows:

a) Foreign currency transactions

The financial statements are presented in Brazilian Reais, the functional and reporting currency of Banco Santander and its subsidiaries.

The assets and liabilities and foreign subsidiary are converted to Real as follows:

- Assets and liabilities are translated at the exchange rate at the balance sheets date.

- Revenues and expenses are translated at the monthly average exchange rates.

- Gain and losses on translation of net investment are recorded in the statement of comprehensive income, in “exchange rate of investees located abroad”.

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* Values expressed in thousands, except when indicated.
b) Basis of consolidation

i. Subsidiaries

“Subsidiaries” are defined as entities over which the Bank has control. Control is based on whether the Bank has: i) power over the investee; ii) exposure, or rights, to variable returns from its involvement with the investee; and iii) the ability to use its power over the investee to affect the amount of the returns, as set forth in the law, the Bylaws or agreement.
Consolidation of a subsidiary begins when the Bank obtains control over the subsidiary and ceases when the Bank loses control of the subsidiary. Specifically, income and expense of a subsidiary acquired or disposed during the year are included in the consolidated income statement and other comprehensive income from the date the Bank gains controls until the date when the Bank ceases to control the subsidiary.

Profit or loss and each component of Other Comprehensive Income are attributed to the owners of the Bank and to the non-controlling interests even if the effect is attributed to non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Bank and to the non-controlling interest even if this generates a negative balance for non-controlling interests. All transactions, balances, income and expenses between the companies of the Santander Group are eliminated in the consolidated financial statements.

Changes in the Santander Group’s interest in a subsidiary that do not result in loss of control are registered as equity transactions. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to owners of the Company.

When the Bank loses control of a ~~subsidiary,~~controlled delivery, or the ~~profit or~~ loss ~~on disposal~~ is ~~calculated as~~recognized in the income statement and is the difference ~~between~~between: (i) the ~~aggregate~~sum of the fair value of the ~~consideration~~deliveries received and the fair value of ~~any retained interest~~the residual interest; and (ii) the ~~previous carrying amount~~prior balance of ~~the~~ assets (including goodwill), and liabilities of the subsidiary and ~~any non-controlling interests. Amounts~~non-equity interests, if any. All amounts previously recognized ~~in other comprehensive income in relation~~“Other Comprehensive Income” related to are accounted for as if the Bank had directly disposed of the corresponding assets or liabilities of the subsidiary ~~are registered~~ (i.e., reclassified to income ~~statement~~ or transferred ~~directly~~ to ~~retained earnings) in the same manner~~another equity account, as ~~it would be required if the relevant assets~~mandatory or ~~liabilities are disposed of.~~mandatory authorized by IFRS). The fair value of ~~any~~an investment ~~retained in~~held on the former ~~subsidiary at the~~ date ~~when~~of loss of control ~~got lost~~ is considered as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial ~~Instruments: Recognition and Measurement~~Instruments or, when applicable, ~~the costs~~recognition on initial recognition of an investment in an associate or ~~jointly controlled entity.~~joint venture.

ii. Interests in joint ventures (jointly controlled entities) and associates

Joint ventures mean interests in entities that are not subsidiaries but which are jointly controlled by two or more unrelated entities. This is evidenced by contractual arrangements whereby two or more entities (“ventures”) acquire interests in entities (jointly controlled entities) so that strategic financial and operating decisions affecting the joint venture require the unanimous consent of the ventures.

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* Values expressed in thousands, except when indicated.
Associates are entities over which the Bank is in a position to exercise significant influence (significant influence is the power to participate in the financial and operating decisions of the investee) but it does not control or has joint control over the investee.

In the consolidated financial statements, interest in joint ventures and investments in associates are registered using the equity method, i.e. at the Bank’s share of net assets of the investee, after taking into consideration the dividends received from capital reductions and other related transactions. Relevant information regarding companies registered under the equity method by the Bank is provided in note 11.

iii. Business combinations, acquisitions and disposals

A business combination ~~means~~is the ~~union~~combination of two or more ~~individual business~~separate entities or economic ~~business~~units into one single entity or group of entities and is registered in accordance with IFRS 3 - “Business Combinations”.
Business combinations are carried out so that the Bank obtains control over an entity and are recognized for accounting purposes as follow:

• The Bank measures the cost of the business combination, defined as the fair value of the assets offered, the liabilities incurred and the equity instruments issued, if any.

• The fair values of the assets, liabilities and contingent liabilities of the acquired entity or business, including any intangible assets which might not have been recognized by the acquiree, are estimated at the acquisition date and recognized in the consolidated financial statement.

~~Consolidated Financial Statements | December 31, 2020 | F-19~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
• The excess of the acquisition cost over the fair value of the identifiable net assets acquired are recognized as goodwill (note 13). The excess of fair value of the identifiable net assets over the acquisition cost is an advantageous purchase gain and it is recorded as income on the date of the acquisition.

The note 3 includes a description of the most significant ~~transactions~~transaction carried out in 2021, 2020 ~~2019~~ and ~~2018.~~2019.

~~viii.~~iv. Investment Funds

These include investment funds in which the Santander Group companies hold a substantial interest or the entirety of the interests and are therefore exposed to, or have rights, to variable returns and have the ability to affect those returns through power over the fund, in accordance with IFRS 10 - Consolidated Financial Statements and are therefore, consolidated in these financial statements.

c) Definitions and classification of financial instruments
i. Definitions

“Financial instrument” is any contract that gives rise to a financial asset of one entity and, simultaneously, to a financial liability or financial interest of another entity.
“Equity instrument” is any agreement that evidences a residual interest in the asset of the issuing entity after deducting all of its liabilities.

“Financial derivative” is a financial instrument whose value changes in response to the change in an observable market variable (such as an interest rate, foreign exchange rate, financial instrument price, market index or credit rating), whose initial investment is zero or very small compared with other financial instruments with a similar response to changes in market factors, and which is settled at a future date.

“Hybrid financial instruments” are contracts that simultaneously include a non-derivative host contract together with a derivative, known as an embedded derivative, that is not separately transferable and has the effect to make part of the cash flow of the hybrid contract vary similar to a stand-alone derivative.

The following transactions are not treated for accounting purposes as financial instruments:

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* Values expressed in thousands, except when indicated.
• Investments in subsidiaries, jointly controlled entities and associates (note 3&11).

• Rights and obligations under employee benefit plans (note 21).

ii. Classification of financial assets for measurement purposes

Financial assets are initially classified into the various categories used for management and measurement purposes, unless they have to be presented as ~~Non-current assets~~Assets held for sale or they relate to Cash, cash balances at Central Banks and other deposits on demand, Changes in the fair value of hedged items in portfolio hedges of interest rate risk (asset side), Hedging derivatives and Investments, which are reported separately.

Upon initial recognition of an equity instrument not held for trading, the Bank may irrevocably choose to present subsequent changes in fair value through Other Comprehensive Income. This option is made considering each investment individually and was not used by the Bank. In addition, upon initial recognition, the Bank may irrevocably designate at fair value through profit or loss a financial asset that would otherwise meet the measurement requirements at amortized cost or at fair value through Other Comprehensive Income, if such designation eliminate or substantially reduce an accounting mismatch that could exist. This option was not used by the Bank.
Financial assets are included for measurement purposes in one of the following categories:

• Financial Assets Measured Atat Fair Value Through Profit Oror Loss Held ~~For~~for Trading: this category includes the financial assets acquired to generate short-term profit resulting from the fluctuation of its prices and financial derivatives not classified as hedging instruments, whose primary ~~business model~~intention of the Bank is to trade them frequently.

~~Consolidated Financial Statements | December 31, 2020 | F-20~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
• Financial Assets Measured Atat Fair Value Through Profit Oror Loss: this category includes the financial assets that did not meet the pre-established criteria when evaluating the SPPI Test (Solely Payment of Principal and Interest).

• Non-Trading Financial Assets Mandatorily Measured Atat Fair Value Through Profit Oror Loss: this category includes the financial assets that at the time of initial designation was made the fair value option.

• Financial Assets Measured Atat Fair Value Through Profit Oror Loss: are stated at fair value. This category does not include debt instruments classified as “Held-to-maturity investments” or “Financial assets at fair value through profit or loss”, and equity instruments issued by entities other than subsidiaries, associates and jointly controlled entities, provided that such instruments have not been classified as “Financial assets held for trading” or as “Other financial assets at fair value through profit or loss”.

~~The results rising~~Results arising from changes in fair value are recognized ~~at the Financial Assets Measured At Fair Value Through Other Comprehensive Income line~~ in the ~~Shareholders´~~item adjustment to market value in equity, ~~except for cumulative~~with the exception of impairment losses, which are recognized in ~~statement of~~ profit or loss. When the investment is ~~sold~~disposed of or has ~~evidences~~evidence of ~~decreases on the~~a decline in fair value due to ~~impairment,~~non-recovery, the result previously ~~recognized result at~~accumulated in the ~~same Shareholders´ Equity line, mentioned above~~account of adjustments to fair value in equity is reclassified to ~~the statement of profit or loss.~~income.

• Financial Assets Measured Atat Amortized Cost: this category includes financing granted to third parties, based on their nature, irrespective of the type of borrower and the form of financing, including finance lease transactions in which the consolidated entities act as lessors. The consolidated entities ~~included in the consolidation have, in general, the intention of maintaining~~generally intend to hold the loans and credits ~~they grant~~granted by them until their final maturity ~~which,~~and, therefore, they are presented in the consolidated balance ~~sheet~~sheets at their amortized cost (which includes the ~~necessary~~required adjustments to reflect ~~the~~ estimated impairment losses).
~~A financial asset is measured at amortized cost if it meets the following conditions and is not designated at fair value through profit or loss:~~
~~• The asset is maintained within a business model whose objective is to maintain assets in order to receive contractual cash flows;~~
~~• The contractual terms of the financial asset generate, on specific dates, cash flows that refer exclusively to payments of the principal and interest on the principal amount outstanding;~~
~~• A debt instrument is measured at fair value through Other Comprehensive Income if it meets the following conditions and is not designated at fair value through profit or loss;~~
~~• The asset is maintained within a business model whose objective is achieved by receiving contractual cash flows and by selling financial assets; and~~
~~• The contractual terms of the financial asset generate, on specific dates, cash flows that refer exclusively to payments of the principal and interest on the principal amount outstanding.~~
~~Business model assessment~~
The Bank assesses the objective of a business model in which an asset is maintained at the portfolio level, as it better reflects how the business is managed and what information is provided to management. The information considered comprises:
- Policies and objectives defined for the portfolio and the application of these policies in practice. Including, if the Administration's strategy is focused on earning contractual interest income, maintaining a specific interest rate profile, aligning the duration of the assets;
~~- How the portfolio's performance is assessed and reported to the Bank's management;~~
~~- The risks that affect the performance of the business model (and the financial assets held within that business model) and how these risks are managed;~~
~~- How the business managers are remunerated - for example, if the remuneration is based on the fair value of the managed assets or the contractual cash flows received;~~
- The frequency, volume and timing of sales in previous periods, the reasons for such sales and your expectations about future sales. However, information on sales activity is not considered in isolation, but as part of an overall assessment of the objective defined by the Bank to manage financial assets.
Financial assets held for trading or managed, whose performance is assessed based on fair value, are measured at fair value through profit or loss, as (i) they are not held to receive contractual cash flows (ii) nor are they held to receive flows contractual cash flow and sell financial assets.
~~Consolidated Financial Statements | December 31, 2020 | F-21~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
~~Valuation to determine whether contractual cash flows refer exclusively to principal and interest payments~~
For the purposes of this assessment, “principal” is defined as the fair value of the financial asset upon initial recognition. “Interest” is defined as the consideration for the value of the currency over time and for the credit risk associated with the value of the principal outstanding during a specific period and for other basic risks and costs of loans (for example, liquidity risk and administrative costs), as well as the profit margin.
When assessing whether contractual cash flows refer exclusively to payments of principal and interest, the Bank considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the term or value of the contractual cash flows in a way that would not meet this condition. When carrying out the assessment, the Bank considers:
~~- contingent events that would change the amount and timing of cash flows;~~
~~- leverage;~~
~~- advance payment terms and extension;~~
~~- terms that limit the Bank's right to cash flows from assets; and~~
~~- resources that modify the consideration of the currency value over time, for example, periodic adjustment of interest rates.~~

iii. Classification of financial assets for presentation purposes

Financial assets are classified by nature into the following headings in the consolidated financial statements:

• Cash and balances with the Bacen: cash balances and balances receivable on demand relating to deposits with Bacen and credit institutions.
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* Values expressed in thousands, except when indicated.

• Financial Assets Measured At Amortized Cost: includes the debit balances of all credit and loans granted by the Bank, other than those represented by securities, as well as finance lease receivables and other debit balances of a financial nature in favor of the Bank, such as checks drawn on credit institutions, balances receivable from clearing houses and settlement agencies for transactions on the stock exchange and organized markets, bonds given in cash, capital calls, fees and commissions receivable for financial guarantees and debit balances arising from transactions not originating in banking transactions and services, such as the collection of rentals and similar items.

• Loans and other amounts with credit institutions: credit of any nature in the name of financial institutions.

• Loans and advances to clients: includes debit balances of all the remaining credit and loans granted by the Bank, including money market operations through centralized counterparties.

• Debt instruments: bonds and other securities that represent a debt for their issuer, that generate an interest return, and that are in the form of certificates or book entries.

• Equity instruments: Financial instruments issued by other entities, such as shares, which have the nature of equity instruments for the issuer, other than investments in subsidiaries, joint ventures or associates. Investment fund units are included in this item.

• Trading derivatives: includes the fair value in favor of the Bank of derivatives which do not form part of hedge accounting.

• Hedging derivatives: includes the fair value in favor of the Bank of derivatives designated as hedging instruments in hedge accounting.

• Investments in associates and jointly controlled companies: includes the investments made in the share capital of associates and jointly controlled companies.

~~Consolidated Financial Statements | December 31, 2020 | F-22~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
iv. Classification of financial liabilities for measurement purposes

Financial liabilities are classified for measurement purposes into one of the following categories:

• Other Financial Assets At Fair Value Through Profit Or ~~Loss Held for Trading:~~Loss: this category includes financial liabilities incurred for the purpose of generating a profit in the near term from fluctuations in their prices, financial derivatives not designated as hedging instruments, and financial liabilities arising from the outright sale of financial assets acquired under reverse repurchase agreements ("reverse repos") or borrowed (short positions).

• Other Financial Assets At Fair Value Through Profit Or Loss: financial liabilities are included in this category when they provide more relevant information, either because this eliminates or significantly reduces recognition or measurement inconsistencies (accounting mismatches) that would otherwise arise from measuring assets or liabilities or recognizing the gains or losses on them on different bases, or because a group of financial liabilities or financial assets and liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided on that basis to the Group's key management personnel.

• Financial liabilities at amortized cost: financial liabilities, irrespective of their instrumentation and maturity, not included in any of the above-mentioned categories which arise from the ordinary borrowing activities carried on by financial institutions.

v. Classification of financial liabilities for presentation purposes

Financial liabilities are classified by nature into the following items in the consolidated financial statements:

• Deposits from Bacen: deposits of any nature received from Bacen.

• Deposits from credit institutions: deposits of any nature, including credit received and money market operations in the name of credit institutions.

• Client deposits: includes deposits of any nature such as demand deposits, saving deposits and time deposits including money market operation received from client.

• Marketable debt securities: includes the amount of bonds and other debt represented by marketable securities, other than subordinated liabilities.

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* Values expressed in thousands, except when indicated.
• Trading derivatives: includes the fair value, with a negative balance for the Bank, of derivatives which do not form part of hedge accounting.

• Short positions: includes the amount of financial liabilities arising from the outright sale of financial assets purchased under reverse repurchase agreements or borrowed.

• Subordinated liabilities: amount of financing received which, for the purposes of payment priority, ranks behind ordinary debt. This category also includes the financial instruments issued by the Bank which, although equity for legal purposes, do not meet the requirements for classification as equity.

• Other financial liabilities: includes the amount of payment obligations having the nature of financial liabilities not included in other items, and liabilities under financial guarantee contracts, unless they have been classified as non-performing.

• Hedging derivatives: includes the fair value of the Bank's liability in respect of derivatives, including embedded derivatives separated from hybrid financial instruments, designated as hedging instruments in hedge accounting.

• ~~Debt Instruments Eligible to Compose Capital:~~Equity instruments: financial instruments issued by other entities, such as shares, with the nature of equity instruments for the issuer, except investments in subsidiaries, jointly controlled entities or associates.

d) Funding, debt notes issued and other liabilities

Funding debt rates and other liabilities Instruments are recognized initially at fair value, considered primarily as the transaction price. They are subsequently measured at amortized cost and its expenses are recognized as a financial cost.

Among the liabilities initial recognition methods, it is important to emphasize those compound financial instruments which are classified as such due to the fact that the instruments contain both, a debt instrument (liability) and an embedded equity component (derivative).
~~Consolidated Financial Statements | December 31, 2020 | F-23~~
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* Values expressed in thousands, except when indicated.

The recognition of a compound instrument consists of a combination of (i) a main instrument, which is recognized as an entity’s genuine liability (debt) and (ii) an equity component (derivative convertible into ordinary share).

The issue of "Notes" must be registered in specific heading liabilities and updated according to the agreed rates and adjusted by the effect of exchange rate variations, when denominated in foreign currency. All remuneration related to these instruments, such as interest and Exchange variation (difference between the functional currency and the currency in which the instrument was named) shall be recognized as expenses for the period, according to the accrual basis.

The relevant details of these issued instruments are described in explanatory note 19.

e) Measurement of financial assets and liabilities and recognition of fair value changes

In general, financial assets and liabilities are initially recognized at fair value which, in the absence of evidence to the contrary, is deemed to be the transaction price. Financial instruments not measured at fair value through profit or loss, are adjusted by the transaction costs. Financial assets and liabilities are subsequently measured at each period-end as follows:

i. Measurement of financial assets

Financial assets are measured at fair value, without deduction of estimated costs of transaction that may be incurred on their disposal, except for loans and receivables, held-to-maturity investments, equity instruments whose fair value cannot be determined in a sufficiently objective manner and financial derivatives that have as equity instruments subject and are settled by delivery of those instruments.

The fair value of a financial instrument on a given date is taken to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The most objective and common reference for the fair value of a financial instrument is the price that would be paid for it on an active, transparent and deep market (quoted price or market price).

If there is no market price for a given financial instrument, its fair value is estimated on the basis of valuation techniques commonly used by ~~market participants,~~the international financial community, according to the specific features of the instrument to be measured and, particularly, the various types of risk associated with it.

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* Values expressed in thousands, except when indicated.
All derivatives are recognized in the balance sheets at fair value from the trade date. If the fair value is positive, they are recognized as assets and if the fair value is negative, they are recognized as liabilities. The changes in the fair value of derivatives from the trade date are recognized in “Gains (losses) on financial assets and liabilities” in the consolidated income statement. Specifically, the fair value of standard financial derivatives included in the portfolios of financial assets or liabilities held for trading is deemed to be their daily quoted price and if, for exceptional reasons, the quoted price cannot be determined on a given date, these financial derivatives are measured using methods similar to those used to measure over the counter “OTC” derivatives.

The fair value of OTC derivatives is taken to be the sum of the future cash flows arising from the instrument, discounted to present value at the date of measurement (“present value” or “theoretical close”) using valuation techniques commonly used by ~~market participants:~~the financial markets: “net present value” (NPV), option pricing models and other methods.

“Financial Assets Measured At Amortized Cost” and “Held-to-maturity investments” are measured at amortized cost using the effective interest method. “Amortized cost” is the acquisition cost of a financial asset or liability plus or minus, as appropriate, the principal repayments and the cumulative amortization (taken to the income statement) between the difference of the initial cost and the maturity amount. In the case of financial assets, amortized cost furthermore includes any reductions for impairment or uncollectibility. In the case of loans and receivables hedged in fair value hedges, the changes in the fair value of these assets related to the risk or risks being hedged are recognized.

The “effective interest rate” is the discount rate that exactly matches the initial amount of a financial instrument to all its estimated cash flows of all kinds over its remaining life. For fixed rate financial instruments, the effective interest rate coincides with the contractual interest rate established on the acquisition date plus, where applicable, the fees and transaction costs that, because of their nature, form part of their financial return. In the case of floating rate financial instruments, the effective interest rate coincides with the rate of return prevailing in all connections until the next benchmark interest reset date.

Equity instruments whose fair value cannot be determined in a sufficiently objective manner are measured at acquisition cost adjusted, where appropriate, by any related impairment loss.

~~Consolidated Financial Statements | December 31, 2020 | F-24~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
~~Equity instruments whose fair value cannot be calculated in a sufficiently objective manner are measured at acquisition cost, adjusted, as the case may be, to the related impairment losses.~~
The amounts at which the financial assets are recognized represent, in all material respects, the Bank’s maximum exposure to credit risk at each reporting date. Also, the Bank has received collateral and other credit enhancements to mitigate its exposure to credit risk, which consist mainly of mortgage guarantees, cash collateral, equity instruments and personal security, assets leased out under leasing and renting agreements, assets acquired under repurchase agreements and securities loans and derivatives.

ii. Measurement of financial liabilities

In general, financial liabilities are measured at amortized cost, as defined above, except for those included under “Financial Assets Measured Atat Fair Value Through Profit Oror Loss” and “Other financial liabilities at fair value through profit or loss” and financial liabilities designated as hedge items (or hedging instruments) in fair value hedges, which are measured at fair value.

iii. Recognition of fair value changes

As a general rule, changes in the carrying amount of financial assets and liabilities are recognized in the consolidated income statement, distinguishing between those arising from the accrual of interest and similar items -which are recognized under “Interest and similar income” or “Interest expense and similar charges”, as appropriate - and those arising for other reasons, which are recognized at their net amount in the heading “Gains (losses) on financial assets and liabilities (net)”.

Adjustments due to changes in fair value arising from Available-for-sale financial assets are recognized temporarily in equity in then heading “Other Comprehensive Income”. Items charged or credited to this account remain in the Bank’s consolidated equity until the related assets are written-off, whereupon they are charged to the consolidated income statement.

iv. Hedging transactions

The consolidated entities use financial derivatives for the following purposes: i) to provide these instruments to clients who request them in the management of their market and credit risks; ii) to use these derivatives in the management of the risks of the Bank entities' own positions and assets and liabilities (“hedging derivatives”); and iii) to obtain gains from changes in the prices of these derivatives (“financial derivatives”).

Financial derivatives that do not qualify for hedge accounting are treated for accounting purposes as trading derivatives.

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* Values expressed in thousands, except when indicated.
A derivative qualifies for hedge accounting if all the following conditions are met:

1. The derivative hedges one of the following three types of exposure:

a. Changes in the fair value of assets and liabilities due to fluctuations, among other, in the interest rate and/or exchange rate to which the position or balance to be hedged is subject (“fair value hedge”);

b. Changes in the estimated cash flows arising from financial assets and liabilities, commitments and highly probable forecast transactions (“cash flow hedge”);

c. The net investment in a foreign operation (hedge of a net investment in a foreign operation).

2. It is effective in offsetting exposure inherent in the hedged item or position throughout the expected term of the hedge, which means that:

a. At the date of arrangement the hedge is expected, under normal conditions, to be highly effective (prospective effectiveness).

b. There is sufficient evidence that the hedge was actually effective during the whole life of the hedged item or position (retrospective effectiveness).

3. There must be adequate documentation evidencing the specific designation of the financial derivative to hedge certain balances or transactions and how this effective hedge was expected to be achieved and measured, provided that this is consistent with the Bank’s management of own risks.
~~Consolidated Financial Statements | December 31, 2020 | F-25~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

The changes in value of financial instruments qualifying for hedge accounting are recognized as follows:

a. In fair value hedges, the gains or losses arising on both the hedging instruments and the hedged items (attributable to the type of risk being hedged) are recognized directly in the consolidated income statement.

b. In cash flow hedges, the effective portion of the change in value of the hedging instrument is recognized temporarily in equity under “Other comprehensive Income - Cash flow hedges” until the forecast transactions occur, when it is recognized in the consolidated income statement, unless, if the forecast transactions result in the recognition of non-financial assets or liabilities, it is included in the cost of the non-financial asset or liability. The ineffective portion of the change in value of hedging derivatives is recognized directly in the consolidated income statement.

c. The ineffective portion of the gains and losses on the hedging instruments of cash flow hedges and hedges of a net investment in a foreign operation are recognized directly under “Gains (losses) on financial assets and liabilities (net)” in the consolidated income statement.

If a derivative designated as a hedge instrument no longer meets the requirements described above due to expiration, ineffectiveness or for any other reason, the derivative is classified as a derivative measured at fair value through profit or loss.

When fair value hedge accounting is discontinued (expired, sold our no longer meet hedge accounting criteria) the adjustments previously recognized on the hedged item are transferred to profit or loss at the effective interest rate re-calculated at the date of hedge discontinuation. The adjustments must be fully amortized at maturity.

When cash flow hedges are discontinued, any cumulative gain or loss on the hedging instrument recognized in equity in the heading "Other comprehensive Income” (from the period when the hedge was effective) remains recognized in equity until the forecast transaction occurs at which time it is recognized in profit or loss, unless the transaction is no longer expected to occur, in which case any cumulative gain or loss is recognized immediately in profit or loss.

For the accounting and disclosure of the hedge accounting structures as of December 31, 2019, the bank used the faculty of IFRS 9, to maintain the practices determined by IAS 39.

f) Settlement of financial assets and liabilities

~~Derecognition~~Write-off of Financial Assets

The Bank derecognizes a financial asset when the contractual rights to the cash flows offrom the asset expire or when it transfers the rights to ~~the receipt of~~receive the contractual cash flows in a transaction in which essentially all the risks and ~~benefits~~rewards of ownership of the financial asset are transferred or in which the Bank does not transfer or retain substantially all the risks and rewards of ownership of the financial asset and does not control the financial asset.
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* Values expressed in thousands, except when indicated.

~~The~~On derecognition of a financial asset, the difference between the carrying amount of the asset (or ~~book value~~carrying amount allocated to the portion of the asset ~~disposed)~~derecognized) and the sum of (i) of the consideration received (including any new ~~assets~~asset obtained, less any new ~~liabilities~~liability assumed) and (ii) any accumulated gains or losses recognized in ~~"Other~~“Other Comprehensive ~~Income" is~~Income” are recorded in ~~the income statement.~~income.

As ~~from the date~~ of the ~~adoption of~~ IFRS opening date, mentioned above, any accumulated ~~gains /~~ gains/losses recognized in ~~"Other~~“Other Comprehensive ~~Income"~~Income” in relation to equity instruments designated at fair value through Other Comprehensive Income are not recorded in ~~the statement of~~ income ~~through the write-off~~upon derecognition of these securities.

The Bank carries out ~~transactions~~operations in which it transfers the assets recognized in its balance sheet, but ~~maintains~~retains all or substantially all the risks and benefits of the transferred assets ~~transferred~~ or part ~~thereof.~~of them. In these cases, the transferred assets are not written off. Examples of ~~such~~these operations include assignments of ~~co-sponsored~~ loan ~~portfolios.~~
portfolios with recourse. In ~~operations~~transactions in which the Bank does not retain or transfer substantially all the risks and rewards of ownership of a financial asset and ~~hold control of~~controls the asset, the Bank continues to recognize the asset into the extent of its ~~continued~~continuing involvement, determined by the extent to which it is exposed to changes in the value of the transferred asset.

~~Derecognition~~Write-off of Financial Assets ~~due to~~by Assignment of Credit ~~Assignment~~

The accounting treatment of transfers of financial assets depends on the extent to which the risks and rewards associated with the transferred assets are transferred to third parties:

1. If the Bank transfers substantially all the risks and rewards to third parties-unconditional sale of financial assets, sale of financial assets under an agreement to repurchase them at their fair value at the date of repurchase, sale of financial assets with a purchased call option or written put option that is deeply out of the money, securitization of assets in which the transferor does not retain a subordinated debt or grant any credit enhancement to the new holders, and other similar cases, the transferred financial asset is derecognized and any rights or obligations retained or created in the transfer are recognized simultaneously.

2. If the Bank retains substantially all the risks and rewards associated with the transferred financial asset -sale of financial assets under an agreement to repurchase them at a fixed price or at the sale price plus interest, a securities lending agreement in which the borrower undertakes to return the same or similar assets, and other similar cases, the transferred financial asset is not derecognized and continues to be measured by the same criteria as those used before the transfer. However, the following items are recognized:

a. An associated financial liability, for an amount equal to the consideration received; this liability is subsequently measured at amortized cost.

b. The income from the transferred financial asset not derecognized and any expense incurred on the new financial liability.

3. If the Bank neither transfers or retains substantially all the risks and rewards associated with the transferred financial asset - sale of financial assets with a purchased call option or written put option that is not deeply in or out of the money, securitization of assets in which the transferor retains a subordinated debt or other type of credit enhancement for a portion of the transferred asset, and other similar cases, the following distinction is made:

a. If the transferor does not retain control of the transferred financial asset, the asset is derecognized and any rights or obligations retained or created in the transfer are recognized.

~~Consolidated Financial Statements | December 31, 2020 | F-26~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
b. If the transferor retains control, it continues to recognize the transferred financial asset for an amount equal to its exposure to changes in value and recognizes a financial liability associated with the transferred financial asset. The net carrying amount of the transferred asset and the associated liability is the amortized cost of the rights and obligations retained, if the transferred asset is measured at amortized cost, or the fair value of the rights and obligations retained, if the transferred asset is measured at fair value.

~~Derecognition~~Write-off of Financial Liabilities

The Bank ~~derecognizes~~writes off a financial liability when its contractual obligations are ~~terminated,~~extinguished, canceled or when they expire.

g) Offsetting of financial instruments
Financial asset and liability balances are offset (i.e. reported in the consolidated balance sheets at their net amount) only if the Bank and their subsidiaries currently have a legally enforceable right to set off the recognized amounts and intend either to settle on a net basis, or to realize the asset and settle the liability ~~simultaneously.~~
~~Offsetting Agreements and Obligations Settlement (CMN Resolution 3.263/2005) - The~~simultaneously, as provided for in IFRS 7 / IAS 32, additionally the Bank has an agreement for the clearing and settlement of obligations under the National Financial System (SFN), signed with individuals and legal entities, whether or not members of the SFN, resulting in higher financial settlement guarantee, with the parties that have this modality of agreement. These agreements establish that payment obligations to Banco Santander arising from credit and derivative operations, in the event of default by the counterparty, will be offset against Banco Santander's payment obligations with the counterparty.
Consolidated Financial Statements | December 31, 2021 | F-23
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* Values expressed in thousands, except when indicated.
The following table provides details of financial assets and liabilities subject to offsetting at December 31, 2021, 2020 ~~2019~~ and ~~2018:~~2019:
Thousand of reais 2020 Thousand of reais 2021
Assets: Financial assets, gross Financial assets
offset in the balance sheet, gross Financial assets
offset in the balance sheet, net Financial assets, gross Financial assets
offset in the balance sheet, gross Financial assets
offset in the balance sheet, net
Derivatives 29,431,287 (560,666 ) 28,870,621 21,575,848 (435,925) 21,139,923

Liabilities: Financial liabilities, gross Financial liabilities
offset in the balance sheet, gross Financial liabilities
offset in the balance sheet, net
Derivatives 25,054,906 (435,925) 24,618,981

Thousand of reais Thousand of reais 2020
Assets: Financial assets, gross Financial assets
offset in the balance sheet, gross Financial assets
offset in the balance sheet, net
Derivatives 26,808,181 (560,666) 26,247,515

Financial liabilities, gross Financial liabilities
offset in the balance sheet, gross Financial liabilities
offset in the balance sheet, net
Liabilities:
Derivatives 29,917,498 (560,666) 29,356,832

Thousand of reais Thousand of reais 2019
Assets: Financial assets, gross Financial assets
offset in the balance sheet, gross Financial assets
offset in the balance sheet, net
Derivatives 19,279,829 (458,929) 18,820,900

Liabilities: Financial liabilities, gross Financial liabilities
offset in the balance sheet, gross Financial liabilities
offset in the balance sheet, net
Derivatives 21,264,072 (458,929) 20,805,143

Liabilities: Financial liabilities, gross Financial liabilities
offset in the balance sheet, gross Financial liabilities
offset in the balance sheet, net
Derivatives 32,540,604 (560,666 ) 31,979,938

Thousand of reais 2019
Assets: Financial assets, gross Financial assets
offset in the balance sheet, gross Financial assets
offset in the balance sheet, net
Derivatives 20,904,663 (458,929 ) 20,445,734

Liabilities: Financial liabilities, gross Financial liabilities
offset in the balance sheet, gross Financial liabilities
offset in the balance sheet, net
Derivatives 22,888,906 (458,929 ) 22,429,977

~~Consolidated Financial Statements | December 31, 2020 | F-27~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Thousand of reais 2018
Assets: Financial assets, gross Financial assets
offset in the balance sheet, gross Financial assets
offset in the balance sheet, net
Derivatives 18,667,611 (304,165 ) 18,363,446

Liabilities: Financial liabilities, gross Financial liabilities
offset in the balance sheet, gross Financial liabilities
offset in the balance sheet, net
Derivatives 18,771,000 (304,165 ) 18,466,835

h) Impairment of financial assets
i. Definition
A financial asset is considered impaired when there is objective evidence that events have occurred which:
• Give rise to an adverse impact on the future cash flows that were estimated at the transaction date, in the case of debt instruments (loans and debt securities);
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* Values expressed in thousands, except when indicated.
• In the case of equity instruments, mean that their carrying amount may not be fully recovered.
• Arising from the violation of terms of loans, and
• During the Bankruptcy process.
As a general rule, the adjustment of the value of the impaired financial instruments is recognized in the consolidated income statement for the period in which the impairment becomes evident, and the reversal, if any, of previously recognized impairment loss is recognized in the consolidated income statement for the period in which the impairment is reversed or reduced.
ii. Debt instruments carried at amortized cost
The amount of an impairment loss incurred for determination of the recoverable amount on a debt instrument measured at amortized cost is equal to the difference between its carrying amount and the present value of its estimated future cash flows (excluding future credit losses that have not been incurred) discounted the original effective interest rate of the financial asset (or the effective interest rate computed at initial recognition), and is presented as a reduction of the asset balance and recorded in income statements.
In estimating the future cash flows of debt instruments the following factors are considered:
• All the amounts that are expected to be obtained over the remaining life of the instrument, in this case, the provided guarantees. The impairment loss considers the likelihood of collecting accrued interest receivable.
• The various types of risk to which each instrument is subject; and
• The circumstances in which collections will foreseeably be made.
These cash flows are subsequently discounted using the instrument's effective interest rate.
Specifically, in regards to recoverable amount losses resulting from materialization of the insolvency risk of the obligors (credit risk), a debt instrument is impaired due to insolvency when there is evidence of a deterioration of the obligor's ability to pay, either because it is in arrears or for other reasons.
~~Consolidated Financial Statements | December 31, 2020 | F-28~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
The Bank has certain policies, methods and procedures for covering its credit risk arising from insolvency allocable to counterparties.
These policies, methods and procedures are applied in the granting, in the examination and to document debt instruments, and contingent liabilities and commitments, the identification of their recoverable amount and the calculation of the amounts necessary to cover the related credit risk.
The procedures applied in the identification, measurement, control and reduction of the exposure to credit risk, are based on an individual basis or grouped by similarity.
• Clients with individual management: Wholesale clients, financial institutions and certain companies. Risk management is performed through an analysis complemented by tools to support the decision-making based in internal risk assessment.
• Clients with standardized management: individuals and companies not classified as individual clients. Risk management models based on automated decision-making and risk assessment procedure, complemented, when the model is not comprehensive or accurate enough, by teams of analysts specialized in this type of risk. The credits related to clients standardized, are usually considered not recoverable when they have historical loss experience and ~~delinquency~~delay greater than 90 days.
Regarding the provision for impairment losses from credit risk, the Bank evaluates all loans. Loans are either individually or collectively evaluated for impairment. Loans accounted as amortized cost, which are not individually evaluated for impairment, are collectively evaluated for impairment, grouping them considering the similarity of risk. Loans individually evaluated for impairment are not included in balances that are collectively evaluated for impairment.
To measure the impairment loss on loans individually evaluated for impairment, the Bank considers the conditions of the borrower, such as his economic and financial situation, level of indebtedness, ability to generate income, cash flow , management, corporate governance and quality of internal controls, payment history, industry expertise, contingencies and credit limits, as well as characteristics of assets, such as their nature and purpose, type, sufficiency and liquidity level guarantees and total amount of credit, as well as based on historical experience of impairment and other circumstances known at the moment of evaluation.
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* Values expressed in thousands, except when indicated.
To measure the impairment loss on loans collectively evaluated for impairment, the Bank segregates financial assets into groups considering the characteristics and similarity of credit risk, in other words, according to segment, the type of assets, guarantees and other factors associated as the historical experience of impairment and other circumstances known at the time of assessment.
In some cases, the observable data required to estimate the amount of an impairment loss on a financial asset may be limited or no longer fully relevant to current circumstances.
In such cases, an entity uses its experienced judgment to estimate the amount of any impairment loss. Similarly, an entity uses its experienced judgment to adjust observable data for a group of financial assets to reflect current circumstances.
The impairment loss is calculated by using statistical models that consider the following factors:
• Exposure at default (EAD) is the amount of risk exposure at the date of default by the counterparty. The timing of default is considered in the PD measurement.
• In accordance with ~~IFRSs,~~IFRS, the exposure at default used for this calculation is the current exposure, as reported in the balance sheets.
• Probability of default, or “PD”, is the probability of the borrower failing to meet its principal and/or interest payment obligations.
PD is measured using a time horizon of one ~~year when the transaction is at stage one or for the life time of the transaction, when the it is at stages 2 or 3;~~year; that is, it quantifies the probability of the borrower ~~default.~~default in the coming year. A loan will be defaulted if either the principal or interest become past due by ninety days or more or the loan is active but there are doubts about the solvency of the counterparty (subjective doubtful assets).
• Loss is given default, or “LGD”, is the loss arising in the event of default.
LGD calculation is based on the net charge offs on defaulted loans, considering the guarantees/collateral associated with the loans, the income and expenses associated with the recovery process and the timing of default.
• Loss identification period, or "LIP - Loss identification period", is the period of time between the occurrence of a loss event and the identification of evidence of such loss. In other words, it represents the time horizon from the occurrence of the credit loss to the effective confirmation of such loss.
• In addition, prior to loans be written-off (which is only done after the Bank have completed all recovery efforts and after about 360 days late), it is registered fully provision of the loan´s remaining balance so this provision (allowance for loan losses) fully covers the losses. Thus, the Bank that its loan loss allowance methodology has been developed to meet its risk metrics and capture loans that could potentially become impaired.
~~Consolidated Financial Statements | December 31, 2020 | F-29~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
iii. Debt or equity instruments classified as financial assets measured at fair value through other comprehensive income
The difference between the amortized cost and fair value of debt or equity instruments classified as available for sale are recorded in equity under "Other Comprehensive Income."
When there is objective evidence that the aforementioned differences are due to a prolonged decline in fair value, they are no longer recognized in equity and are reclassified, at the cumulative amount at that date, to the consolidated income statement. Losses from a prolonged decline in fair value relating to an investment in equity instruments are not reversed in subsequent periods.
i) Repurchase agreements
Purchases (sales) of financial instruments under a non-optional resale (repurchase) agreement at a fixed price (repos) are recognized in the consolidated financial statements as financing granted (received), based on the nature of the debtor (creditor), under Loans and advances with Bacen, Loans and advances to credit institutions or Loans and advances to clients (Deposits from Bacen, Deposits from credit institutions or Client deposits).
Differences between the purchase and sale prices are recognized as interest over the duration of the contract.

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* Values expressed in thousands, except when indicated.
j) Accounting for leases
~~i. Financial leases~~
Financial leases, until December 31, 2018, are leases that transfer substantially all the risks and rewards incidental to ownership of the leased asset to the lessee. From January 1, 2019, see note 1.c.1.
When the consolidated entities act as the lessors of an asset, the sum of the present value of the lease payments receivable from the lessee, including the exercise price of the lessee’s purchase option at the end of the lease term when such exercise price is sufficiently below fair value at the option date such that it is reasonably certain that the option will be exercised, is recognized as lending to third parties and is therefore included under Financial Assets Measured At Amortized Cost in the consolidated financial statements.
The finance income arising from these contracts is credited in the heading “Interest and similar income” in the consolidated income statement in order to achieve a constant rate of return over the deadline of the lease.
~~k) Accounting for Leases - IFRS 16~~
As of January 1, 2019, the Bank adopted IFRS 16, which replaces IAS 17.
I. ~~Transition~~
~~As permitted by the specific transition provisions, Banco Santander has chosen to apply the rules in a modified retrospective manner, the effects of which were applied on January 1, 2019.~~I. Lease Identification
~~The changes in accounting practices resulting from the~~Upon adoption of IFRS 16, ~~have been applied to assets under right of use as part of tangible assets and~~the Bank recognizes lease liabilities, ~~as other liabilities in the balance sheet.~~
~~II.~~ ~~Lease Identification~~
~~In adopting IFRS 16, the Bank recognized lease liabilities involving leases that had already been classified as “commercial leases” in accordance with~~following the principles of ~~IAS 17~~IFRS 16 - Leases.

~~For the initial application of the standard, the Bank used the~~The following ~~practical procedures allowed:~~
~~• The exclusion of initial direct costs for measuring the right-of-use asset on the initial application date;~~
~~• It was decided not to separate the service provision component embedded in leasing contracts; and~~
~~• The Bank also decided not to apply IFRS 16 to contracts that were not identified as containing a lease under IAS 17 and IFRIC 4 - Determination of whether a Contract contains a Lease.~~
~~Consolidated Financial Statements | December 31, 2020 | F-30~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
~~Additionally, the following~~exemptions from recognition ~~exemptions~~ are also being used:
• Accounting for ~~operating~~ leases with a remaining term of less than 12 months onas at 1 January 1, 2019 as short-term leases;
• Accounting for ~~operating~~ leases ~~whose~~where the underlying asset is of low value;
• Until January 1, 2019, leases of fixed assets, in which the Bank, as a lessee, held substantially all the risks and ~~benefits~~rewards of ownership were classified as ~~finance~~ leases. The balances ~~presented~~shown are immaterial.
The Bank leases ~~various~~several properties and equipment. Predominantly, the assets subject to the lease agreements are real estate ~~deals referring~~business related to the ~~agencies.~~branches.
Banco Santander does not have ~~any rights of use~~right-of-use assets that ~~fall within~~meet the definition of investment properties.
~~III.~~ ~~Lease term~~
~~The lease~~II. Lease Term
Lease agreements are individually formalized, analyzed and renegotiated ~~individually~~ and contain a wide range of different terms and conditions. The Bank assesses the term of the contract, as well as the intention to remain in the properties. Thus, ~~the term~~time estimates may vary according to ~~the~~ contractual conditions, considering extension options, and also according to legal provisions.
The Bank assumes that the fines for ~~contract~~contractual termination ~~collected~~charged before the due date do not make up a significant portion.
~~The lease~~Lease agreements dodoes not contain restrictive clauses, but ~~the~~ leased assets cannot be used as collateral for loans.

~~IV.~~ ~~Initial Measurement~~
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* Values expressed in thousands, except when indicated.
III. Initial Measurement
In
On their initial ~~registration,~~recording, leases are recognized as a right-of-use asset and a corresponding liability on the date ~~that~~ the leased asset becomes available for use by the Group.
The right of use ~~right~~ to be ~~registered~~recorded is measured at cost ~~against~~as a contra entry to the lease liability ~~which~~that represents the present value of lease payments that ~~have~~are not ~~been~~ made to date. ~~The lease~~Lease payments are discounted using the lessee's incremental ~~interest rate on the lessee's loan.~~borrowing rate. There is no onerous contract that required an adjustment to the ~~usage~~ rights of use to be recorded as assets on the date of ~~initial~~first-time adoption.
~~Usage rights~~Rights of use are measured at amortized cost in accordance with the following:
• The initial measurement value of the ~~initial measurement of the leasing~~lease liability;
• Any lease payments made before or on the ~~reduced start~~commencement date ofless any incentive received;
• Any ~~initial cost~~ directly ~~allocated;~~attributable upfront cost; and
• Restoration costs, if the requirements of IAS 37 are met for ~~the~~ recording of Provisions, Contingent Liabilities and Contingent Assets.
Grupo Santander uses as an incremental rate the interest rate ~~that~~ it would have to pay when borrowing the funds necessary ~~resource~~ to obtain the asset with a value similar to the asset ~~under~~subject to the lease, for a term, guarantee and similar economic scenarios, represented in Santander Brasil, by the curve cost of funding ~~cost~~ (funding) of a free asset, applied individually to each contract ~~according to~~in accordance with the estimates projected ~~estimates for~~as the lease term.
Lease liabilities include the net present value of the following lease payments:
• Reduced fixed payments ~~for~~of any incentive;
• Variable payments that are based on a rate or index;
• Amounts expected to be paid by the lessee based on the residual value of guarantees;
• The exercise price of a call option, if the lessee ~~is reasonably certain~~has reasonable certainty about ~~the exercise of~~exercising the option; and
• ~~Penalty payments~~Payment of penalties for terminating the lease if the term of the transaction reflects the exercise of the option by the lessee.
Lease liabilities are mainly adjusted for inflation (IGP-M), whose estimated projections on the base date of December 31, 2021 are presented below:
IGP-M Projection (annual) ~~Consolidated Financial Statements | December 31, 2020 | F-31~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
~~Below is presented the projected inflation (IGP-M) on December 31, 2020:~~
~~Projected IGP-M (annualized)~~
   ~~Up to~~   Until 3 months ~~26.1~~ %17.8%
From 3 to 12 months ~~5.3~~ %6.6%
From 1 to 3 years 4 %3.5%
From 3 to 5 years 4 %3.5%
More than 5 years 4 %3.5%
V. ~~Subsequent measurement~~
IV. Subsequent Measurement
After the initial measurement, the values of the assets recorded as ~~rights~~right of use are being updated using the cost method, sothus any accumulated depreciation is deducted monthly, in accordance with the criteria of IAS ~~16/~~16 / CPC 27 - ~~Property, Plant and Equipment in the~~Fixed Assets on asset depreciation ~~of the~~ right of ~~use asset.~~ use and corrected any remeasurement of the lease liability, ~~when~~where applicable.
The lease liability initially recorded is updated monthly by ~~monthly~~ increasing the ~~liability~~ amount of the liability for the interest ~~installment~~portion of each lease agreement and reducing the amount of monthly lease payments and ~~adjusted~~corrected for any lease ~~remeasurements,~~remeasurement, when applicable.
The lease liability is remeasured, in the event of changes in the lease term or ~~the~~ contract value, the amount resulting from the new determination of the lease liability is recorded ~~against~~as a contra entry to the corresponding ~~asset in use right.~~right-of-use asset.

~~The rights of use are subject of impairment test.~~
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* Values expressed in thousands, except when indicated.
The effects of ~~adopting~~the adoption of IFRS 16 have an impact exclusively on the operating segment ~~- Banco Comercial.~~– Commercial Banking.
~~l) Non-current assets~~
k) Assets held for sale
“~~Impairment losses”~~Assets held for sale” includes the carrying amount of individual items or disposal groups or items forming part of a business unit earmarked for disposal (“Discontinued operations”), whose sale in their present condition is highly probable and is expected to occur within one year, the property or other ~~non-current~~ assets received by the consolidated entities as total or partial settlement of their debtors' payment obligations to them are deemed to be ~~non-current~~ assets held for sale through the completion of actions which normally occurs up to one year.
~~Non-current assets~~Assets held for sale are measured at the lower of fair value less costs to sell and their carrying amount at the date of classification in this category. These assets held for sale are not depreciated.
Impairment losses on an asset or disposal group arising from a reduction in its carrying amount to its fair value (less costs to sell) are recognized in the heading “Gains (losses) on disposal and expenses of ~~non-current~~ assets held for sale not classified as discontinued operations” in the consolidated income statement. The gains on ~~a non-current~~ asset held for sale resulting from subsequent increases in fair value (less costs to sell) increase its carrying amount and are recognized in the consolidated income statement up to an amount equal to the impairment losses previously recognized.
m) l) Residual maturity periods and average interest rates
The analysis of the maturities of the balances of certain items in the consolidated financial statements at December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019 is provided in note 43-d.
n) m) Tangible assets
“Tangible assets” includes the amount of buildings, land, furniture, vehicles, computer hardware, right-of-use of assets and other fixtures owned by the Bank, including tangible assets received by the Bank in full or partial satisfaction of financial assets representing receivables from third parties which are intended to be held for continuing use and tangible assets acquired under finance leases are presented at acquisition cost, less the related accumulated depreciation and any impairment losses (net carrying amount higher than recoverable amount).
Depreciation is calculated, using the straight-line method, on the basis of the acquisition cost of the assets less their residual value. The land on which the buildings and other structures are located has an indefinite life and, therefore, it is not depreciated.
~~Consolidated Financial Statements | December 31, 2020 | F-32~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
The Depreciation expense on tangible ~~asset depreciation charge~~assets is recognized in the consolidated statement of income ~~statement~~ and is basically calculated ~~basically~~ using the following depreciation rates (based on the average years of estimated useful ~~life~~lives of the ~~various~~different assets):
Annual

Rate
Buildings for own use 4%
Furniture 10%
Fixtures 10%
Office and IT equipment 20%
Leasehold improvements 10% or up to contractual maturity
The Bank assesses at end of each reporting period, if there is indication that the items of tangible assets carrying amount may be impaired, that is if there is an asset with its carrying amount bigger than its recoverable amount, either for ~~use~~use or sale.

Once an impairment loss of tangible assets is identified, it is adjusted to reach its recoverable amount by recognizing an impairment loss recorded in the heading "Impairment loss on other assets (Net)". Additionally, the value of depreciation of that asset is recalculated in order to adjust the value of the life of the asset.

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* Values expressed in thousands, except when indicated.
In case of evidence or indication of a recovery of a tangible asset value, the Bank recognizes the reversal of the impairment loss amount recorded in prior years and should adjust the future depreciation expenses according to the lifetime value of the asset. Under no circumstance, a reversal of impairment loss of an asset will increase its carrying amount higher than the amount that it would have had no impairment loss been recognized in prior years.

Upkeep and maintenance expenses relating to property, plant and equipment for own use are recognized as an expense in the period in which they are incurred.

o) n) Intangible assets

Intangible assets are identifiable non-monetary assets (separable from other assets) without physical substance which arise as a result of a legal transaction or software development. Only assets whose cost can be estimated reliably and from which the consolidated entities consider it probable that future economic benefits will be generated are recognized.

Intangible assets are recognized initially at acquisition or production cost and are subsequently measured deducting any accumulated amortization and any accumulated impairment losses.

i. Goodwill

In the acquisition and/or merger of investment in subsidiary, any difference between the investment cost and the investor's share in net fair value of assets, liabilities and contingent liabilities of the investee (subsidiary or affiliate) is accounted for in accordance with IFRS 3 "Business Combination ".

Goodwill is only recognized when it has been acquired for consideration and represents, therefore, a payment made by the acquirer in anticipation of future economic benefits from assets of the acquired entity that are not capable of being individually identified and separately recognized.

~~On an~~At the end of each annual ~~basis~~reporting period or whenever there is any indication of impairment goodwill is reviewed for impairment (i.e. a reduction in its recoverable amount to below its carrying amount) and, if there is any impairment, the goodwill is written down with a charge to Impairment on non financial assets (net) - Intangible assets in the consolidated income statement.

The net fair value adjustments of assets, liabilities and contingent liabilities of the investee in relation to their carrying amount are allocated to individual identifiable assets acquired and liabilities assumed that comprise them based on their respective fair values at the date of purchase.

In the case of a business combination made in stages, prior interest in the acquired is measured again at fair value at the acquisition date when control of the acquired is obtained.
~~Consolidated Financial Statements | December 31, 2020 | F-33~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

ii. Other intangible assets

Other intangible assets are non-monetary assets without physical substance. Generally arising from software development and acquisition of rights that can generate benefits for the Bank. They can have characteristics of definite or indefinite period.

Other intangible assets can have an indefinite useful life -when, based on an analysis of all the relevant factors, it is concluded that there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows for the consolidated entities- or a finite useful life, in all other cases.

Intangible assets with indefinite useful lives are not ~~amortized. At~~amortized, but rather at the end of each ~~accounting~~reporting period or whenever there is any indication of impairment the ~~entity~~consolidated entities review the ~~intangible asset classification as with~~remaining useful lives of the assets in order to determine whether they continue to be indefinite ~~useful live, in~~and, if this is not the case, ~~this classification is maintained these assets are subject~~ to ~~annual impairment test (IAS36).~~take the appropriate steps.

Intangible assets with finite useful lives are amortized over those useful lives using methods similar to those used to depreciate tangible assets. The amortization expense is recognized under "Depreciation and amortization" in the consolidated income statement.

The Bank assesses at the end of each period, if there is any indication that the items of intangible assets may present an impairment loss, i.e. an asset that presents the carrying amount higher than the net realizable value. After identifying any reduction in impairment loss, it is adjusted to reach its fair value.

Measurement of the recoverable amount of other intangible assets - software is made based on the value in use, as well as the analysis of the discontinuity of the asset in relation to the activities of the Bank.
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* Values expressed in thousands, except when indicated.
Expenditures for acquisition and development of software are amortized over a maximum period of 5 ~~years.~~years.

p)
o) Other assets

Other Assets include the balances of all prepayments and accrued income (excluding accrued interest), acquired client list, the net amount of the difference between pension plan obligations and the fair value of the plan assets with a balance on the entity’s behalf, when this net amount shall be disclosed in the consolidated financial statements, and the amount of any other assets not included in other items.

The Bank uses the value in use of client relationship as a basis for measuring the impairment since it is not reasonably possible to determine the net value of sales, because there is no basis for making a reliable estimate of the value to be obtained by selling the asset in a transaction at cumulative basis, between knowledgeable, willing parties. The value in use of client lists acquired related to the purchase of the "payroll" will be determined individually. An analysis that aims to demonstrate the expectation of generating future economic benefit and the present value of expected cash flows is prepared by the business areas. Quarterly, these analyses are reviewed based on the actual cash flows of each business (value in use), which are compared with the carrying amount, checking whether there is a need to record a loss on non-recoverability.

q) p) Liabilities for insurance contracts

The liabilities for insurance contracts are comprised substantially by actuarial provisions for current and future benefits (PMBaC and PMBC). Insurance contracts are contracts under which the Bank accepts a significant risk, other than a financial risk, from a policyholder by agreeing to compensate the beneficiary on the occurrence of an uncertain future event by which the policyholder will be adversely affected.

Insurance liabilities are recognized when the contract is entered into and the premiums are charged. Contracts that have been classified as insurance are not ~~reclassified.~~reclassified subsequently. The liability is derecognized when the contract expires or is cancelled.

All valuation methods used by the subsidiaries are based on the general principle that the carrying amount of the net liability must be sufficient to meet any reasonably foreseeable obligation resulting from the insurance contracts. Investment assumptions are either determined by the local regulator and based on management’s future expectations. In the later case, the anticipated future investment yield is set by management, considering the available market information and economic indicators. A significant assumption related to estimated gross profits on variable annuities, is the annual long-term growth rate of the underlying assets.

At each financial statement date an assessment is made in order to verify whether the actuarial provisions are adequate.

~~Consolidated Financial Statements | December 31, 2020 | F-34~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
In the years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~,2019, as determined by IFRS 4 - Contracts classification and subsequent amendments, the adequacy of the technical provisions constituted were evaluated through Liability Adequacy Test ~~(LAT)~~(LAP).

At December 31, ~~2020,~~2021, the LAT indicated the need for the additional constitution of technical provisions amounted to R$209,277 (12/31/2020 - R$285,554 ~~(12/~~ and 12/31/2019 - R$357,539 ~~and 12/31/2018 - R$215,754)~~) for Indemnity Funds for Benefit (FGB) plans.

r) q) Provisions for legal and administrative proceedings, commitments and other provisions

Banco Santander and its subsidiaries are involved in lawsuits and administrative proceedings related to tax, labor and civil, in the normal course of their activities.

The provisions include legal obligations, lawsuits and administrative proceedings related to tax and social security obligations, whose object is to challenge their legality or constitutionality, regardless of the assessment that the probability of success, the amounts are fully recognized in the financial statements.

Provisions are reviewed at each financial statement date and adjusted to reflect the current best estimate and may be fully or partially reversed or reduced when the outflows of resources and obligations relevant to the process are no longer probable, including decay of legal deadlines, among others.

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* Values expressed in thousands, except when indicated.
Provisions for the lawsuits and administrative proceedings are recorded when their risk of loss is considered probable and the amounts can be reliably measured, based on the nature, complexity and history of lawsuits, the legal opinion of the internal and external advisors, based on the best available information. For those lawsuits for which the risk of loss is possible, are not recorded and the information is disclosed in the financial statements and for the lawsuits for which the risk of loss is remote, no disclosure is required.

Contingent assets are not recognized, except when there are guarantees or favorable lawsuits decisions, about which features no longer fit, characterizing the gain as practically certain. Assets with probable success, if any, are only disclosed in the financial statements.

On the favorable decisions to Santander, the counterparty has the right, in the event of specific legal requirements, to file a rescission lawsuit within a period determined by current legislation. Rescission lawsuits are considered as new events and will be evaluated for contingent liability purposes if and when they are filed.

s) r) Other liabilities
“Other liabilities” includes the balance of all accrued expenses and deferred income, excluding accrued interest, and the amount of any other liabilities not included in other categories.

t) s) Share-based compensation

The Bank has long-term compensation plans with vesting conditions. The main vesting conditions are: (1) service conditions, since it is necessary that the participant continues to be employed by the Bank during the term of the Plan for his rights to vest; (2) performance conditions, since the number of Units that ultimately vest will be determined according to the result of certain performance parameter of the Bank, such as: total Shareholder Return (TSR) and may be reduced in case of failure to achieve the goals of reducing the Return on Risk Adjusted Capital (RORAC), comparison between actual and budget in each year, as determined by the Board of Directors and (3) market conditions, since some parameters are linked to the market price of the Bank´s shares. The Bank measures the fair value of the services rendered by reference to the fair value of the equity instruments granted at the grant date, considering the market conditions for each plan when estimating the fair value.

Settlement in shares

The Bank measures the fair value of the services received by reference to the fair value of the equity instruments granted at the grant date, considering the market conditions for each grant when estimating the fair value. In order to recognize the personnel expenses against equity reserves throughout the vesting period, as the services are received, the Bank considers the treatment of service conditions and recognize the amount for the services received during the vesting period based on the best available estimate of the number of equity instruments expected to vest. Semi-annually, the Bank reviews the estimate of the number of equity instruments expected to vest.

Settlement in cash

~~Consolidated Financial Statements | December 31, 2020 | F-35~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
For cash-settled share-based compensation (in the form of share appreciation rights), the Bank measures the fair value of services rendered and the corresponding liability incurred, based on the fair value of the share appreciation rights at the grant date and until the liability is settled. The Banks remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period. In order to recognize the personnel expenses against a provision in “other liabilities” throughout the vesting period, reflecting the period as the services are received, the Bank bases the total liability on the best estimate of the number of share appreciation rights that will vest at the end of the vesting period and recognizes the amount for the services received during the vesting period based on such best available estimate. Periodically, the Bank reviews such estimate of the number of share appreciation rights that will vest at the end of vesting period.

u) t) Recognition of income and expenses

The most significant criteria used by the Bank to recognize its income and expenses are summarized as follows:

i. Interest income, interest expenses and similar items

Interest income, interest expenses and similar items are generally recognized on an accrual basis using the effective interest method.

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* Values expressed in thousands, except when indicated.
ii. Commissions, fees and similar items

Fees and commission income and expenses are recognized in the income statement using criteria that vary according to their nature (note 34). The main criteria are as follows:

• Fee and commission income and expenses relating to financial assets and financial liabilities measured at fair value through profit or loss are recognized when paid;

• Those arising from transactions or services that are performed over a period of time are recognized over the life of these transactions or services; and

• Those relating to services provided in a single act are recognized when the single act has been performed.
iii. Non-financial income and expenses
These are recognized for accounting purposes on an accrual basis.
iv. Deferred collections and payments

These are recognized for accounting purposes at the amount resulting from discounting the expected cash flows at market rates.

v. Loan arrangement fees

Loan arrangement fees, mainly loan origination and application fees, are accrued and recognized in the income statement over the term of the loan. In the case of loan origination fees, the portion relating to the associated direct costs incurred in the loan arrangement is recognized immediately in the consolidated income statement.

v) u) Guarantees

v.1) Financial guarantees

“Financial guarantees” are defined as contracts whereby an entity undertakes to make specific payments for a third party if the latter does not do so, irrespective of the various legal forms they may have, such as guarantees, irrevocable documentary credits issued or confirmed by the entity, among others.

The Bank initially recognizes the commission of the financial guarantees as liability in the consolidated financial statements at fair value, which is generally the present value of the fees, commissions and similar interest receivable from these contracts over their term.

Financial guarantees, regardless of the guarantor, type of instrument or other circumstances, are reviewed periodically so as to determine the credit risk to which they are exposed and, if appropriate, to consider whether a provision is required. The credit risk is determined by application of criteria similar to those established for quantifying impairment losses on debt instruments measured at amortized cost.

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* Values expressed in thousands, except when indicated.
The provisions made for these transactions are recognized in the heading “Provisions - Provisions for contingent liabilities, commitments and other provisions” in the consolidated financial statements (note 22).

If a specific provision is required for financial guarantees, the related unearned commissions are recognized in the heading “Financial liabilities at amortized cost – Other financial liabilities” in the consolidated financial statements are reclassified to the appropriate provision.

v.2) Guarantees and Credit Risk Mitigation Policy

Banco Santander controls the credit risk using the collateral in its operations. Each business unit is responsible for credit risk management and formalizes the use of collateral in its lending policies.

Banco Santander uses guarantees in order to increase its ability to recover operations subject to credit risk. The guarantees can be fiduciary, real, legal structures with power mitigation and compensation agreements. Annually the bank reviews its guarantees policies to capture changes in the market, in the ~~caracteristics~~characteristics of the assets given as guarantees and the conditions of the assets, these are examples of technical parameters reviewed.

Credit limits are continually monitored and changed in client behavior function. Thus, the potential loss values represent a fraction of the amount available.

w)
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* Values expressed in thousands, except when indicated.
v) Assets under management and investment and pension funds managed by the Bank

Assets owned by third parties and managed by the consolidated entities are not presented in the consolidated financial statements. Management fees are included in “Fee and commission income” in the consolidated income statement. Note 43-b contains information on the third-party assets managed by the Bank.

The investment funds and pension funds managed by the consolidated entities are not recorded in the consolidated financial statements since the related assets are owned by third parties. The fees and commissions earned in the year for the services rendered by the Bank entities to these funds (asset management and custody services) are recognized in the heading “Fee and commission income” in the consolidated income statement.

x) w) Post-employment benefits

Post-employment benefit plans include the commitments of the Bank: (i) addition to the benefits of public pension plan; and (ii) healthcare in case of retirement, permanent disability or death for those employees, and their direct beneficiaries.

Defined contribution plans

Defined contribution plans isare the post-employment benefit plan which the Bank, and its subsidiaries, as the sponsoring entity pays fixed contributions into a pension fund, not having a legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all benefits relating to services provided in the current and in previous periods.

The contributions made are recognized in the heading "Interest Expense and Similar Charges" in the income statement.
Defined benefit plans

Defined benefit plan is the post-employment benefit plan which is not a defined contribution plan and is shown in Note 21. For this type of plan, the sponsoring entity's obligation is to provide the benefits agreed with the former employees, assuming the potential actuarial risk that benefits will cost more than expected.

For defined benefit plan, the amendment of IAS 19 established fundamental changes in the accounting for and disclosure of employee post-employment benefits such as removing the corridor approach in the accounting for the obligation of the plans, as well as changes in the criteria for recognition of conventional interest of plan assets (valuation based on the discount rate actuarial liability).

In addition, there is full recognition in liabilities heading of actuarial losses (actuarial deficit) not recognized previously when they occur, which its counterparty is a heading in the stockholders’ equity (Other Comprehensive Income).

Main Definitions
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* Values expressed in thousands, except when indicated.

- The present value of the defined benefit obligation is the present value without any deduction from the plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and past periods.

- Deficit or surplus is: (a) the present value of the defined benefit obligation, less (b) the fair value of plan assets.

- The sponsoring entity may recognize the plan assets in the financial statements when they meet the following characteristics: (i) the fund assets are sufficient to meet all employee benefit plan or the sponsor obligations; or (ii) the assets are returned to the sponsoring entity in order to reimburse it for employee benefits already paid.

- Actuarial gains and losses correspond to changes in the present value of defined benefit obligation resulting from: (a) adjustments by experience (the effects of differences between the actuarial assumptions adopted and what has actually occurred); and (b) effects of changes in actuarial assumptions.

- Current service cost is the increase in the present value of the defined benefit obligation resulting from employee service provided in the current period.

- The past service cost is the change in present value of defined benefit obligation for employee service provided in prior periods resulting from a change in the plan or reductions in the number of employees covered.

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* Values expressed in thousands, except when indicated.
Post-employment benefits are recognized in income in the headings "Interest expense and similar Charges" and "Provisions (net)".

The defined benefit plans are recorded based on an actuarial study, conducted annually by an external consulting firm, at the end of each year to be effective for the subsequent period.

y) x) Other long-term employee benefits

“Other long-term employee benefits”, defined as obligations to early retirees considered as those who have ceased to render services at the entity but who, without being legally retired, continue to have economic rights relating to the entity until they acquire the legal status of retiree, long-service bonuses, obligations for death of spouse or disability before retirement that depend on the employee's length of service at the entity and other similar items, are treated for accounting purposes, where applicable, as established above for defined benefit post-employment plans, except that all past service costs and actuarial gains and losses are recognized immediately (note 21).

z) y) Termination benefits

Termination benefits are recognized when there is a detailed formal plan identifying the basic changes to be made, provided that implementation of the plan has begun, its main features have been publicly announced or objective facts concerning its implementation have been disclosed.

~~aa)~~ z) Income taxes (IRPJ), Social Contribution (CSLL), Social Integration Program (PIS) and Tax for Social Security Financing (COFINS)

~~Income~~The income tax expense is obtained by adding the Income Tax, Social Contribution, PIS and COFINS. Current Income Tax and Social Contribution ~~result~~arise from the application of the respective rates on taxable income, and the PIS and COFINS rates applied on the respective calculation ~~basis~~base provided for in the specific legislation, also added ~~also with~~to the changes in deferred tax assets and liabilities recognized in the consolidated income statement. The CSLL rate, for banks of any kind, was ~~increased~~raised from 15% to 20% ~~effective as of March 1, 2020, pursuant to Article 32 of Constitutional Amendment 103, published on November 13, 2019.~~
Income tax is calculated at the rate of 15% plus a surcharge of 10% levied on the profit, after adjustments determined by tax legislation. The social contribution (CSLL) is calculated at the rate of 20% for financial institutions (15% up to August 2015) and 9% for other companies, levied on the profit, after considering the adjustments determined by tax legislation. The CSLL rate, for banks of any kind, was increased from 15% to 20%, effective as of March 1, 2020, pursuant to article 32 of Constitutional Amendment 103, published on November 13, 2019.
The IRPJ charge is calculated at the rate of 15%, plus a surcharge of 10%, applied on profit, after making the adjustments determined by tax legislation. The CSLL is calculated at the rate of 15% for financial institutions and legal entities of private insurance and capitalization and 9% for other companies, levied on profit, after considering the adjustments determined by tax legislation.
The CSLL rate for banks of any kind, financial institutions, private insurance companies and capitalization companies (financial sector companies) was increased by 5% for the base period between July 1, 2021 and 31 December 2021, pursuant to Law 14,183/2021 (result of the conversion into the Provisional Measure Law (MP) 1,034/2021).

The expense for corporate income tax is recognized in the consolidated income statement, except when it results from a transaction recognized directly in equity, in which case the tax effect is also recognized in equity.

The current income tax expense is calculated as the sum of the current tax resulting from application of the appropriate tax rate to the taxable profit for the year (net of any deductions allowable for tax purposes), and of the changes in deferred tax assets and liabilities recognized in the consolidated income statement.
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* Values expressed in thousands, except when indicated.

Tax assets classified as "Current" are amounts of tax to be recovered within the next twelve months.

Tax liabilities includes the amount of all tax liabilities (except provisions for taxes), which are broken down into “current” amount payable in respect of the income tax on the taxable profit for the year and other taxes in the next twelve months.

Deferred tax assets and liabilities include temporary differences, which are identified as the amounts expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities and their related tax bases, and tax loss and tax credit carry forwards. These amounts are measured at the tax rates that are expected to apply in the period when the asset is realized or the liability is settled.

Deferred tax assets are only recognized as temporary differences to the extent that it is considered probable that the consolidated entities will have sufficient future taxable profits against which the deferred tax assets can be utilized, and the deferred tax assets do not arise from the initial recognition (except in a business combination) of other assets and liabilities in a transaction that affects neither taxable profit or accounting profit. Other deferred tax assets (tax loss and tax credit carry forwards) are only recognized if it is considered probable that the consolidated entities will have sufficient future taxable profits against which they can be utilized.

Due to the change in social contribution tax rate, the group companies made the remeasurement of tax credit assets and deferred liabilities at the rates applicable to the period in which estimates the realization of assets and settlement of liabilities.

Income and expenses recognized directly in stockholders equity are accounted as temporary differences.

The deferred tax assets and liabilities recognized are reassessed at each financial statement date in order to ascertain whether they still exist, and the appropriate adjustments are made on the basis of the findings of the analyses performed.

Under the current regulation, the expected realization of tax credits is based on the Bank's projections of future results and on technical ~~technical~~ analysis of the realization of the temporary differences, as shown in ~~Note~~note 23.
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* Values expressed in thousands, except when indicated.

PIS (Social Integration Program) and COFINS (Tax for Social Security Financing) have been computed at a combined rate of 4.65% on certain gross revenues and expenses. Financial institutions may deduct financial expenses in determining the PIS/COFINS tax basis. PIS and COFINS are considered a profit-base component (net basis of certain revenues and expenses), therefore and accordingly to IAS 12 it is recorded as income taxes.
• IFRIC 23 - Published in June 2017 by the IASB, IFRIC 23 - Uncertainty ~~over~~about the Treatment of Income Tax ~~Treatments~~ on ~~Profit has~~Income is mandatory ~~application as of~~from January 1, 2019 and aims to clarify procedures for the application of recognition and measurement requirements established in ~~the~~ IAS 12 ofIncome Taxes ~~on Profit~~ when there is uncertainty ~~about~~as to the ~~treatments~~treatment to be adopted for ~~the Taxes~~Income Taxes. Said standard did not generate significant impacts on ~~Profit.~~these Financial Statements.

The Bank carried out analyzes on the procedures already adopted for accounting and presentation of Income Taxes in relation to the content of IFRIC 23 and it was possible to conclude that there are no impacts on related measurements nor disclosures.
~~bb)~~aa) Consolidated cash flow statements

The following terms are used in the consolidated cash flow statements with the following meanings:

• Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquid investments that are subject to an insignificant risk of changes in value and original maturity of three months or less.

• Operating activities: the primary revenue-generating activities of credit institutions and other activities that are not investing or financing activities.

• Investing activities: the acquisition and disposal of long-term assets and other investments not included in cash and cash equivalents.

• Financing activities: activities that result in changes in the size and composition of the equity and liabilities that are not operating activities.

In preparing the consolidated cash flows statement, the high liquidity investments with insignificant risk of changes in their values were classified as "Cash and cash equivalents". The Bank classifies as cash and cash equivalents balances recorded in the headings ~~"Cash and balance with the Brazilian Central Bank"~~"Cash" and "Loans and amounts due from credit institutions" in the consolidated financial statements, except restricted resources and long-term transactions.

The interest paid and received correspond to operating activities of Banco Santander.

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* Values expressed in thousands, except when indicated.

* Values expressed in thousands, except when indicated.
3. 3. Basis of consolidation

Below are highlighted the controlled entities and investment funds included in the consolidated financial statements of Banco Santander. Similar information regarding companies accounted by the equity method by the Bank is provided in Note 11.
Quantity of Shares or Quotas Owned (in Thousands) 12/31/2021
Investments Activity Common Shares and Quotas Preferred Shares Direct Participation Consolidated Participation
Controlled by Banco Santander
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. Recovery of Defaulted Credits 2,142,011 -    100.00% 100.00%
Aymoré Crédito, Financiamento e Investimento S.A. (Aymoré CFI) Financial 2,877 -    100.00% 100.00%
BEN Benefícios e Serviços S.A.  (BEN Benefícios) Other Activities 90,000 -    100.00% 100.00%
Esfera Fidelidade S.A. Other Activities 10,001 -    100.00% 100.00%
GIRA - Gestão Integrada de Recebíveis do Agronegócio S.A. Tecnology 381 -    80.00% 80.00%
Rojo Entretenimento S.A. Other Activities 7,417 -    94.60% 94.60%
Sanb Promotora de Vendas e Cobrança Ltda. Other Activities 30,988 -    100.00% 100.00%
Sancap Investimentos e Participações S.A. (Sancap) Holding 23,538,159 -    100.00% 100.00%
Santander Brasil Administradora de Consórcio Ltda. (Santander Brasil Consórcio) Buying Club 436,441 -    100.00% 100.00%
Santander Corretora de Títulos e Valores Mobiliários S.A. (Santander CCVM) Broker 14,067,640 14,067,640 99.99% 100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A. (Santander Corretora de Seguros) Other Activities 7,184 -    100.00% 100.00%
Santander Holding Imobiliária S.A. Holding 558,601 -    100.00% 100.00%
Santander Leasing S.A. Arrendamento Mercantil (Santander Leasing) Leasing 164 -    100.00% 100.00%
F1RST Tecnologia e Inovação Ltda. Other Activities 196,979 -    100.00% 100.00%
Paytec Tecnologia em Pagamentos Ltda. Other Activities 348 -    100.00% 100.00%
SX Negócios Ltda. Other Activities 75,050 -    100.00% 100.00%
Controlled by Aymoré CFI
Bank PSA   Bank 105 -    0.00% 50.00%
Bank Hyundai Capital Brasil S.A. Bank 150,000 -    0.00% 50.00%
Solutions 4Fleet Other Activities 328 -    0.00% 80.00%
Controlled by Santander Leasing
Bank Bandepe S.A. Bank 3,589 -    0.00% 100.00%
PI Distribuidora de Títulos e Valores Mobiliários S.A. Leasing 348 -    0.00% 100.00%
Controlled by Sancap
Santander Capitalização S.A. (Santander Capitalização) Capitalization 64,615 -    0.00% 100.00%
Evidence Previdência S.A. Private Pension 42,819,564 -    0.00% 100.00%
Controlled by Santander Holding Imobiliária S.A.
Summer Empreendimentos Ltda. Other Activities 17,084 -    0.00% 100.00%
Apê11 Tecnologia e Negócios Imobiliários S.A. Other Activities 3,808 -    0,00% 90,00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.
Return Capital Serviços de Recuperação de Créditos S.A. Collection and Recover of Credit Management 200 -    0.00% 100.00%
Liderança Serviços Especializados em Cobranças Ltda. Collection and Recover of Credit Management 250 -    0.00% 100.00%
Controlled by Paytec Tecnologia em Pagamentos Ltda.
Paytec Logística e Armazém Ltda. Other Activities 100 -    0.00% 100.00%
Controlled by PI Distribuidora de Títulos e Valores Mobiliários S.A.
Toro Corretora de Títulos e Valores Mobiliários Ltda. Broker 19,140 -    0.00% 60.00%
Controlled by Toro Corretora de Títulos de Valores Mobiliários Ltda.
Toro Investimentos S.A. Broker 98,400 -    0.00% 100.00%
Jointly Controlled Companies by Sancap
Santander Auto S.A. Other Activities 22,452 -    0.00% 50.00%

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* Values expressed in thousands, except when indicated.

Quantity of Shares or Quotas Owned (in Thousands)
Investments Activity Common Shares and Quotas Preferred Shares Direct Participation Participation
Controlled by Banco Santander
Santander Leasing S.A. Arrendamento Mercantil (Santander Leasing) Leasing 84 - 78.58% 100.00%
Santander Brasil Administradora de Consórcio Ltda, (Santander Brasil Consórcio) Buying Club 238,886 - 100.00% 100.00%
Banco Bandepe S.A. Bank 3,589 - 100.00% 100.00%
Aymoré Crédito, Financiamento e Investimento S.A. (Aymoré CFI) Financial 2,877 - 100.00% 100.00%
Santander CCVM Broker 14,067,640 14.067.640 99.99% 100.00%
Santander Corretora de Seguros, Investimentos e Serviços S.A. (Santander Corretora de Seguros) Other Activities 7,184 - 100.00% 100.00%
Getnet S.A. Payment Institution 69,565 - 100.00% 100.00%
Sancap Investimentos e Participações S.A. (Sancap) Holding 23,538,159 - 100.00% 100.00%
Santander Brasil EFC Financial 75 - 100.00% 100.00%
Atual Serviços de Recuperação de Créditos e Meios Digitais S.A. Recovery of Defaulted Credits 1,464,627 - 100.00% 100.00%
Santander Holding Imobiliária S.A. Holding 481,196 - 100.00% 100.00%
Santander Brasil Tecnologia S.A. Technology 45,371 - 100.00% 100.00%
Rojo Entretenimento S.A. Other Activities 7,417 - 94.60% 94.60%
BEN Benefícios e Serviços S.A. (BEN Benefícios) Other Activities 90,000 - 100.00% 100.00%
Esfera Fidelidade S.A. Other Activities 10,001 - 100.00% 100.00%
Sanb Promotora de Vendas e Cobrança Ltda, Other Activities 6,950 - 100.00% 100.00%
Santander Tecnologia e Inovação Ltda, Other Activities 5,045 - 100.00% 100.00%
Toque Fale Serviços de Telemarketing Ltda, (Toque Fale) Other Activities 75,050 - 100.00% 100.00%
Controlled by Aymoré CFI
Banco PSA Bank 105 - - 50.00%
Banco Hyundai Capital Brasil S.A. (Note 2,c,j,1) Bank 150,000 - - 50.00%
Controlled by Santander Leasing
PI Distribuidora de Títulos e Valores Mobiliários S.A. Leasing 182 - - 100.00%
Controlled by Sancap
Santander Capitalização S.A. (Santander Capitalização) Capitalization 64,615 - - 100.00%
Evidence Previdência S.A. Private Pension 42,819,564 - - 100.00%
Controlled by Atual Serviços de Recuperação de Créditos e Meios Digitais S.A.
Return Capital Serviços de Recuperação de Créditos S.A. Collection and recover of Credit management 200 - - 100.00%
Controlled by Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.)
Return Gestão de Recursos S.A. (atual denominação social da Gestora de Investimentos Ipanema S.A.) Resources Management 11 - - 100.00%
Jointly Controlled Companies by Sancap
Santander Auto S.A. Other Activities 22,452 - - 50.00%
Controlled by Getnet S.A.
Auttar HUT Processamento de Dados Ltda, (Auttar HUT) Other Activities 3,865 - - 100.00%

Consolidated Investment Funds

·● Santander Fundo de Investimento Amazonas Multimercado Crédito Privado de Investimento no Exterior (Santander FI Amazonas);
·● Santander Fundo de Investimento Diamantina Multimercado Crédito Privado de Investimento no Exterior (Santander FI Diamantina);
·● Santander Fundo de Investimento Guarujá Multimercado Crédito Privado de Investimento no Exterior (Santander FI Guarujá);
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* Values expressed in thousands, except when indicated.
·● Santander Fundo de Investimento Unix Multimercado Crédito Privado (Santander FI Unix);
·● Santander Fundo de Investimento SBAC Referenciado DI Crédito Privado (Santander FI SBAC);
·● Santander Paraty QIF PLC (Santander Paraty) (2);
·● Prime 16 – Fundo de Investimento Imobiliário (atual denominação do BRL V - Fundo de Investimento Imobiliário - FII) (1);
·● Santander FI Hedge Strategies Fund (Santander FI Hedge Strategies) (2);
·● Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema VI - Não Padronizado (Fundo Investimento Ipanema NPL VI) (3);
· ~~Fundo de Investimento em Direitos Creditórios Multisegmentos NPL Ipanema V - Não Padronizado (Fundo Investimento Ipanema NPL V) (4);~~
·● Santander Hermes Multimercado Crédito Privado Infraestrutura Fundo de Investimentos ~~(5)~~(4); e
·● Fundo de Investimentos em Direitos Creditórios Atacado – Não Padronizado ~~(6).~~(5);
·● Atual - Multimarket Investment Fund Private Credit Investment Abroad (6);
● Verbena FCVS – Fundo de Investimento ~~Multimercado Credito Privado Investimento no Exterior (7)~~em Direitos Creditórios(7).

(1) Banco Santander was a creditor ~~for~~of certain overdue credit operations that had real estate as collateral. The operation for the recovery of these credits consists of the contribution of ~~real estate~~properties as collateral to the capital of the Real Estate Investment Fund and the consequent transfer of the Fund's quotas to Banco Santander, by means of a ~~donation~~payment in payment of the aforementioned credit operations.
At the Extraordinary General Meeting (AGE) held on October 30, 2018, the change of name from BRL V - Fundo de Investimento Imobiliário - FII to Prime 16 - Fundo de Investimento Imobiliário was approved.
(2) Banco Santander, through its subsidiaries, holds the risks and benefits of Santander Paraty and the Santander FI Hedge Strategies Sub-Fund, residing in Ireland, and both are fully consolidated in their Consolidated Financial Statements. In the Irish market, an investment fund cannot act directly and, for this reason, it was necessary to create another structure (a sub-fund), Santander FI Hedge Strategies. Santander Paraty does not have an equity position, and all records come from the financial position of Santander FI Hedge Strategies.
(3) ~~Refers~~This fund was created and started to be consolidated in September 2017. It refers to a structure ~~where~~in which Banco Santander sold certain credit operations, which had already been transferred to losses (operations overdue for more than 360 days) to this fund. Atual Serviços de Recuperação de Creditos e Meios Digitais S.A. (current corporate name of Atual Companhia Securitizadora de Creditos Financeiros), a company controlled by Banco Santander, holds 100% of the shares ofin this fund.
(4) ~~Indirectly controlled by Atual Serviços de Recuperação de Creditos e Meios Digitais S.A.~~
~~(5) Fund~~This fund was consolidated in November 2018 and is controlled through Banco Bandepe S.A.
~~(6)~~(5) This fund started to be consolidated in June 2019 and is controlled through Atual Serviços de Recuperação de Creditos e Meios Digitais S.A.
~~(7)~~(6) This fund started to be consolidated in August 2020 and is controlled through Atual Serviços de Recuperação de Creditos e Meios Digitais S.A.
(7) This fund was consolidated in February 2021 and is controlled through Banco Santander Brasil S.A. It holds 100% of the shares in this fund.
Corporate movements were implemented in order to reorganize the ~~entities'~~ operations and activities of the entities in accordance with the business plan of the Santander ~~Conglomerate's business plan.~~Conglomerate.
i) Acquisition of equity interest in Apê11 Tecnologia e Negócios Imobiliários Ltda.
On September 2, 2021, Santander Holding Imobiliária S.A. (“SHI”) – a wholly owned subsidiary of the Company – celebrated, with the partners of Apê11 Tecnologia e Negócios Imobiliários Ltda. (“Apê11”), certain Share Purchase and Sale Agreement and Investment Agreement, by which, once the transaction is carried out, it will hold 90% of the capital stock of Apê11 (“Transaction”). Apê11 acts as a collaborative marketplace, pioneering the digitization of the purchase journey of houses and apartments. After the fulfillment of the precedent conditions established in the Share Purchase and Sale Investment Agreement, the closing of the Transaction was formalized on December 16, 2021.

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* Values expressed in thousands, except when indicated.
a)ii) Acquisition of equity interest in Liderança Serviços Especializados em Cobranças Ltda. and Fozcobra Agência de Collections Ltda.
On August 4, 2021, Atual Serviços de Recovery de Créditos e Meios Digitais S.A. (“Atual”) – a wholly-owned subsidiary of the Company – celebrated, with the partners of Liderança Serviços Especializados em Cobranças Ltda. (“Liderança”), a certain Agreement for the Assignment of Quotas and Other Covenants, whereby, once the transaction is carried out, it will hold 100% of the share capital of Liderança (“Transaction”). Liderança operates in the area of overdue credit recovery, providing extrajudicial collection services to financial institutions of different sizes, retail networks, telecommunications operators and automakers, among others, and has a subsidiary, Fozcobra Agência de Cobranças Ltda. After the fulfillment of the precedent conditions established in the Agreement for the Assignment of Quotas and Other Covenants, the closing of the Transaction was formalized on October 1, 2021. Subsequently, Fozcobra was merged into Leadership on October 4, 2021.
iii) Acquisition of Equity Interest in Solutions 4Fleet Consultoria Empresarial Ltda.
On July 13, 2021, Aymoré Crédito, Financiamento e Investimento S.A. (“Aymoré”), celebrated with the partners of Solution 4Fleet Consultoria Empresarial Ltda. (“Solutions 4Fleet”), certain Investment Agreement and Share Purchase and Sale Agreement, by which, once the transaction is carried out, Aymoré will hold 80% of the capital stock of Solution 4Fleet (“Transaction”). Solutions 4Fleet specializes in structuring vehicle rental and subscription businesses – long-term rental for individuals. After the fulfillment of the precedent conditions established in the Share Purchase and Sale Investment Agreement, the closing of the Transaction was formalized on October 8, 2021.
iv) Acquisition of equity interest in Car10 Tecnologia e Informação S.A and Pag10 Fomento Mercantil Eireli.
On July 13, 2021, Webmotors S.A. (“Webmotors”), celebrated with the partners of Car10 Tecnologia e Informação S.A. (“Car10 Tecnologia”) and Pag10 Fomento Mercantil Eireli (“Pag10” and, together with Car10 Tecnologia, “Car10”), certain Investment Agreements and Share Purchase and Sale Agreements, under which, once the transaction is carried out, Webmotors will hold approximately 66.7% of the share capital of Car10 Tecnologia, which, in turn, is the sole holder of Pag10 (“Transaction”). Car10 acts as a marketplace that brings together more than 7,000 service providers such as workshops and autocenters; auto body and Paint; and cleaning and sanitizing, as well as emergency assistance and towing. After compliance with the condition’s precedent established in the Investment Agreement for the Purchase and Sale of Shares, the closing of the Transaction was formalized on September 20, 2021.
v) Acquisition of Equity Interest in Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda.
On June 15, 2021, Pi Distribuidora de Títulos e Valores Mobiliários S.A. (“Pi”), Toro Corretora de Títulos e Valores Mobiliários S.A. (“Toro CTVM”), and Toro Investimentos S.A. (“Toro Investimentos” and, together, with Toro CTVM, “Toro”) entered into, with the partners of Monetus Investimentos Ltda., and Monetus Corretora de Seguros Ltda. (jointly “Monetus”), investment agreement and other covenants, whereby, once the transaction is carried out, Toro Investimentos will hold 100% of the capital stock of Monetus (“Transaction”). Monetus, originally from Belo Horizonte, carries out its activities through an automated investment application based on objectives, after considering the client's needs and risk profile, the application automatically creates, executes and tracks a diversified and personalized investment strategy that use the platform to undertake and serve customers in the best way. The execution of the Transaction will be subject to the execution of the definitive instruments and the implementation of certain usual conditions in this type of transaction, including the applicable regulatory approvals.
vi) Acquisition of Equity Interest in Mobills Labs Soluções em Tecnologia Ltda. and Mob Soluções em Tecnologia Ltda.
On June 15, 2021, Pi Distribuidora de Títulos e Valores Mobiliários S.A. (“Pi”), Toro Corretora de Títulos e Valores Mobiliários S.A. (“Toro CTVM”), and Toro Investimentos S.A. (“Toro Investimentos” and, together, with Toro CTVM, “Toro”) entered into, with the partners of Mobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda. (together “Mobills”), an investment agreement and other covenants, by which, once effective In the transaction, Toro Investimentos will hold 100% of the capital stock of Mobills (“Transaction”). Based in Ceará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning. The execution of the Transaction will be subject to the execution of the definitive instruments and the implementation of certain usual conditions in this type of transaction, including the applicable regulatory approvals.
vii) Corporate reorganization Santander Leasing S.A. Arrendamento Mercantil and Banco Bandepe S.A.
On May 11, 2021, Banco Santander (Brasil) S.A. (“Banco Santander”) and Banco Bandepe S.A. (“Bandepe”) entered into a Share Purchase Agreement through which Banco Santander acquired the entire interest shareholding held by Bandepe in Santander Leasing S.A. Arrendamento Mercantil (“Santander Leasing”), which corresponds to 21.42%. In this operation, Banco Santander became the sole shareholder of Santander Leasing. On May 27, 2021, the merger of all the shares of Bandepe by Santander Leasing was resolved, in order to convert Bandepe into a wholly owned subsidiary of Santander Leasing (“Incorporation of Shares”). The Merger of Shares resulted in an increase in the capital stock of Santander Leasing of R$ 5,365,189,080.65 (five billion, three hundred and sixty-five million, one hundred and eighty-nine thousand, eighty reais and sixty-five cents), in reason for the merger of shares issued by Banco Bandepe held by Banco Santander.
Consolidated Financial Statements | December 31, 2021 | F-39
Table of Contents

* Values expressed in thousands, except when indicated.
viii) Partial spin-off and segregation of Getnet Adquirência e Serviços para Meios de Pagamentos S.A.
After the approval of the studies and favorable proposal of the Board of Directors of Santander Brasil, on March 31, 2021, the shareholders of Santander Brasil approved the partial spin-off of Santander Brasil, for the segregation of shares owned by them issued by Getnet Acquirência e Serviços for Meios de Pagamentos S.A. (“Getnet”), with a version of the split portion for Getnet itself. Upon completion of the spin-off, the shareholders of Santander Brasil will become direct shareholders of Getnet in proportion to their participation in the capital of Santander Brasil and the shares and Units of Santander Brasil will be traded with the right to receive the shares and Units of issue of Getnet.
As a result of the Spin-off, Santander Brasil's share capital was reduced in the total amount of 2,000,000 (two billion reais), without the cancellation of shares, with Santander Brasil's share capital increasing to 57,000,000 (fifty-seven billion reais) to 55,000,000 (fifty-five billion reais).
ix) Signing of an agreement for the Acquisition of Paytec Tecnologia em Pagamentos Ltda. and Paytec Logística e Armazém Eireli.
On December 8, 2020, Banco Santander celebrated, with the partners and owners of Paytec Tecnologia em Pagamentos Ltda. and Paytec Logística and Armazém Eireli (together “Paytec”), a share purchase and sale agreement, transfer of ownership and other covenants, whereby, once the transaction is carried out, it will hold 100% of the share capital of Paytec. Paytec acts as a logistics operator with national coverage and focused on the payments market. After approval of the transaction by the Central Bank of Brazil, the transaction was carried out on March 12, 2021, with Banco Santander now holding 100% of the share capital of the Paytec companies.
x) Dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A.
On November 12, 2020, by decision of its sole partner, the dissolution and liquidation of Santander Brasil, Establecimiento Financiero de Credito, S.A. (which had its corporate name changed to Santander Brasil, SAU), an offshore entity headquartered in Spain, was approved. fully owned by Banco Santander Brasil, which acted to complement the foreign trade strategy for corporate clients (large Brazilian companies and their operations abroad) and to offer financial products and services. The capital invested abroad was repatriated in November 2020. The company's dissolution and liquidation deed were registered in the Madrid Registry with effect from December 15, 2020. These activities are now carried out by the Bank's branch in Luxembourg.
xi) Disposal of Investments in Norchem Holding e Negócios S.A. and Norchem Participações e Consultoria S.A.
On October 8, 2020, Banco Santander (Brasil) S.A. withdrew from the shareholder structure of Norchem Participações e Consultoria SA (NPC) and Norchem Holding e Negócios S.A. (NHN), upon capital reduction in the amounts of R$19,950 million and R$14,770 million, respectively, and consequent cancellation of shares held by Banco Santander (Brasil) S.A.
xii) Acquisition of Equity Interest in Toro Controle
On September 29, 2020, Pi Distribuidora de Títulos e Investimentos S.A. (“Pi”), which is indirectly controlled by Banco Santander, entered into an investment agreement with the shareholders of Toro Controle e Participações S.A. (“Toro Controle”) and other covenants. Toro Controle had been a holding company that, ultimately, had controlled Toro Corretora de Títulos e Valores Mobiliários Ltda. (“Toro CTVM”) and Toro Investimentos S.A. (“Toro Investimentos” and, together, “Toro”). Toro is an investment platform founded in Belo Horizonte in 2010. In 2018, it received the necessary authorizations and started its operation as a securities brokerage aimed at the retail public. After compliance with all applicable conditions precedent, including approval by the Central Bank of Brazil, the transaction was carried out on April 30, 2021, with the acquisition of shares representing 60% of the capital stock of Toro Controle and its immediate incorporation by Toro CTVM, so that Pi became the direct holder of the equivalent of 60% of the share capital of Toro CTVM which, in turn, holds 100% of the share capital of Toro Investimentos.
xiii) Signing of an Agreement for the Acquisition of Equity Interest in Gira – Gestão Integrada de Recebíveis do Agronegócio S.A.
On August 11, 2020, Banco Santander signed a share purchase and sale agreement and other agreements with the shareholders of Gira – Integrated Management of Receivables of Agronegócio S.A. Gira is a technology company that operates in the management of agribusiness receivables and has a robust technological platform, capable of adding greater security to agricultural credit operations. Upon compliance with the conditions established in the contract, in particular the applicable regulatory approvals, the parties formalized the definitive instruments on January 8, 2021. With the completion of the transaction, Banco Santander now holds 80% of Gira's share capital.
xiv) Acquisition of direct equity interest in Toque Fale Serviços de Telemarketing Ltda.
On March 24, 2020, the Bank acquired the shares representing the entire share capital of Toque Fale Serviços de Telemarketing Ltda. (“Toque Fale”) for R$1,099 million, corresponding to the book value of the shares on February 29, 2020, previously held by Getnet Acquirência e Serviços para Meios de Pagamento S.A. and Auttar HUT Processamento de Dados Ltda. As a result, the Bank became a direct shareholder of Toque Fale and holder of 100% of its capital.
Consolidated Financial Statements | December 31, 2021 | F-40
Table of Contents

* Values expressed in thousands, except when indicated.
xv) Disposal of the equity interest held in Super Pagamentos e Administração de Meios Eletrônicos S.A.
On February 28, 2020, the ~~sale~~equity interest held in Super Pagamentos e Administração de Meios Eletrônicos S.A. was sold to Superdigital Holding Company, SL, a company indirectly controlled by Banco Santander, ~~SA,~~S.A., of the shares representing the ~~entire~~totality of the share capital of Super ~~Pagamentos e Administração de~~Payments and Administration of Meios Eletrô~~nico SA~~nicos S.A. (“Superdigital”) for the amount of R$~~270,000.~~270 million. As a result, the Bank ~~ceased to be~~is no longer a shareholder of Superdigital.
xvi) Acquisition of Summer Empreendimentos Ltda.
~~b) Put~~On May 14, 2019, Banco Santander (Brasil) S.A. and its wholly owned subsidiary Santander Holding Imobiliária S.A. (“SHI”) entered into a binding document with the partners of Summer Empreendimentos Ltda. (“Summer”) establishing the terms of the negotiation of purchase and sale of shares representing the entirety of Summer's capital stock. The acquisition was approved by BACEN on September 16, 2019 and concluded on September 20, 2019, so that SHI now holds 99.999% and Banco Santander 0.001% of the shares representing Summer's capital stock. Due to the Entity's short-term sale plan, Summer was initially recorded as an Asset Held by Sale, at its cost value. In June 2020, with the non-execution of the established plan, Summer became part of the scope of Banco Santander's Consolidated Financial Statements.
xvii) Sale option of ~~equity~~ interest in Banco Olé Consignado S.A.
and merger of Banco Olé Consignado S.A. and Bosan Participações S.A.
On March 14, 2019, the minority shareholder of Banco Olé ~~Bonsucesso~~ Consignado S.A. ~~(Olé Consignado)~~(“Banco Olé”) formalized its interest ~~to exercise~~in exercising the put option ~~right~~ provided for in the Investment Agreement, ~~executed~~entered into on July 30, 2014, ~~to sell~~for the sale of its ~~40% equity~~ interest in 40% in the share capital ~~stock~~ of Olé ~~Consignado~~Consigned to Banco Santander ~~(Brazil)~~(Brasil) S.A. (“Banco Santander”).
On December 20, 2019, the parties entered into a binding agreement for the acquisition, by Banco Santander, of all ~~the~~ shares issued by Bosan Participações S.A. (holding ~~company~~ whose only asset are shares representing 40% of ~~the capital of~~ Banco Olé's share capital), for the amount total of R$1.6 billion (“Transaction”).
, to be paid on the closing date of the Transaction.
On January 31, 2020, the ~~Company~~Bank and the shareholders of Bosan Participações SAS.A. (“Bosan”) concluded the definitive agreement and signed the purchase and sale agreement for 100% of the shares issued by Bosan, through the transfer of Bosan's shares to ~~Company~~Bank and payment to sellers in the total amount of R$1,608,772. As a result, Banco Santander became, directly and indirectly, the holder of 100% of the shares of Banco Olé~~'s shares.~~
.
On August 31, 2020, ~~the shareholders of~~ Banco Santander shareholders approved ~~the~~the merger by the Bank of Banco Olé Consignado SAS.A. and Bosan Participações SAS.A. The mergers did not result in an increase in the share capital of Santander ~~Brasil and are pending approval by the Central Bank of Brazil.~~Brasil.
~~c) Acquisition of direct equity interest in Toque Fale Serviços de Telemarketing LTDA.~~
On March 24, 2020, Banco Santander, SA acquired the shares representing the total share capital of Toque Fale Serviços de Telemarketing LTDA (“Toque Fale”) for the amount of R$1,099,854, corresponding to the book value of the shares on February 29, 2020, previously held by Getnet Adquirência e Serviços para Meios de Pagamento S.A. and Auttar HUT Processamento de Dados LTDA. As a result, the Bank became a direct shareholder of Toque Fale and holder of 100% of its capital.
~~Consolidated Financial Statements | December 31, 2020 | F-41~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
~~d) Acquisition of Summer Empreendimentos Ltda.~~
On May 14, 2019, Banco Santander (Brasil) SA (“Banco Santander”) and its wholly owned subsidiary Santander Holding Imobiliária S.A. (“SHI”) executed a binding agreement with the partners of Summer Empreendimentos Ltda (“Summer”) defining the negotiation terms for the purchase and sale of shares fully representing the capital of Summer. The acquisition was approved by BACEN on September 16, 2019 and closed on September 20, 2019. As a consequence, SHI has become the holder of 99.999% and Banco Santander 0.001% of the shares representing the capital stock of Summer. Due to the Entity's sale plan in the short term, Summer was initially recorded as Non-Current Assets Held by the Sale, at its cost value. In June 2020, with the failure to execute the established plan, Summer became part of the scope of Banco Santander Consolidated Financial Statements.
~~e) Incorporations of Banco Olé Consignado and Bosan Participações S.A.~~
On August 31, 2020, the shareholders of Banco Santander (Brasil) SA (“Santander Brasil”) approved the merger, by Santander Brasil, of Banco Olé Consignado SA and Bosan Participações S.A. The mergers (i) did not result in an increase in the Santander Brasil's share capital; and (ii) are subject to approval by the Central Bank of Brazil.
4. Cash and balances with the Brazilian Central Bank
Cash and balances with the Brazilian Central Bank
Thousand of reais 2020 2019 2018 2021 2020 2019

Cash and cash equivalents~~(1)~~ 20,148,725 20,127,364 19,463,587 16,657,201 20,148,725 20,127,364
of which: -
Cash 4,266,197 4,877,849 4,235,096 4,026,282 4,266,197 4,877,849
Cash and Foreign currency application abroad 15,882,528 15,249,515 15,228,491 Cash and Foreign currency application abroad 12,630,919 15,882,528 15,249,515
Total 20,148,725 20,127,364 19,463,587 16,657,201 20,148,725 20,127,364
~~(1) Corresponds to assets maturing up to 3 months.~~
5. Loans and amounts due from credit institutions
The breakdown, by classification, type and currency, of the balances of “Loans and amounts due from credit institutions” in the consolidated financial statements is as follows:
Thousand of reais 2020 2019 2018 2021 2020 2019

Classification:
Financial Assets Measured At Amortized Cost 112,849,776 109,233,128 91,859,759
Financial Assets Measured at Amortized Cost Financial Assets Measured at Amortized Cost 95,664,754 112,849,776 109,233,128
Of which:
Loans and amounts due from credit institutions, gross 112,858,840 109,246,671 91,873,320 Loans and amounts due from credit institutions, gross 95,686,579 112,858,840 109,246,671
Impairment losses (note 9,c) (9,064 ) (13,543 ) (13,561 )
Impairment losses (note 9.c) (21,825) (9,064) (13,543)
Loans and amounts due from credit institutions, net 112,849,776 109,233,128 91,859,759 Loans and amounts due from credit institutions, net 95,664,754 112,849,776 109,233,128
Loans and amounts due from credit institutions, gross 112,858,840 109,247,248 91,873,320 Loans and amounts due from credit institutions, gross 95,686,579 112,858,840 109,247,248

Type:
Time deposits 63,673,689 66,908,232 64,547,525 73,780,552 63,673,689 66,908,232
Reverse repurchase agreements (1) (2) 699,034 100,246 3,728,963
Reverse repurchase agreements ⁽¹⁾ 4,129,438 699,034 100,246
Escrow deposits 10,773,280 11,424,537 10,182,936 10,200,137 10,773,280 11,424,537
Other accounts(2) 37,712,838 30,814,233 13,413,896 7,576,452 37,712,838 30,814,233
Total 112,858,840 109,247,248 91,873,320 95,686,579 112,858,840 109,247,248
~~(1) Guaranteed by debt instruments.~~
Thousand of reais 2020 2019 2018

Currency:
Brazilian Real 109,287,868 107,693,973 91,419,015
US dollar 2,778,911 1,401,601 422,247
Euro 782,997 151,097 32,058
Total 112,849,776 109,246,671 91,873,320
(1) Guaranteed by debt instruments.
(2) Changes refers substantially to the effect of the write-off of receivables from Getnet spin-off.
Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-42~~F-41
Table of Contents

* Values expressed in thousands, except when indicated.
Loans and amounts due from credit institutions - Currency
Thousand of reais 2021 2020 2019

Currency:
Brazilian Real 91,889,990 109,287,868 107,693,973
US dollar 2,445,781 2,778,911 1,401,601
Euro 1,350,808 792,061 151,674
Total 95,686,579 112,858,840   109,247,248
Cash equivalents
Thousand of reais 2021 2020 2019

Cash equivalents:
Short-term transactions and low risk of change in its value ⁽¹⁾ 16,011,548 8,298,083 1,316,299
(1) The Amount refers to investments in the open market (repurchase agreements) and investments in interbank deposits (CDI) at

~~Table of Contents~~
short term
* Values expressed in thousands, except when indicated.
Thousand of reais 2020 2019 2018

Cash equivalents:
Short-term transactions and low risk of change in its value(1) 8,298,083 1,316,299 5,821,573
~~(1) The value refers to investments in the open market (repo transactions) and investments in interbank deposits (CDI) in the short term.~~
Note 43-d contains a detail of the residual maturity periods of financial assets measured at amortized cost.

6. Debt instruments
The breakdown, by classification, type and currency, of the balances of “Debt instruments” is as ~~follows:~~follows:
Thousand of reais 2020 2019 2018

Classification:
Financial Assets Measured At Fair Value Through Profit Or Loss 3,545,660 3,735,076 3,171,746
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 68,520,799 34,885,631 50,066,469
Financial Assets Measured At Fair Value Through Other Comprehensive Income (1) 109,668,214 95,962,927 85,395,691
Financial Assets Measured At Amortized Cost 48,367,791 38,748,296 36,799,509
Of which:
Debt Instruments 49,945,226 40,803,323 39,513,460
Provision for impairment losses (1,577,435 ) (2,055,027 ) (2,713,951 )
Total 230,102,464 173,331,930 175,433,415

Type:
Government securities - Brazil (2) 191,896,439 135,848,053 116,531,146
Debentures and Promissory notes 17,071,856 13,874,883 10,555,952
Other debt securities 21,134,169 23,608,994 48,346,317
Total 230,102,464 173,331,930 175,433,415
Thousand of reais 2021 2020 2019

Classification:
Financial assets measured at fair value through profit or loss 3,122,017 3,545,660 3,735,076
Financial assets measured at fair value through profit or loss held for trading 47,752,595 68,520,799 34,885,631
Financial assets measured at fair value through other comprehensive income 101,212,600 109,668,214 95,962,927
Financial assets measured at amortized cost 73,125,011 48,367,791 38,748,296
Of which:
Debt instruments 74,315,903 49,945,226 40,803,323
Impairment losses (1,190,892) (1,577,435) (2,055,027)
Total 225,212,223 230,102,464 173,331,930

Type:
Government securities - brazil ⁽¹⁾ 171,436,589   191,896,439 135,848,053
Debentures and promissory notes 19,881,934   17,071,856 13,874,883
Other debt securities ⁽²⁾ 33,893,700   21,134,169 23,608,994
Total 225,212,223 230,102,464 173,331,930
(1) On December 31, 2018, management decided to change the classification of Financial Treasury Bills – LFT, of the securities portfolio of Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Getnet SA), Banco Bandepe SA and Santander Corretora de Cambio e Valores Mobiliários S.A. (Santander CCVM), The securities were transferred from the Trading to Available for Sale category, in the amounts of R$739,430, R$14,099 and R$375,488, respectively, Such transfers did not impact the amounts of Consolidated and also did not generate effect on the result. The change in the category occurred due to the revaluation of the recent trading history of these assets.
~~(2)~~ Includes, substantially, National Treasury Bills (LTN), Treasury Bills (LFT) e National Treasury Notes (NTN-A, NTN-B, NTN-C e NTN-F).
(2) Substantially refer to securities issued by the Official Credit Institute (ICO) of Spain.

The debt instruments are composed, majority ~~by:~~by:
Thousand of reais 2021 2020 2019

Currency:
Brazilian Real 208,599,863   207,752,590 164,447,235
US dollar 16,612,360   22,292,647 8,884,695
Euro -    57,227 -
Total 225,212,223 230,102,464 173,331,930

Thousand of reais 2020 2019 2018

Currency:
Brazilian Real 207,752,590 164,447,235 166,743,410
US dollar 22,292,647 8,884,695 8,690,005
Euro 57,227 - -
Total 230,102,464 173,331,930 175,433,415
Consolidated Financial Statements | December 31, 2021 | F-42
Table of Contents

* Values expressed in thousands, except when indicated.
Debt Instruments linked to
Thousand of reais 2021 2020 2019

Debt Instruments linked to:
Repo Operations 76,211,049 101,371,733 102,849,859
Operations guarantees in B3 S.A. - Brasil, Bolsa, Balcão (B3 S.A.) 19,470,624 12,963,251 6,618,651
Associated to judiciary deposits and other guarantees ⁽¹⁾ 23,291,528 9,665,135 9,573,331
Total 118,973,201 124,000,119 119,041,841
(1) Substantially refers to securities issued by the Official Credit Institute (ICO) of Spain.

Thousand of reais 2020 2019 2018

Debt Instruments linked to:
Repo Operations 101,371,733 102,849,859 90,909,891
Banco Central Mandatory Deposits - - 1,449,207
Operations guarantees in B3 S.A. - Brasil, Bolsa, Balcão (B3 S.A.) 12,963,251 6,618,651 17,985,160
Associated to judiciary deposits and other guarantees 9,665,135 9,573,331 2,078,042
Total 124,000,119 119,041,841 112,422,300
Note 43-d contains details of the residual maturity periods of financial assets measured at fair value through Other Results Comprehensive and corresponding financial assets measured at amortized cost.
7. ~~Consolidated Financial Statements | December 31, 2020 | F-43~~Equity instruments
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
7. ~~Equity instruments~~
a) Breakdown
The breakdown, by classification and type, of the balances of “Equity instruments” is as ~~follows:~~follows:
Thousand of reais 2020 2019 2018 2021 2020 2019

Classification:
Financial Assets Measured At Fair Value Through Profit or Loss Held For Trading 1,818,276 2,029,470 766,333
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit or Loss 438,912 171,453 298,297
Financial Assets Measured At Fair Value Through Other Comprehensive Income 72,173 157,306 40,986
Financial assets measured at fair value through profit or loss held for trading Financial assets measured at fair value through profit or loss held for trading 2,020,610 1,818,276 2,029,470
Non-trading financial assets mandatorily measured at fair value through profit or loss Non-trading financial assets mandatorily measured at fair value through profit or loss 477,707 438,912 171,453
Financial assets measured at fair value through other comprehensive income Financial assets measured at fair value through other comprehensive income 29,187 72,173 157,306
Total 2,329,361 2,358,229 1,105,616 2,527,504 2,329,361 2,358,229

Type:
Shares of Brazilian companies 1,953,128 665,027 783,475 Shares of Brazilian companies 1,869,824 1,953,128 665,027
Shares of foreign companies 13,617 - 1,933 Shares of foreign companies 48,825 13,617 -
Investment funds (1) 362,616 1,693,202 320,208 608,855 362,616 1,693,202
Total 2,329,361 2,358,229 1,105,616 2,527,504 2,329,361 2,358,229
(1) Composed mainly by investment on fixed income, public and private ~~securities,~~securities.
b) Changes
The changes in the balance of “Equity instruments – Financial assets measured at fair value through profit or loss held for trading” were as follows:
Equity instruments - Financial assets measured at fair value through profit or loss held for trading
Thousand of reais 2020 2019 2018 2021 2020 2019

Balance at beginning of year 2,029,470 766,333 489,770 Balance at beginning of year 1,818,276 2,029,470 766,333
Net additions (disposals) (211,194 ) 1,267,243 277,462
Valuation adjustments - (4,106 ) (899 )
Net additions (disposals) / adjustments Net additions (disposals) / adjustments 202,334 (211,194) 1,263,137
Balance at end of year 1,818,276 2,029,470 766,333 2,020,610 1,818,276 2,029,470
The changes in the balance of “Equity instruments – Non-Trading Financial Assets Mandatorily Measured at Fair Value Through Profit or Loss” were as follows:
Equity instruments - Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or ~~Loss” were as follows:~~Loss
Thousand of reais 2021 2020 2019

Balance at beginning of year 438,912 171,453 298,297
Net additions (disposals) / adjustments 38,795 267,459 (126,844)
Balance at end of year 477,707 438,912 171,453

Thousand of reais 2020 2019 2018

Balance at beginning of year 171,453 298,297 33,368
Net additions (disposals) 19,685 (126,893 ) 143,291
Valuation adjustments 247,774 49 121,638
Balance at end of year 438,912 171,453 298,297
Consolidated Financial Statements | December 31, 2021 | F-43
Table of Contents

* Values expressed in thousands, except when indicated.
The changes in the balance of “Equity instruments – Financial Assets Measured Atat Fair Value Through Other Comprehensive Income” were as follows:
Equity instruments - Financial Assets Measured At Fair Value Through Other Comprehensive Income
Thousand of reais 2020 2019 2018 2021 2020 2019

Balance at beginning of year 157,306 40,986 1,106,637 Balance at beginning of year 72,173 157,306 40,986
Net additions (disposals) (85,133 ) (6,118 ) (1,034,219 )
Valuation adjustments - 122,438 (31,432 )
Net additions (disposals) / adjustments Net additions (disposals) / adjustments (42,986) (85,133) 116,320
Balance at end of year 72,173 157,306 40,986 29,187 72,173 157,306
8. ~~Consolidated Financial Statements | December 31, 2020 | F-44~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
8. Derivative financial instruments and ~~Short~~short positions
The main risk factors associated to derivatives contracted are related to exchange rates, interest rates and stocks. To manage these and other market risk factors the Bank uses practices which include the measurement and follow up of the limit´s usage previously defined on internal committees, as well as the daily follow up of the portfolios values in risk, sensitivities and changes in the interest rate and exchange exposure, liquidity gaps, among other practices which allow the control and follow up on the main risk metrics that can affect the Bank´s position in the several markets which it acts. Based on this management model the Bank has accomplished its goal, using operations with derivatives, in optimize the relation risk/benefits even in situation with great volatility.
The derivatives fair value is determined through quotation of market prices. The swaps contracts fair value is determined using discounted cash flow modeling techniques, reflecting suitable risk factors. The fair value of NDF and Future contracts are also determined based on the quotation of market prices for derivatives traded in specific chamber (i.e. stock Exchange for example) or using the same methodology applied for swap contracts. The fair value of options derivatives (call and put) is determined based on the mathematical models, such as Black & Scholes, using yield rates, implied volatilities and the fair value of the corresponding asset. The current market prices are used to price the volatilities. For the derivatives which do not have prices directly disclosed by specific chamber, their fair values are obtained through pricing models which use market information, based on disclosed prices of more liquid assets. Interest rate curves and market volatilities are extracted from ~~theses~~these prices to be used as first input in these models.
a) Trading and hedging derivatives
a.1) Derivatives recorded in the balance sheet and compensation accounts
Portfolio summary of trading derivative and used as hedge
2021 2020 2020 2020 2019 2019 2019
As Previously Reported Adjustment As Revised As Previously Reported Adjustment As Revised
Assets
Swap Differentials Receivable 7,641,355 14,729,642 - 14,729,642 14,634,863 - 14,634,863
Option Premiums to Exercise 1,385,889 4,974,618 - 4,974,618 1,065,753 - 1,065,753
Forward Contracts and Others 12,112,679 9,166,360 (2,623,106) 6,543,254 4,745,118 (1,624,834) 3,120,284
Total 21,139,923 28,870,620 (2,623,106) 26,247,514 20,445,734 (1,624,834) 18,820,900

Liabilities
Swap Differentials Payable 8,538,705 18,327,611 - 18,327,611 16,458,397 - 16,458,397
Option Premiums Launched 2,256,244 4,926,994 - 4,926,994 1,699,729 - 1,699,729
Forward Contracts and Others 13,824,032 8,725,333 (2,623,106) 6,102,227 4,271,851 (1,624,834) 2,647,017
Total 24,618,981 31,979,938 (2,623,106) 29,356,832 22,429,977 (1,624,834) 20,805,143
In 2021, the Company revisited the accounting treatment in relation to the electric energy commercialization contracts, which no longer include the amount of the "principal" and, therefore, only the adjustments to fair value and interest determined in these operations are recorded in equity accounts.

~~a.1) Derivatives~~For better comparability purposes, the amounts of “principal” of energy trading operations recorded in equity accounts, on December 31, 2020 and 2019, were reduced from the headings of “Derivatives => Forward and Other Contracts” in the amounts of BRL 2,623,106 (2019 - BRL 1,624,834), with corresponding impact on total assets and liabilities and between the lines "Financial assets measured at fair value in profit or loss held for trading" and "Financial liabilities measured at fair value in Income Held for Trading" in the statement of cash flows as of December 31, 2020 and 2019. There was no change in the balance of stockholders' equity or income. The financial statements as of December 31, 2020 and 2019, presented for comparison purposes, already include the aforementioned adjustments.
~~Portfolio Summary of Trading and Hedging Derivatives~~

2020 2019 2018

Assets
Swap Differentials Receivable 14,729,642 14,634,863 14,640,289
Option Premiums to Exercise 4,974,618 1,065,753 716,936
Forward Contracts and Others 9,166,361 4,745,101 3,006,221
Total 28,870,621 20,445,717 18,363,446

Liabilities
Swap Differentials Payable 18,327,611 16,458,397 15,952,283
Option Premiums Launched 4,926,994 1,699,729 563,787
Forward Contracts and Others 8,725,333 4,271,852 1,950,765
Total 31,979,938 22,429,978 18,466,835

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-45~~F-44
Table of Contents
* Values expressed in thousands, except when indicated.

* Values expressed in thousands, except when indicated.
Summary by Category

Summary by Category
2020 2019 2018
Trading 2021 2020 2019

Notional Fair Value Notional (1) Fair Value Notional (1) Fair Value Notional (1) Curve Value Fair Value Notional (1) Curve Value Fair Value Notional (1) Fair Value
Swap 398,925,842 (3,597,969 ) (1,823,534 ) (1,431,110 ) 837,762,019 (1,804,744) (897,350) 398,925,842 (3,076,947) (3,597,969) 561,967,799 (1,823,534)
Assets 278,752,387 14,729,642 282,164,189 147,010,930 177,233,869 44,487,274 418,137,448 13,162,674 7,641,355 278,752,387 6,249,519 14,729,642 282,164,189 147,010,930
CDI (Interbank Deposit Rates) 41,316,315 3,010,880 40,550,627 16,908,791 36,135,015 24,267,591 66,837,268 318,541 (778,177) 41,316,315 326,586 3,010,880 40,550,627 16,908,791
Fixed Interest Rate - Real 54,159,848 9,607,342 47,140,927 - 47,968,999 - 231,741,021 9,269,271 6,412,471 54,159,848 4,013,563 9,607,342 47,140,927 -
Indexed to Price and Interest Rates 5,124,411 - 2,388,118 - 2,581,215 - 2,089,110 - (234,488) 5,124,411 - - 2,388,118 -
Foreign Currency 178,076,136 1,039,529 192,084,517 130,102,139 90,495,240 20,219,683 91,837,446 799,550 2,003,728 178,076,136 959,322 1,039,529 192,084,517 130,102,139
Others 75,676 1,071,891 - - 53,400 - 25,632,603 2,775,313 237,822 75,676 950,048 1,071,891 - -
Liabilities 120,173,455 (18,327,611 ) 279,803,610 (148,834,464 ) 176,385,349 (45,918,384 ) 419,624,571 (14,967,418) (8,538,705) 120,173,455 (9,326,465) (18,327,611) 279,803,610 (148,834,464)
CDI (Interbank Deposit Rates) 33,239,801 (13,693,733 ) 24,353,405 - 11,801,600 - 321,402,883 (4,171,481) (12,327,484) 33,239,801 (6,911,748) (13,693,733) 24,353,405 -
Fixed Interest Rate - Real 45,088,689 (2,772,479 ) 67,937,624 (24,079,732 ) 88,317,044 (23,075,374 ) 48,874,762 (6,760,576) 2,467,425 45,088,689 (2,183,507) (2,772,479) 67,937,624 (24,079,732)
Indexed to Price and Interest Rates 33,026,692 (450,958 ) 125,829,755 (123,445,067 ) 24,308,601 (21,775,017 ) 22,827,336 - (728,677) 33,026,692 - (450,958) 125,829,755 (123,445,067)
Foreign Currency 6,636,885 153,695 60,394,529 - 50,748,008 - 887,129 (28,407) 2,287,852 6,636,885 (25) 153,695 60,394,529 -
Others 2,181,388 (1,564,135 ) 1,288,297 (1,309,665 ) 1,210,096 (1,067,993 ) 25,632,461 (4,006,955) (237,822) 2,181,388 (231,186) (1,564,135) 1,288,297 (1,309,665)
Options 2,043,286,085 47,624 1,446,536,133 (1,222,465 ) 335,073,080 153,149 1,130,172,099 (595,345) (885,703) 2,043,286,085 (282,110) 47,624 1,446,536,133 (1,222,465)
Purchased Position 1,006,266,897 4,974,618 678,089,904 381,706 149,076,796 716,936 564,829,758 1,240,879 1,385,889 1,006,266,897 1,869,806 4,974,618 678,089,904 381,706
Call Option - US Dollar 1,188,387 39,202 171,871 (281 ) 14,518,058 239,079 9,898,179 271,464 382,237 1,188,387 47,898 39,202 171,871 (281)
Put Option - US Dollar 1,948,673 109,075 1,456,975 4,355 8,893,620 90,736 4,094,316 140,280 187,123 1,948,673 79,019 109,075 1,456,975 4,355
Call Option - Other 134,761,947 1,093,583 98,154,363 818,664 3,118,344 131,297 31,248,540 459,995 510,976 134,761,947 558,794 1,093,583 98,154,363 818,664
Interbank Market 101,421,659 556,039 98,154,363 819,262 639,488 4,537 28,499,055 444,446 495,214 101,421,659 557,167 556,039 98,154,363 819,262
Others ⁽²⁾ 33,340,288 537,544 - (598 ) 2,478,856 126,760 2,749,485 15,549 15,763 33,340,288 1,627 537,544 - (598)
Put Option - Other 868,367,889 3,732,758 578,306,695 (441,032 ) 122,546,774 255,824 519,588,723 369,140 305,553 868,367,889 1,184,095 3,732,758 578,306,695 (441,032)
Interbank Market 864,852,555 3,729,297 578,306,695 (440,959 ) 121,782,816 217,726 519,588,723 369,140 305,553 864,852,555 1,183,630 3,729,297 578,306,695 (440,959)
Others ⁽²⁾ 3,515,334 3,461 - (73 ) 763,958 38,098 - - - 3,515,334 464 3,461 - (73)
Sold Position 1,037,019,188 (4,926,994 ) 768,446,229 (1,604,171 ) 185,996,284 (563,787 ) 565,342,341 (1,836,224) (2,256,244) 1,037,019,188 (2,151,915) (4,926,994) 768,446,229 (1,604,171)
Call Option - US Dollar 1,537,670 699,243 254,945 (1,472 ) 7,615,856 (101,034 ) 4,111,016 (170,553) (152,348) 1,537,670 (70,201) 699,243 254,945 (1,472)
Put Option - US Dollar 2,315,919 (192,335 ) 263,994 (2,842 ) 12,160,912 (169,431 ) 4,017,161 (348,715) (287,825) 2,315,919 (137,061) (192,335) 263,994 (2,842)
Call Option - Other 130,919,394 (453,919 ) 174,166,802 (440,731 ) 31,679,919 (66,002 ) 33,383,234 (719,460) (872,335) 130,919,394 (588,023) (453,919) 174,166,802 (440,731)
Interbank Market 120,156,285 (464,405 ) 174,166,802 (440,959 ) 29,609,298 (13,195 ) 31,730,928 (713,773) (858,586) 120,156,285 (566,813) (464,405) 174,166,802 (440,959)
Others ⁽²⁾ 10,763,109 10,486 - 228 2,070,621 (52,807 ) 1,652,305 (5,687) (13,749) 10,763,109 (21,210) 10,486 - 228
Put Option - Other 902,246,206 (4,979,984 ) 593,760,488 (1,159,126 ) 134,539,597 (227,320 ) 523,830,930 (597,497) (943,736) 902,246,206 (1,356,630) (4,979,984) 593,760,488 (1,159,126)
Interbank Market 869,328,317 (4,597,427 ) 593,760,488 (1,159,038 ) 133,703,672 (179,841 ) 523,830,930 (597,497) (943,736) 869,328,317 (1,350,314) (4,597,427) 593,760,488 (1,159,038)
Others ⁽²⁾ 32,917,888 (382,557 ) - (88 ) 835,925 (47,479 ) - - - 32,917,888 (6,316) (382,557) - (88)

Futures Contracts 270,258,566 - 433,873,180 - 289,508,200 - 287,984,278 - - 270,258,566 - - 433,873,180 -
Purchased Position 110,275,866 - 72,912,029 - 86,203,734 - 148,237,279 - - 110,275,866 - - 72,912,029 -
Exchange Coupon (DDI) 12,438,695 - 7,394,951 - 20,590,068 - 85,931,389 - - 12,438,695 - - 7,394,951 -
Interest Rates (DI1 and DIA) 97,837,171 - 55,430,519 - 32,690,685 - 28,491,764 - - 97,837,171 - - 55,430,519 -
Foreign Currency - - 9,978,419 - 32,456,813 - 33,797,350 - - - - - 9,978,419 -
Indexes ⁽³⁾ - - - - 466,168 - 16,776 - - - - - - -
Others - - 108,140 - - - - - - - - - 108,140 -
Sold Position 159,982,699 - 360,961,151 - 203,304,466 - 139,746,999 - - 159,982,699 - - 360,961,151 -
Exchange Coupon (DDI) 73,114,014 - 146,032,485 - 146,948,795 - 60,606,204 - - 73,114,014 - - 146,032,485 -
Interest Rates (DI1 and DIA) 67,958,767 - 196,170,105 - 54,160,203 - 53,267,620 - - 67,958,767 - - 196,170,105 -
Foreign Currency 18,653,658 - 17,305,604 - 1,992,574 - 25,678,296 - - 18,653,658 - - 17,305,604 -
Indexes ⁽³⁾ 256,261 - 290,254 - 202,894 - 194,879 - - 256,261 - - 290,254 -
Treasury Bonds/Notes - - 1,162,703 - - - - - - - - - 1,162,703 -
Forward Contracts and Others 163,040,700 441,028 169,401,317 473,249 90,910,841 1,055,456 167,611,313 2,836,843 (1,711,352) 165,663,806 2,693,759 441,028 169,401,317 483,267
Purchased Commitment 96,309,648 9,166,361 79,970,842 426,991 38,666,269 1,303,561 93,097,212 5,345,415 12,112,679 96,309,648 1,370,654 6,543,254 79,970,842 3,120,284
Currencies 87,254,202 5,026,567 79,969,759 426,986 38,095,625 1,250,706 83,752,185 2,738,485 8,501,934 87,254,202 1,370,654 5,026,566 78,344,925 2,794,330
Others 9,055,447 4,139,794 1,083 5 570,644 52,855 9,345,027 2,606,930 3,610,745 9,055,447 - 1,516,688 1,625,917 325,954
Sold Commitment 66,731,052 (8,725,333 ) 89,430,475 46,258 52,244,572 (248,105 ) 74,514,101 (2,508,572) (13,824,032) 69,354,158 1,323,105 (6,102,227) 89,430,475 (2,647,017)
Currencies 64,986,757 (4,846,929 ) 89,426,698 46,170 51,958,529 (252,160 ) 71,611,500 (1,141,826) (11,932,009) 64,986,757 1,323,328 (4,846,929) 87,801,864 (2,275,227)
Others 1,744,295 (3,878,404 ) 3,777 88 286,043 4,055 2,902,602 (1,366,746) (1,892,023) 4,367,401 (223) (1,255,298) 1,628,611 (371,790)

~~(1) Nominal value of updated contracts.~~
~~(2) Includes options of index, mainly being options involving US treasury, shares and stock indexes.~~
~~(3) Includes Bovespa and S&P index.~~
(1) Nominal value of updated contracts.
(2) Includes options of index, mainly being options involving US treasury, shares and stock indexes.
(3) Includes Bovespa and S&P index.
Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-46~~F-45
Table of Contents

* Values expressed in thousands, except when indicated.
* Values expressed in thousands, except when indicated.
a.2) Derivatives Financial Instruments by Counterparty
Notional 2020 2021
Related Financial Related Financial
Customers Parties Institutions⁽¹⁾ Total Customers Parties Institutions ⁽¹⁾ Total
"Swap" 40,241,232 97,784,443 140,726,712 278,752,387
Swap 152,650,125 233,667,783 31,819,540 418,137,448
Options 23,788,051 922,740 2,018,575,293 2,043,286,085 1,127,446,708 1,641,361 1,084,030 1,130,172,099
Futures Contracts 3,198,239 - 267,060,326 270,258,566 287,984,278 -    -    287,984,278
Forward Contracts and Others 67,837,797 49,447,532 45,755,371 163,040,700 Forward Contracts and Others 70,457,399 96,857,222 296,692 167,611,313
(1) ~~(1)~~ Includes trades with B3 S.A. and other securities and commodities exchanges.
Notional 2019 2018
Related Financial
Customers Parties Institutions⁽¹⁾ Total Total
"Swap" 66,976,262 38,784,704 176,403,223 282,164,189 177,233,869
Options 17,041,979 154,903 1,429,326,073 1,446,522,955 335,073,080
Futures Contracts 1,430,470 - 432,442,712 433,873,182 289,508,200
Forward Contracts and Others 47,199,547 118,612,607 3,589,163 169,401,317 90,910,841
~~(1)~~
Notional 2020 2019
Related Financial
Customers Parties Institutions ⁽¹⁾ Total Total
Swap 40,241,232 97,784,443 140,726,712    278,752,387 282,164,189
Options 23,788,051 922,740 2,018,575,293    2,043,286,085 1,446,522,955
Futures Contracts 3,198,239 -    267,060,326    270,258,566 433,873,182
Forward Contracts and Others 67,837,797 49,447,532 45,755,371    163,040,700 169,401,317
(1) Includes trades with B3 S.A. and other securities and commodities exchanges.
a.3) Derivatives Financial Instruments by Maturity
Notional 2020 2021
Up to From 3 to Over Up to From 3 to Over
3 Months 12 Months 12 Months Total 3 Months 12 Months Total
"Swap" 58,388,872 98,073,784 122,289,731 278,752,387
Swap 30,501,795 99,817,727 287,817,926 418,137,448
Options 931,156,902 572,661,800 539,467,382 2,043,286,084 749,406,698 128,500,299 252,265,102 1,130,172,099
Futures Contracts 181,521,486 36,328,390 52,408,689 270,258,566 167,320,563 45,239,639 75,424,076 287,984,278
Forward Contracts and Others 104,098,351 33,788,798 25,153,551 163,040,700 Forward Contracts and Others 72,761,669 67,060,436 27,789,208 167,611,313

Notional 2020 2019
Up to From 3 to Over
3 Months 12 Months Total
Swap 58,388,872 98,073,784 122,289,731 278,752,387 282,164,189
Options 931,156,902 572,661,800 539,467,382 2,043,286,084 1,446,522,962
Futures Contracts 181,521,486 36,328,390 52,408,689 270,258,566 433,873,181
Forward Contracts and Others Forward Contracts and Others 104,098,351 33,788,798 25,153,551 163,040,700 169,401,317

Notional 2019 2018
Up to From 3 to Over
3 Months 12 Months 12 Months Total Total
"Swap" 58,298,876 106,268,113 117,597,200 282,164,189 177,233,869
Options 681,033,183 646,187,139 119,302,640 1,446,522,962 335,073,080
Futures Contracts 140,882,437 179,337,860 113,652,884 433,873,181 289,508,200
Forward Contracts and Others 91,779,011 50,070,366 27,551,940 169,401,317 90,910,841

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-47~~F-46
Table of Contents

* Values expressed in thousands, except when indicated.
* Values expressed in thousands, except when indicated.
a.4) Derivatives by Market Trading
Notional 2020 Stock Exchange ⁽¹⁾ Over the Counter 2021
Stock Exchange ⁽¹⁾ Over the Counter Total Total
"Swap" 82,122,957 196,629,429 278,752,387
Swap 111,418,682 306,718,767 418,137,448
Options 1,940,172,322 103,113,762 2,043,286,084 1,094,484,434 35,687,665 1,130,172,099
Futures Contracts 270,258,566 —   270,258,566 287,984,278 -    287,984,278
Forward Contracts and Others 25,182,494 137,858,206 163,040,700 Forward Contracts and Others 7,108,898 160,502,415 167,611,313
(1) Includes trades with B3 S.A.
Notional Stock Exchange ⁽¹⁾ Over the Counter 2020 2019
Total Total
Swap 82,122,957 196,629,429 278,752,387 282,164,189
Options 1,940,172,322 103,113,762 2,043,286,084 1,446,522,962
Futures Contracts 270,258,566 -    270,258,566 433,873,181
Forward Contracts and Others 25,182,494 137,858,206 163,040,700 169,401,317
(1) Includes trades with B3 S.A.
~~(1) Includes trades with B3 S.A.~~
Notional 2019 2018
Stock Exchange ⁽¹⁾ Over the Counter Total Total
"Swap" 150,179,790 131,984,399 282,164,189 177,233,869
Options 1,423,788,845 22,734,117 1,446,522,962 335,073,080
Futures Contracts 433,873,181 - 433,873,181 289,508,200
Forward Contracts and Others 42,651,980 126,749,337 169,401,317 90,910,841
a.5) Information on Credit Derivatives
Banco Santander uses credit derivatives with the objectives of performing counterparty risk management and meeting its customers' demands, performing protection purchase and sale transactions through credit default swaps and total return swaps, primarily related to Brazilian sovereign risk securities.
Total Return Swaps – TRS
Credit derivatives are where the exchange of the return of the reference obligation occurs through a cash flow and where, in the event of a credit event, the protection buyer is usually entitled to receive from the protection seller the equivalent of the difference between the and the fair value (market value) of the reference obligation on the settlement date of the contract.
Credit Default Swaps – CDS
~~These~~They are credit derivatives where, in the event of a credit event, the protection buyer is entitled to receive from the protection seller the equivalent ofto the difference between the face value of the CDS ~~agreement~~contract and the fair value (market value) of the reference obligation on the settlement date of the contract. In return, the seller receives ~~compensation~~a fee for the sale of the protection.
Below, the composition of the Credit Derivatives portfolio shown by its reference value and effect on the calculation of Required Shareholders' Equity (PLE).
Composition of the Credit Derivatives portfolio shown by its reference value and effect in the calculation of Required Stockholders' ~~Equity.~~Equity

2021 2020 2019

Nominal Value Nominal Value Nominal Value Nominal Value Nominal Value Nominal Value
Retained Risk Transferred Risk - Retained Risk Transferred Risk - Retained Risk Transferred Risk -
Total Rate of Return Swap Credit Swap Total Rate of Return Swap Credit Swap Total Rate of Return Swap Credit Swap
Credit swaps 3,984,392 - 3,483,628 519,670 2,435,880 -
Total 3,984,392 - 3,483,628 519,670 2,435,880 -
2020 2019 2018

Nominal Value
Retained Risk
Total Rate of Return Swap

Nominal Value
Transferred Risk -
Credit Swap

Nominal Value
Retained Risk
Total Rate of Return Swap

Nominal Value
Transferred Risk -
Credit Swap

Nominal Value
Retained Risk
Total Rate of Return Swap

Nominal Value
Transferred Risk -
Credit Swap

Credit Swaps 3,483,628 519,670 2,435,880 - 1,959,128 416,541
Total 3,483,628 519,670 2,435,880 - 1,959,128 416,541
~~Value referring to the premium paid on CDS for use as collateral (transfer of risks) in the amount of R$1,506 (12/31/2019 – R$0).~~
~~The effect in the Required Stockholder’s Equity of the risk received was R$6,985 (12/31/2019 – R$5,257).~~
During the period, there was no occurrence of credit event related to ~~the~~triggering events ~~generated by~~provided for in the contracts.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-48~~F-47
Table of Contents
* Values expressed in thousands, except when indicated.

2020 2019
2018
Over Over Over
Maximum Potential for Future Payments - Gross 12 Months Total 12 Months Total 12 Months
Total
Per Instrument
CDS 4,003,298 4,003,298 2,435,880 2,435,880 1,959,128 1,959,128
Total 4,003,298 4,003,298 2,435,880 2,435,880 1,959,128 1,959,128
Per Risk Classification
Below Investment Grade 4,003,298 4,003,298 2,435,880 2,435,880 1,959,128 1,959,128
Total 4,003,298 4,003,298 2,435,880 2,435,880 1,959,128 1,959,128
Per Reference Entity
Brazilian Government 4,003,298 4,003,298 2,435,880 2,435,880 1,959,128 1,959,128
Total 4,003,298 4,003,298 2,435,880 2,435,880 1,959,128 1,959,128

* Values expressed in thousands, except when indicated.

2021 2020 2019
Over Over Over
Maximum Potential for Future Payments - Gross 12 Months Total 12 Months Total 12 Months Total
Per Instrument
CDS 3,984,392 3,984,392 4,003,298 4,003,298 2,435,880 2,435,880
Total 3,984,392 3,984,392 4,003,298 4,003,298 2,435,880 2,435,880
Per Risk Classification
Below Investment Grade 3,984,392 3,984,392 4,003,298 4,003,298 2,435,880 2,435,880
Total 3,984,392 3,984,392 4,003,298 4,003,298 2,435,880 2,435,880
Per Reference Entity
Brazilian Government 3,984,392 3,984,392 4,003,298 4,003,298 2,435,880 2,435,880
Total 3,984,392 3,984,392 4,003,298 4,003,298 2,435,880 2,435,880
a.6) Hedge Accounting
There are three types of hedge accounting: Fair Value Hedge, Cash Flow Hedge and Foreing Currency Investments Hedge.
The derivatives used as hedging instruments are represented as follows:
~~a.6.i)~~a.6.I ) Fair Value Hedge
Banco Santander’s fair value hedging strategy consists of hedging the exposure to changes in fair value related to recognized assets and liabilities.
The fair value strategy adopted by management segregates transactions by risk factor (e.g. Real/Dollar foreign exchange risk, fixed Reais interest rate risk, Dollar foreign exchange coupon risk, inflation risk, interest rate risk, etc.). The transactions generate exposures that are consolidated by risk factor and compared with internal pre-established limits.
In order to hedge the changes of fair value in receivables and interest payments, Santander uses interest rate Swap contracts related to pre-fixed ~~(pre define~~(pre-define interest rate at inception) assets and liabilities.
Banco Santander applies fair value hedge as follows:
•Designates Foreign Currency + Coupon versus %CDI and Pre - Real Interest Rate or contracts dollar futures (DOL, DDI/DI) as derivatives instruments in Hedge Accounting structures, with foreign currency loan operations being the object of such transactions.
• The Bank has a portfolio of credit assets denominated in US dollars at the fixed rate in the balance sheet of Santander EFC, whose operations are recorded in Euro. As a way of managing this mismatch, the Bank designates each Euro Floating Foreign Currency swap versus Fixed Dollar as the market risk hedge of the corresponding loan.
• The Bank has a pre-fixed interest rate risk generated by government securities (NTN-F and LTN) in the Financial Assets portfolio measured through Other Comprehensive Income. To manage this mismatch, the entity contracts DI futures on the Stock Exchange and designates them as a derivative instrument in a hedge accounting framework.
• The Bank has a risk to the IPCA (Broad pricing to consumers index) generated by debentures in the portfolio of securities available for sale. To manage this mismatch, it contracts IPCA (DAP) futures on the Stock Exchange and designates them as a derivative instrument in a Hedge Accounting structure.
~~Consolidated Financial Statements | December 31, 2020 | F-49~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
In order to assess the effectiveness and measure the ineffectiveness of the strategies, the institution complies with international accounting standard IAS 39, which requires that the effectiveness test be performed at the beginning (prospective test) of the hedge structure and be repeated periodically (prospective and retrospective tests) in order to demonstrate that the hedge ratio remains effective.
To assess the effectiveness and measure the ineffectiveness of the strategies, the Bank follows IAS 39, which requires that the effectiveness test be performed at the beginning (prospective test) of the hedge structure, and repeated periodically (prospective and retrospective test) to demonstrate that the hedge relationship remains effective.
~~a) Prospective test:~~ according to the standard, the prospective test must be done on the start date (inception) and quarterly to demonstrate that the expectation regarding the effectiveness of the hedge relationship is high.
~~a.1) The initial prospective test (at inception):~~ it is restricted to a qualitative review of the critical terms and conditions of the instrument and the hedged object, to a conclusion that changes in the market value of both instruments are expected to completely cancel each other out.
~~a.2) The prospective periodic test:~~ the sensitivity of the present value of the hedged object and the hedging instrument to a parallel variation of 10 Basis Points in the interest rate curve will be computed periodically. For the purposes of effectiveness, the ratio of the two sensitivities must be between 80% and 125%.
~~b) Retrospective test:~~ the retrospective effectiveness test will be conducted by comparing the market to market (mtm) variation of the hedge instrument from the beginning date with the variation of the hedge object's mtm from the beginning.
~~In fair value hedges, gains or losses, both on hedge instruments and on hedged items (attributable to the type of risk being protected) are recognized directly in the consolidated income statement.~~
2020 2019 2018
Hedge Structure Effective Portion Accumulated Portion Ineffective Effective Portion Accumulated Portion Ineffective Effective Portion Accumulated Portion Ineffective
Fair Value Hedge
Brazilian Treasury Bonds (LTN, NTN-F) (2,183,841 ) - (2,853,807 ) - (1,381,156 ) -
Bonds (LEA) - - (61,761 ) - (191,472 ) -
Resolution 2770 - - (94 ) - 689 -
Trade Finance Off (5,092 ) - (4,015 ) - (58,020 ) -
Total (2,188,933 ) - (2,919,677 ) - (1,629,959 ) -
12/31/2020

Hedge Instruments
Hedge
Objects
Curve Adjustment to Accounting Curve Adjustment to Accounting
Strategies Value Market Value Value Value Market Value Value
Future Contracts 46,649,331 - 46,649,331 42,529,036 2,802,690 45,331,727
Hedge of Securities 46,649,331 - 46,649,331 42,529,036 2,802,690 45,331,727

12/31/2019

Hedge Instruments
Hedge
Objects
Curve Adjustment to Accounting Curve Adjustment to Accounting
Strategies Value Market Value Value Value Market Value Value
Swap Contracts 3,249,742 101,264 3,351,004 3,555,326 662,773 4,218,099
Credit Operations Hedge 1,118,210 28,993 1,147,202 1,423,809 63,231 1,487,040
Hedge of Securities 2,131,532 72,271 2,203,802 2,131,517 599,542 2,731,059
Future Contracts 789,631 - 789,631 45,427,125 3,000,490 48,427,614
Hedge of Securities 789,631 - 789,631 45,427,125 3,000,490 48,427,614
~~Consolidated Financial Statements | December 31, 2020 | F-50~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

12/31/2018
Hedge
Hedge Instruments Objects
Curve Adjustment to Accounting Curve Adjustment to Accounting
Strategies Value Market Value Value Value Market Value Value
Swap Contracts 3,908,082 140,447 4,048,529 3,921,249 65,014 3,986,263
Credit Operations Hedge 1,152,249 115,180 1,267,429 1,166,387 50,668 1,217,055
Hedge of Securities 2,755,833 25,267 2,781,100 2,754,862 14,346 2,769,208
Future Contracts 41,286,091 - 41,286,091 44,130,671 (205,941 ) 43,924,730
Hedge of Securities 41,286,091 - 41,286,091 44,130,671 (205,941 ) 43,924,730
(*) The Bank has market risk hedge strategies, the objects of which are assets in its portfolio, which is why we demonstrate the passive edge of the respective instruments. For structures whose instruments are futures, we show the balance of the calculated daily adjustment, recorded in a clearing account.
~~a.6.II) Cash Flow Hedge~~
The Bank's cash flow hedge strategies consist of hedging exposure to changes in cash flows, interest payments and exchange rate exposure, which are attributable to changes in interest rates on recognized assets and liabilities and changes exchange rates for unrecognized assets and liabilities.
~~The Bank applies the cash flow hedge as follows:~~
• Enters into fixed-rate asset swaps and foreign currency liabilities and designates them as a hedging instrument in a Cash Flow Hedge structure, with the object of foreign currency loan operations negotiated with third parties through offshore agencies and securities Brazilian foreign debt held to maturity.
• It contracts Dollar futures or DDI + DI futures (Synthetic Dollar Futures) and designates them as a protection instrument in a Cash Flow Hedge structure, having as object item the Bank's credit portfolio in Dollars and Promissory Notes in securities portfolio available for sale.
• The Bank has a portfolio of assets indexed to the Euro and traded at offshore branches. In the transaction, the value of the asset in Euro will be converted to the Dollar by the rate of the exchange contract of the transaction. As from the conversion, the principal amount of the funding, already expressed in US dollars, will be adjusted by a floating or fixed rate. The assets will be covered with Swap Cross Currency in order to cross the risk in Euro for LIBOR + Coupon.
• The Bank has a pre-fixed interest rate risk generated by government securities (NTN-F and LTN) in the Financial Assets portfolio measured through Other Comprehensive Income. To manage this mismatch, the entity contracts DI futures on the Stock Exchange and designates them as a derivative instrument in a hedge accounting framework.
• The Bank has pre-fixed interest rate risk on its liabilities through issues of real estate credit bills (LCI). To manage this risk, the entity contracts DI futures on the Exchange and designates them as a hedging instrument in a hedge accounting structure.

• The Bank has a risk to the IPCA index generated by the issuance of Guaranteed Real Estate Bills. To manage this risk, the Bank contracts IPCA futures (DAP) on the Exchange and designates them as a hedging instrument in a Hedge Accounting structure.
• The Bank has a risk to the IPCA (Broad pricing to consumers index) generated by debentures in the portfolio of securities available for sale. To manage this mismatch, it contracts IPCA (DAP) futures on the Stock Exchange and designates them as a derivative instrument in a Hedge Accounting structure.
In order to assess the effectiveness and measure the ineffectiveness of the strategies, the institution complies with international accounting standard IAS 39, which requires that the effectiveness test be performed at the beginning (prospective test) of the hedge structure and be repeated periodically (prospective and retrospective tests) in order to demonstrate that the hedge ratio remains effective.
Consolidated Financial Statements | December 31, 2021 | F-48
Table of Contents

* Values expressed in thousands, except when indicated.
To assess the effectiveness and measure the ineffectiveness of the strategies, the Bank follows IAS 39, which requires that the effectiveness test be performed at the beginning (prospective test) of the hedge structure, and repeated periodically (prospective and retrospective test) to demonstrate that the hedge relationship remains effective.
a) Prospective test: according to the standard, the prospective test must be done on the start date (inception) and quarterly to demonstrate that the expectation regarding the effectiveness of the hedge relationship is high.
a.1) The initial prospective test (at inception): it is restricted to a qualitative review of the critical terms and conditions of the instrument and the hedged object, to a conclusion that changes in the market value of both instruments are expected to completely cancel each other out.
a.2) The prospective periodic test: the sensitivity of the present value of the hedged object and the hedging instrument to a parallel variation of 10 Basis Points in the interest rate curve will be computed periodically. For the purposes of effectiveness, the ratio of the two sensitivities must be between 80% and 125%.
b) Retrospective test: the retrospective effectiveness test will be conducted by comparing the market to market (mtm) variation of the hedge instrument from the beginning date with the variation of the hedge object's mtm from the beginning.
In fair value hedges, gains or losses, both on hedge instruments and on hedged items (attributable to the type of risk being protected) are recognized directly in the consolidated income statement.
Attributable to the type of risk being hedged
2021 2020 2019
Hedge Structure Effective Portion Accumulated Portion Ineffective Effective Portion Accumulated Portion Ineffective Effective Portion Accumulated Portion Ineffective
  Fair Value Hedge
Brazilian Treasury Bonds (LTN, NTN-F) 3,756,394   0    (2,183,841) 0    (2,853,807) 0
Bonds (LEA) 0    0    -    0    (61,761) 0
Resolution 2770 0    0    -    0    (94) 0
Trade Finance Off 728 0    (5,092) 0    (4,015) 0
Total 3,757,122   0    (2,188,933) 0    (2,919,677) 0
Hedge Instruments

12/31/2021
Hedge
Hedge Instruments Objects
Curve Adjustment to Accounting Curve Adjustment to Accounting
Strategies Value Market Value Value Value Market Value Value
Swap Contracts 84,767 (2,204) 82,563 84,937 3,175 88,112
Credit Operations Hedge 84,767 (2,204) 82,563 84,937 3,175 88,112
Future Contracts 41,437,967 (7,913) 41,430,054 46,351,128 (2,031,108) 44,320,021
Credit Operations Hedge 2,850,589 (14,439) 2,836,150 2,738,830 15,685 2,754,515
Hedge of Securities 38,587,378 6,527 38,593,904 43,612,299 (2,046,793) 41,565,506

12/31/2020
Hedge
Hedge Instruments Objects
Curve Adjustment to Accounting Curve Adjustment to Accounting
Strategies Value Market Value Value Value Market Value Value
Future Contracts 46,649,331 -    46,649,331 42,529,036 2,802,690 45,331,727
Hedge of Securities 46,649,331 -    46,649,331 42,529,036 2,802,690 45,331,727

12/31/2019
Hedge
Hedge Instruments Objects
Curve Adjustment to Accounting Curve Adjustment to Accounting
Strategies Value Market Value Value Value Market Value Value
Swap Contracts 3,249,741 101,264 3,351,004 3,555,326 662,773 4,218,099
Credit Operations Hedge 1,118,210 28,993 1,147,202 1,423,809 63,231 1,487,040
Hedge of Securities 2,131,532 72,271 2,203,802 2,131,517 599,542 2,731,059
Future Contracts 789,631 -    789,631 45,427,125 3,000,490 48,427,614
Hedge of Securities 789,631 -    789,631 45,427,125 3,000,490 48,427,614
(*) The Bank has market risk hedge strategies, the objects of which are assets in its portfolio, which is why we demonstrate the passive edge of the respective instruments. For structures whose instruments are futures, we show the balance of the calculated daily adjustment, recorded in a clearing account.
Consolidated Financial Statements | December 31, 2021 | F-49
Table of Contents

* Values expressed in thousands, except when indicated.
a.6.II) Cash Flow Hedge
The Bank's cash flow hedge strategies consist of hedging exposure to changes in cash flows, interest payments and exchange rate exposure, which are attributable to changes in interest rates on recognized assets and liabilities and changes exchange rates for unrecognized assets and liabilities.
The Bank applies the cash flow hedge as follows:
• Enters into fixed-rate asset swaps and foreign currency liabilities and designates them as a hedging instrument in a Cash Flow Hedge structure, with the object of foreign currency loan operations negotiated with third parties through offshore agencies and securities Brazilian foreign debt held to maturity.
• It contracts Dollar futures or DDI + DI futures (Synthetic Dollar Futures) and designates them as a protection instrument in a Cash Flow Hedge structure, having as object item the Bank's credit portfolio in Dollars and Promissory Notes in securities portfolio available for sale.
• The Bank has a portfolio of assets indexed to the Euro and traded at Offshore agencies. In the transaction, the value of the asset in Euro will be converted to Dollar at the exchange contract rate for entering the transaction. As of the conversion, the principal amount of the transaction, already expressed in dollars, will be corrected by a floating or pre-fixed rate. The assets will be hedged with Swap Cross Currency, in order to transfer the risk in Euro to IBOR + Coupon.
To assess the effectiveness and measure the ineffectiveness of these strategies, Banco Santander follows IAS 39, which indicates that the effectiveness test must be carried out in the design/start of the hedge structure (prospective test) and repeated periodically (prospective and retrospective test) for demonstrate that the expectation of the hedge relationship remains effective (between 80 and 125%).
In this hedge strategy, the effectiveness tests (prospective/retrospective) are conducted by comparing two proxies, one for the hedged object and the other for the instrument.
The hedge object proxy is a “conceptual” swap, where the passive “tip” simulates the part of the Stable Portion to be protected and the active pre-fixed “tip” is identical to the set of futures designated as a hedge, being consistent with market rates practiced on the day the hedge is designated. The hedge instrument proxy is a “conceptual” swap, where the active “tip” is made up of the number of futures contracts designated as hedging, and the passive pre-fixed “tip” is the rate negotiated in the acquisition of these contracts. The proxy is stable throughout the strategy since the contracts are maintained until maturity.
Any ineffectiveness is recognized in the income ~~statement.~~statement in the line Gains (losses) on financial assets and liabilities (net).
a) Prospective Test: according to the regulations, the prospective test must be performed on the start date and quarterly to demonstrate that the expectation regarding the effectiveness of the hedge relationship is high, however the tests are carried out monthly for proactive monitoring and more efficient projections, in addition to better maintenance of testing-related routines.
a.1) Periodic Prospective Test:Market Risk makes the projections of three scenarios for the tests, being: 1st 10bps on the curve; 2nd 50bps on the curve and 3rd 100bps on the curve. Using the validated estimates, prospective tests are performed by valuing the two variable legs of the transaction to market.
~~Consolidated Financial Statements | December 31, 2020 | F-51~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
a.2) Initial Prospective Test:the methodology of the periodic prospective test should also be applied on the start date of each new strategy.
b) Retrospective ~~test:~~test: it must be performed monthly with historical data to demonstrate cumulatively that the hedge was effective, according to the methodology presented above. Any ineffectiveness is recognized in the income statement.
Consolidated Financial Statements | December 31, 2021 | F-50
Table of Contents

* Values expressed in thousands, except when indicated.
The Ineffective portion is measured using the prospective hedge test and if identified recognized in the income statement in the line Gains (losses) on financial assets and liabilities (net).
Effectiveness should be between 80% and 125%.
In cash flow hedges, the effective portion of the variation in the value of the hedge instrument is temporarily recognized in equity under the caption “Other comprehensive income - cash flow hedges” (Note ~~26)~~25) until the anticipated transactions occur, when this portion is recognized in the consolidated income statement, except if the anticipated transactions result in the recognition of non-financial assets or liabilities, this portion will be included in the cost of the financial asset or liability. The non-effective portion of the variation in the value of foreign exchange hedge derivatives is recognized directly in the consolidated income statement. And the ineffective portion of the gains and losses on cash flow hedge instruments in an operation abroad is recognized directly in “Gains (losses) on financial assets and liabilities (net)” in the consolidated statements of income.
Hedge Structure - Cash Flow
2020 2019 2018
Hedge Structure Effective Portion Accumulated Portion Ineffective Effective Portion Accumulated Portion Ineffective Effective Portion Accumulated Portion Ineffective
Cash Flow Hedge
Eurobonds 14,666 - (6,074 ) - (8,925 ) -
Trade Finance Off 58,088 - 139,852 - (16,453 ) (3,981 )
Government Securities (LFT) 727,437 - 503,665 - 331,922 -
Bank Deposit Certificate - CDB - - - - 1,225 -
Total 800,190 - 637,443 - 307,769 (3,981 )
2021 2020 2019
Hedge Structure Effective Portion Accumulated Portion Ineffective Effective Portion Accumulated Portion Ineffective Effective Portion Accumulated Portion Ineffective
  Cash Flow Hedge
Eurobonds 0    0    14,666 0    (6,074) 0
Trade Finance Off (236,630) 0    58,088 0    139,852 0
Government Securities (LFT) (982,648) -    727,437 -    503,665 -
Bank Deposit Certificate - CDB 402,779 -    -    -    -    -
Total (816,500) -    800,190 -    637,443 -

Hedge Instruments / Hedge Object
12/31/2020

Hedge Instruments Hedge Object
Accounting Adjustment to Market Accounting
Strategies Value - liability Market Value Value Value
Swap Contracts 1,428,053 1,428,053 1,302,666 1,302,666
Hedge of Securities 1,428,053 1,428,053 1,302,666 1,302,666
Future Contracts 19,500,234 19,500,234 23,447,934 23,447,934
Hedge of Securities 19,500,234 19,500,234 23,447,934 23,447,934

12/31/2019

Hedge Instruments Hedge Object
Accounting Adjustment to Market Accounting
Strategies Value - liability Market Value Value Value
Swap Contracts 1,361,658 35,110 1,396,768 1,324,685
Credit Operations Hedge 435,872 (3,494 ) 432,378 399,831
Hedge of Securities 925,786 38,604 964,390 924,854
Future Contracts 54,460,972 - 54,460,972 7,726,566
Credit Operations Hedge (1) 50,975,253 - 50,975,253 4,506,878
Hedge of Securities 3,485,719 - 3,485,719 3,219,688

12/31/2018
Hedge Instruments Hedge Object
Accounting Adjustment to Market Accounting
Strategies Value - liability Market Value Value Value
Swap Contracts 2,227,004 (24,206 ) 2,202,798 2,423,678
Credit Operations Hedge 1,032,283 68,730 1,101,012 1,198,921
Hedge of Securities 1,194,721 (92,936 ) 1,101,786 1,224,757
Future Contracts 44,541,939 - 44,541,939 17,224,115
Credit Operations Hedge (1) 44,000,952 - 44,000,952 16,910,915
Hedge of Securities 540,987 - 540,987 313,200
(*) The Bank has cash flow hedge strategies, the objects of which are assets in its portfolio, which is why we have shown the liability side of the respective instruments. For structures whose instruments are futures, we show the notional's balance, recorded in a clearing account.
~~(1) Updated value of the instruments on December 31, 2020 is R$6,972,063 (12/31/2019 - R$8,425,386).~~

12/31/2021

Hedge Instruments Hedge Object
Curve Accounting Adjustment to Curve Market Accounting
Strategies Value Value - liability Market Value Value Value Value
Future Contracts 110,932,644 (616,062) 110,316,582 128,673,067 (8,912,769) 119,760,298
Credit Operations Hedge ⁽¹⁾ 28,542,862 (577,845) 27,965,018 28,659,545 1,508,397 30,167,942
Hedge of Securities 71,320,781 (26) 71,320,756 89,837,000 (10,543,430) 79,293,570
Funding Hedge 11,069,000 (38,191) 11,030,809 10,176,522 122,264 10,298,786

12/31/2020

Hedge Instruments Hedge Object
Accounting Adjustment to Market Accounting
Strategies Value - liability Market Value Value Value
Swap Contracts 1,428,053 1,428,053 1,302,666 1,302,666
Hedge of Securities 1,428,053 1,428,053 1,302,666 1,302,666
Future Contracts 19,500,234 19,500,234 23,447,934 23,447,934
Credit Operations Hedge ⁽¹⁾ 19,500,234 19,500,234 23,447,934 23,447,934

12/31/2019

Hedge Instruments Hedge Object
Accounting Adjustment to Market Accounting
Strategies Value - liability Market Value Value Value
Swap Contracts 1,361,658 35,110 1,396,768 1,324,685
Credit Operations Hedge 435,872 (3,494) 432,378 399,831
Hedge of Securities 925,786 38,604 964,390 924,854
Future Contracts 54,460,972 -    54,460,972 7,726,566
Credit Operations Hedge ⁽¹⁾ 50,975,253 -    50,975,253 4,506,878
Hedge of Securities 3,485,719 -    3,485,719 3,219,688
(*) The Bank has cash flow hedge strategies, the objects of which are assets in its portfolio, which is why we have shown the liability side of the respective instruments. For structures whose instruments are futures, we show the notional's balance, recorded in a clearing account.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-52~~F-51
Table of Contents
* Values expressed in thousands, except when indicated.

* Values expressed in thousands, except when indicated.
In Consolidated, the mark-to-market effect of swap and future asset contracts corresponds to a credit in the amount of R$~~11,169~~193,793 (12/31/~~2019~~2020 - R$~~11,063)~~11,169) and is recorded in equity, reduced tax effects, of which R$~~5,026~~569 will be realized against revenue in the next twelve months.
~~a.7)~~
a.6) Derivative Financial Instruments - Margins Pledged as Guarantee
The margin given in guarantee for transactions traded at B3 S.A. with its own and third party derivative financial instruments is composed of federal public securities.
Composed of government securities
2020 2019 2018 2021 2020 2019
Financial Treasury Bills - LFT 4,363,666 5,342,992 7,552,926 31,305,549 4,363,666 5,342,992
National Treasury Bills - LTN 6,155,276 1,086,556 3,392,886 3,751,223 6,155,276 1,086,556
National Treasury Notes - NTN 2,814,274 660,918 873,134 7,725,538 2,814,274 660,918
Total 13,333,215 7,090,466 11,818,946 42,782,310 13,333,215 7,090,466

b) Short Positions
As of December 31, ~~2020,~~2021, the balance of short positions totaled R$ ~~45,807,946 (2019~~12,780,599 (2020 - R$ ~~23,835,653~~45,807,946 and ~~2018~~2019 - R$ ~~32,695,677)~~23,835,653) which includes the amount of financial liabilities resulting from the direct sale of financial assets purchased ~~through~~under commitments for resale or ~~loan commitments.~~borrowed.
9. 9. Loans and advances to clients
a) Breakdown
The breakdown, by classification, of the balances of “Loans and advances to clients” in the consolidated financial statements is as follows:
Thousand of reais 2020 2019 2018

Classification:
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 60,808 - 619,180
Financial Assets Measured At Amortized Cost 393,707,229 326,699,480 301,072,207
Of which:
  Loans and receivables at amortized cost 417,761,218 347,256,660 321,314,010
  Impairment losses (24,053,989 ) (20,557,180 ) (20,241,803 )
Loans and advances to customers, net 393,768,037 326,699,480 301,691,387
Loans and advances to customers, gross 417,822,026 347,256,660 321,933,190

Thousand of reais 2020 2019 2018

Type:
Loans operations ⁽¹⁾ 390,941,415 329,910,319 308,364,517
Lease Portfolio 2,096,240 2,111,842 1,836,504
Repurchase agreements 4,530,041 10,500 509,147
Other receivables ⁽²⁾ 20,254,330 15,223,999 11,223,022
Total 417,822,026 347,256,660 321,933,190
~~(1)~~
Thousand of reais 2021 2020 2019

Classification:
Non-trading financial assets mandatorily measured at fair value through profit or loss 392,455 60,808 -
Loans and receivables -    -    -
Financial assets measured at amortized cost 464,451,587 393,707,229 326,699,480
Of which:
   Loans and receivables at amortized cost 492,962,247 417,761,218 347,256,660
   Impairment losses (28,510,660) (24,053,989) (20,557,180)
Loans and advances to customers, net 464,844,042 393,768,037 326,699,480
Loans and advances to customers, gross 493,354,702 417,822,026 347,256,660

Thousand of reais 2021 2020 2019

Type:
Loans operations ⁽¹⁾ 457,384,432 390,941,415 329,910,319
Lease Portfolio 2,532,048 2,096,240 2,111,842
Repurchase agreements 6,044,808 4,530,041 10,500
Other receivables ⁽²⁾ 27,393,414 20,254,330 15,223,999
Total 493,354,702 417,822,026 347,256,660
(1) Includes loans and other loans with credit characteristics.
(2) Refers substantially to Foreign Exchange Transactions and Other Receivables with credit granting characteristics.
~~(2) Refers substantially to Foreign Exchange Transactions and Other Receivables with credit granting characteristics.~~
Note 43-d contains ~~a detail~~details of the residual maturity periods of ~~loans and receivables.~~
financial assets measured at the corresponding amortized cost. There are no loans and advances to ~~clients for material~~customers in significant amounts without fixed maturity dates.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-53~~F-52
Table of Contents
* Values expressed in thousands, except when indicated.

* Values expressed in thousands, except when indicated.
b) Detail
~~Following is a detail,~~Below, the details, by ~~loan~~condition and type ~~and status, borrower~~of credit, debtor sector and interest rate formula, of ~~the~~ loans and advances to ~~clients,~~customers, which reflect the ~~Bank’s~~Bank's exposure to credit risk in its ~~core business,~~main activity, gross of ~~impairment losses:~~reduction losses to recoverable value:
Thousand of reais 2020 2019 2018 2021 2020 2019
Loan borrower sector:
Commercial, and industrial 191,281,653 145,387,439 146,293,616 Commercial, and industrial 215,967,128 191,281,653 145,387,439
Real estate-construction 45,791,869 39,720,713 36,515,352 Real estate-construction 54,738,606 45,791,869 39,720,713
Installment loans to individuals 178,652,145 160,036,668 137,287,593 Installment loans to individuals 220,115,963 178,652,145 160,036,668
Lease financing 2,096,359 2,111,840 1,836,629 2,533,004 2,096,359 2,111,840
Total 417,822,026 347,256,660 321,933,190 493,354,702 417,822,026 347,256,660
Interest rate formula
Thousand of reais 2021 2020 2019
Interest rate formula:
Fixed interest rate 337,583,246 292,884,352 258,760,620
Floating rate 155,771,456 124,937,674 88,496,040
Total 493,354,702 417,822,026 347,256,660

Debt sector by maturity
Thousand of reais 2020 2019 2018
Interest rate formula:
Fixed interest rate 292,884,352 258,760,620 240,772,724
Floating rate 124,937,674 88,496,040 81,160,466
Total 417,822,026 347,256,660 321,933,190
2021
Debt Sector by Maturity Less than 1 year % of total Between 1 and 5 years % of total More than 5 years % of total Total % of total

Commercial and industrial 165,729,422 61.37% 73,723,212            45.81% 8,221,617 13.18% 247,674,251 50.20%

Real estate 3,985,684 1.48% 10,137,988             6.30% 40,614,935 65.12% 54,738,607 11.10%
Installment loans to individuals 99,050,959 36.68% 75,832,619           47.12% 13,525,262 21.69% 188,408,840 38.19%

Lease financing 1,284,868 0.48% 1,238,498            0.77% 9,638 0.02% 2,533,004 0.51%
Loans and advances to customers, gross 270,050,934 100.00% 160,932,317      100.00% 62,371,452 100.00% 493,354,702 100.00%

2020
Debt Sector by Maturity Less than 1 year % of total Between 1 and 5 years % of total More than 5 years % of total Total % of total

Commercial and industrial 127,569,542 58.23% 60,190,422 40.94% 3,521,688 6.81% 191,281,652 45.78%

Real estate 3,419,553 1.56% 8,973,495 6.10% 33,398,822 64.54% 45,791,870 10.96%
Installment loans to individuals 87,174,594 39.79% 76,667,187 52.15% 14,810,364 28.62% 178,652,145 42.76%

Lease financing 899,055 0.41% 1,182,713 0.80% 14,591 0.03% 2,096,359 0.50%
Loans and advances to customers, gross 219,062,744 100.00% 147,013,817 100.00% 51,745,465 100.00% 417,822,026 100.00%

2019
Debt Sector by Maturity Less than 1 year % of total Between 1 and 5 years % of total More than 5 years % of total Total % of total

Commercial and industrial 102,083,249 54.83% 39,408,727 33.44% 3,895,463 9.01% 145,387,439 41.87%

Real estate 3,633,231 1.95% 8,145,568 6.91% 27,941,913 64.65% 39,720,713 11.44%
Installment loans to individuals 79,624,744 42.76% 69,034,596 58.58% 11,377,328 26.33% 160,036,668 46.09%

Lease financing 855,624 0.46% 1,252,673 1.06% 3,543 0.01% 2,111,840 0.61%
Loans and advances to customers, gross 186,196,848 100.00%    117,841,564 100.00% 43,218,247 100.00% 347,256,660 100.00%

Debt Sector by Maturity Less than 1 year % of total Between 1 and 5 years % of total More than 5 years % of total Total
2020
% of total

Commercial and industrial 127,569,542 58.23 % 60,190,422 40.94 % 3,521,688 6.81 % 191,281,652 45.78 %

Real estate 3,419,553 1.56 % 8,973,495 6.10 % 33,398,822 64.54 % 45,791,870 10.96 %
Installment loans to individuals 87,174,594 39.79 % 76,667,187 52.15 % 14,810,364 28.62 % 178,652,145 42.76 %

Lease financing 899,055 0.41 % 1,182,713 0.80 % 14,591 0.03 % 2,096,359 0.50 %
Loans and advances to customers, gross 219,062,744 100 % 147,013,817 100 % 51,745,465 100 % 417,822,026 100 %

Debt Sector by Maturity Less than 1 year % of total Between 1 and 5 years % of total More than 5 years % of total Total
2019
% of total

Commercial and industrial 102,083,249 54.83 % 39,408,727 33.44 % 3,895,463 9.01 % 145,387,439 41.87 %

Real estate 3,633,231 1.95 % 8,145,568 6.91 % 27,941,913 64.65 % 39,720,713 11.44 %
Installment loans to individuals 79,624,744 42.76 % 69,034,596 58.58 % 11,377,328 26.33 % 160,036,668 46.09 %

Lease financing 855,624 0.46 % 1,252,673 1.06 % 3,543 0.01 % 2,111,840 0.61 %
Loans and advances to customers, gross 186,196,848 100 % 117,841,564 100 % 43,218,247 100 % 347,256,660 100 %

2018
Debt Sector by Maturity Less than 1 year % of total Between 1 and 5 years % of total More than 5 years % of total Total % of total

Commercial and industrial 109,802,828 58.92 % 32,538,999 32.77 % 3,951,789 10.90 % 146,293,616 45.44 %

Real estate 4,298,925 2.31 % 7,964,308 8.02 % 24,252,119 66.90 % 36,515,352 11.34 %
Installment loans to individuals 71,433,099 38.33 % 57,808,600 58.21 % 8,045,894 22.20 % 137,287,593 42.64 %

Lease financing 838,659 0.45 % 997,644 1.00 % 326 0.00 % 1,836,629 0.57 %
Loans and advances to customers, gross 186,373,511 100 % 99,309,551 100 % 36,250,128 100 % 321,933,190 100 %

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-54~~F-53
Table of Contents
* Values expressed in thousands, except when indicated.
Thousand of reais 2020 2019 2018

Maturity
Less than 1 year 219,062,744 186,196,849 186,373,511
Between 1 and 5 years 147,013,817 117,841,564 99,309,551
More than 5 years 51,745,465 43,218,247 36,250,128
Loans and advances to customers, gross 417,822,026 347,256,660 321,933,190

Internal risk classification
Low (1) 347,312,357 257,133,115 240,440,294
Medium-low (1) 24,277,404 56,549,196 50,485,682
Medium (2) 26,231,871 11,754,806 11,967,262
Medium - high (2) 3,896,457 8,512,386 7,722,198
High (3) 16,100,937 13,307,156 11,317,754
Loans and advances to customers, gross 417,822,026 347,256,660 321,933,190
~~(1) Transactions classifieds on Stage 1~~
~~(2) Transactions classifieds on Stage 2~~
~~(3) Transactions classifieds on Stage 3~~

* Values expressed in thousands, except when indicated.
Maturity
Thousand of reais 2021 2020 2019

Maturity
Less than 1 year 270,050,934 219,062,744 186,196,849
Between 1 and 5 years 160,932,317 147,013,817 117,841,564
More than 5 years 62,371,451 51,745,465 43,218,247
Loans and advances to customers, gross
493,354,702 417,822,026 347,256,660

Internal risk classification
Low 374,505,212 347,315,357 257,133,115
Medium-low 79,216,725 24,277,404 56,549,196
Medium 14,589,977 26,231,871 11,754,806
Medium - high 9,413,110 3,896,457 8,512,386
High 15,629,678 16,100,937 13,307,156
Loans and advances to
Customers, gross
493,354,702 417,822,026 347,256,660

c) Impairment losses
The ~~following~~ tables below show the ~~reconciliation~~reconciliations of the ~~initial~~beginning and ~~final~~ending balances of the ~~provision~~allowance for losses by category of financial instrument. The terms ofexpected credit losses ~~expected in~~over 12 months, expected credit losses ~~expected during the~~over their useful life and impairment losses are explained in the ~~note~~accounting practices note.
The changes in provisions for impairment losses in the balances of the item "Financial assets measured at amortized cost" are as follows:
Considering the amounts recognized in "Loss due to impairment of the amount of the recoverable value against the result" and the "Recoveries of loans written off as loss", and "PDD of Avals", the "Loss with financial assets - Financial assets measured at amortized cost" totaled in December 31, 2021, R$17,112,734 (2020 - R$17,450,188 and 2019 - R$13,369,905).
Changes in the allowances for the impairment losses on ~~accounting practices. The comparative values referring to 01/01/2018 represent~~ the ~~provision for losses~~balances of ~~credit on 12/31/2017 after the initial adoption adjustments of IFRS 9 (note 1)~~Loans and receivables
Thousand of reais 2021
Stage 1 Stage 2 Stage 3
Credit losses expected in 12 months Expected credit losses over a useful life not subject to impairment Expected credit losses during the useful life subject to impairment Total

Balance at beginning of year 5,837,199 4,928,606 14,874,684 25,640,489
Impairment losses charged to income for the year 3,200,608 4,883,553 8,902,534 16,986,695
Transfers between stages (553,054) 31,154 10,221,329 9,699,429
Movement of the period 3,753,662 4,852,399 (1,318,795) 7,287,266
Of which:
Commercial and industrial 347,359 1,779,043 1,213,907 3,340,309
Real estate-construction 4,411 (50,798) 162,418 116,031
Installment loans to individuals 2,851,686 3,155,946 7,524,183 13,531,815
Lease financing (2,848) (638) 2,026 (1,460)
Variation by Stage (2,060,142) (4,058,304) 6,118,446 -
Write-off of impaired balances against recorded impairment allowance -    -    (12,903,807) (12,903,807)
Of which:
Commercial and industrial -    -    (5,153,345) (5,153,345)
Real estate-construction -    -    (166,579) (166,579)
Installment loans to individuals -    -    (7,575,967) (7,575,967)
Lease financing -    -    (7,916) (7,916)

Balance at end of year 6,977,664 5,753,855 16,991,855 29,723,376
Of which:
Loans and advances to customers 6,861,404 5,703,285 15,945,970 28,510,659
Loans and amounts due from credit institutions (Note 5) 21,825 -    -    21,825
Provision for Debt Instruments  (Note 6) 94,435 50,570 1,045,887 1,190,892

Recoveries of loans previously charged off -    -    1,536,336 1,536,336
Of which:
Commercial and industrial -    -    462,523 462,523
Real estate-construction -    -    64,257 64,257
Installment loans to individuals -    -    1,002,257 1,002,257
Lease financing -    -    7,299 7,299
Discount granted -    -    (1,662,375) (1,662,375)

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-55~~F-54
Table of Contents

* Values expressed in thousands, except when indicated.

Thousand of reais 2021 2020 2019
Balance at beginning of year 25,640,489 22,625,750 22,969,315
Impairment losses charged to income for the year 16,986,695 18,311,441 14,361,382
Of which:
Commercial and industrial 3,340,309 6,918,671 2,376,910
Real estate-construction 116,031 81,415 94,957
Installment loans to individuals 13,531,815 11,308,689 11,866,475
Lease financing (1,460) 2,666 23,040
Write-off of impaired balances against recorded impairment allowance (12,903,808) (15,296,703) (14,704,948)
Of which:
Commercial and industrial (5,153,346) (4,616,722) (5,713,369)
Real estate-construction (166,579) (232,262) (108,294)
Installment loans to individuals (7,575,967) (10,433,131) (8,834,391)
Lease financing (7,916) (14,588) (48,893)
Balance at end of year 29,723,376 25,640,488 22,625,750
Of which:
Loans and advances to customers 28,510,659 24,053,989 20,557,180
Loans and amounts due from credit institutions (Note 5) 21,825 9,065 13,543
Provision for Debt Instruments  (Note 6) 1,190,892 1,577,435 2,055,027

Recoveries of loans previously charged off 1,536,336 861,253 991,476
Of which:
Commercial and industrial 462,523 422,023 519,594
Real estate-construction 64,257 55,631 46,639
Installment loans to individuals 1,002,257 370,491 417,477
Lease financing 7,299 13,107 7,767
* Values expressedConsidering the amounts recognized in ~~thousands, except when indicated.~~
~~The variations in the provisions for losses~~“Loss due to ~~non-recovery in~~impairment of income against income” and “Recoveries of loans written off as loss”, and “Available allowances” the ~~balances of the item “Financial~~“Losses on financial assets - Financial assets measured at amortized cost” ~~are as follows:~~
Thousand of reais 2020
Stage 1 Stage 2 Stage 3
Credit losses expected in 12 months Expected credit losses over a useful life not subject to impairment Expected credit losses during the useful life subject to impairment Total

Balance at beginning of year 4,358,601 3,293,690 14,973,459 22,625,750
Impairment losses charged to income for the year 4,968,075 2,881,726 10,462,365 18,312,166
Transfers between stages (3,142,225 ) 2,850,217 7,081,358 6,789,350
Movement of the period 8,110,300 31,509 3,380,007 11,522,817
Of which:
Commercial and industrial 3,230,168 1,867,504 1,821,724 6,919,396
Real estate-construction (8,544 ) (27,803 ) 117,762 81,415
Installment loans to individuals 1,752,883 1,041,818 8,513,988 11,308,689
Lease financing (6,432 ) 207 8,891 2,666
Variation by Stage (3,489,478 ) (1,246,810 ) 4,736,287 -
Write-off of impaired balances against recorded impairment allowance - - (15,297,428 ) (15,297,428 )
Of which:
Commercial and industrial - - (4,617,446 ) (4,617,446 )
Real estate-construction - - (232,262 ) (232,262 )
Installment loans to individuals - - (10,433,132 ) (10,433,132 )
Lease financing - - (14,588 ) (14,588 )

Balance at end of year 5,837,199 4,928,606 14,874,684 25,640,488
Of which:
Loans and advances to customers 5,746,000 4,919,000 13,388,989 24,053,989
Loans and amounts due from credit institutions (Note 5) 9,065 - - 9,065
Provision for Debt Instruments (Note 6) 82,135 9,606 1,485,695 1,577,435
-
Recoveries of loans previously charged off - - 861,253 861,253
Of which:
Commercial and industrial - - 422,023 422,023
Real estate-construction - - 55,631 55,631
Installment loans to individuals - - 370,491 370,491
Lease financing - - 13,107 13,107

Thousand of reais 2020 2019 2018
Balance at beginning of year 22,625,750 22,969,315 20,723,062
Impairment losses charged to income for the year 18,311,441 14,361,382 13,540,105
Of which:
Commercial and industrial 6,918,671 2,376,910 3,620,292
Real estate-construction 81,415 94,957 192,901
Installment loans to individuals 11,308,689 11,866,475 9,708,243
Lease financing 2,666 23,040 18,669
Write-off of impaired balances against recorded impairment allowance (15,296,703 ) (14,704,948 ) (11,293,852 )
Of which:
Commercial and industrial (4,616,722 ) (5,713,369 ) (3,981,414 )
Real estate-construction (232,262 ) (108,294 ) (190,660 )
Installment loans to individuals (10,433,131 ) (8,834,391 ) (7,099,553 )
Lease financing (14,589 ) (48,893 ) (22,225 )
Balance at end of year 25,640,488 22,625,750 22,969,315
Of which:
Loans and advances to customers 24,053,989 20,557,180 20,241,803
Loans and amounts due from credit institutions (Note 5) 9,065 13,543 13,561
Provision for Debt Instruments (Note 6) 1,577,435 2,055,027 2,713,951

Recoveries of loans previously charged off 861,253 991,476 826,573
Of which:
Commercial and industrial 422,023 519,594 345,085
Real estate-construction 55,631 46,639 103,433
Installment loans to individuals 370,491 417,477 369,557
Lease financing 13,107 7,767 8,498
~~Considering these amounts recognized~~totaled in ~~“Impairment losses charged to income for the year” and the "Recoveries of loans previously charged off", the "Impairment losses on financial assets - Loans and receivables” amounted on~~ December 31, ~~2020~~2021, R$17,112,734 (2020- R$17,450,188 ~~(2019~~ and 2019 - R$13,369,905 ~~and 2018 - R$12,713,532),~~).
The balances of the provision for losses due to non-recovery by debtor sector ~~are as follows:~~
Thousand of reais 2021 2020 2019

Commercial and industrial 8,324,614 9,757,193 7,455,243
Real estate - Construction 154,248 193,935 344,782
Installment loans to individuals 21,240,296 15,675,765 14,800,208
Lease financing 4,218 13,594 25,517
Total 29,723,376 25,640,488 22,625,750
Thousand of reais 2020 2019 2018

Commercial and industrial 9,757,193 7,455,243 10,791,702
Real estate - Construction 193,935 344,782 358,119
Installment loans to individuals 15,675,765 14,800,208 11,768,124
Lease financing 13,594 25,517 51,370
Total 25,640,488 22,625,750 22,969,315
~~Consolidated Financial Statements | December 31, 2020 | F-56~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
d) Impaired assets
The details of the changes in the balance of the financial assets classified as “Loans and receivables – loans and advances to clients” (as defined at Note 1.i) and considered to be impaired due to credit risk are as follows:
Loans and receivables - loans and advances to customers
Thousand of reais 2020 2019 2018 2021 2020 2019

Balance at beginning of year on 01/01/2018 after the initial adoption IFRS 9) 23,426,076 22,425,801 19,847,987
Balance at beginning of year Balance at beginning of year 23,176,039 23,426,076 22,425,801
Net additions 14,757,908 16,000,733 13,871,666 18,428,727 14,757,908 16,000,733
Written-off assets (15,007,946 ) (15,000,458 ) (11,293,852 ) (14,681,454) (15,007,946) (15,000,458)
Balance at end of year 23,176,039 23,426,076 22,425,801 26,923,312 23,176,039 23,426,076
Following is a detail of the financial assets considered to be impaired classified by age of the oldest past-due amount:

Thousand of reais 2020 2019 2018

With no Past-Due Balances or Less than 3 Months Past Due 12,966,813 11,729,920 12,000,867
With Balances Past Due by
3 to 6 Months 3,049,974 3,961,042 3,473,591
6 to 12 Months 4,798,859 5,721,762 4,929,099
12 to 18 Months 1,243,809 985,476 1,144,035
18 to 24 Months 607,527 523,441 325,701
More than 24 Months 509,056 504,435 552,508
Total 23,176,039 23,426,076 22,425,801

Debt Sector

Commercial and industrial 10,558,213 10,072,655 11,832,302
Real estate - Construction 456,130 826,863 1,035,352
Installment loans to individuals 12,144,238 12,497,179 9,499,148
Lease financing 17,458 29,379 58,999
Total 23,176,039 23,426,076 22,425,801
Consolidated Financial Statements | December 31, 2021 | F-55
Table of Contents

* Values expressed in thousands, except when indicated.
Thousand of reais 2021 2020 2019

With no Past-Due Balances or Less than 3 Months Past Due 12,885,506 12,966,813 11,729,920
With Balances Past Due by
3 to 6 Months 4,717,302 3,049,974 3,961,042
6 to 12 Months 6,866,628 4,798,859 5,721,762
12 to 18 Months 1,253,046 1,243,809 985,476
18 to 24 Months 659,702 607,527 523,441
More than 24 Months 541,129 509,056 504,435
Total 26,923,312 23,176,039 23,426,076

Thousand of reais 2021 2020 2019
Debt Sector
Commercial and industrial 11,439,692 10,558,213 10,072,655
Real estate - Construction 470,115 456,130 826,863
Installment loans to individuals 14,996,152 12,144,238 12,497,179
Lease financing 17,353 17,458 29,379
Total 26,923,312 23,176,039 23,426,076
e) Loan past due for less than 90 days but not classified as impaired
Thousand of reais 2020 % of total loans past due for less than 90 days 2019 % of total loans past due for less than 90 days 2018 % of total loans past due for less than 90 days Thousand of reais 2021 % of total loans past due for less than 90 days 2020 % of total loans past due for less than 90 days 2019 % of total loans past due for less than 90 days

Commercial and industrial 5,131,885 25.80 % 3.517.086 15.42 % 4.424.143 19.77 % Commercial and industrial 4,892,277 20.68% 5,131,885 25.80% 3,517,086 15.42%
Real estate - Construction 3.085.498 15.51 % 5.781.977 25.35 % 4.527.432 20.23 % Real estate - Construction 3,605,641 15,24% 3,085,498 15.51% 5,781,977 25.35%
Installment loans to individuals 11,660,666 58.62 % 13.489.513 59.13 % 13.255.646 59.24 % Installment loans to individuals 15,150,254 64.04% 11,660,666 58.62% 13,489,513 59.13%
Financial Leasing 13.292 0.07 % 24.325 0.11 % 167.741 0.75 % Financial Leasing 10,961 0,05% 13,292 0.07% 24,325 0.11%
Total(1) 19.891.340 100.00 % 22.812.900 100.00 % 22.374.962 100.00 % 23,659,133 100.00% 19,891,340 100.00% 22,812,900 100.00%
(1) Refers exclusively to loans between 1 and 90 days.
f) Lease at present value
As at December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019 there were no leasing agreements or commitments that are considered individually relevant.
Breakdown by maturity
Gross investment in lease transactions
Thousand of reais 2021 2020 2019

Overdue 3,531 2,740 3,233
Due to:
Up to 1 year 1,067,567 952,172 978,748
From 1 to 5 years 1,642,506 1,394,525 1,442,244
Over 5 years 132,459 20,128 4,014
Total 2,846,063 2,369,565 2,428,239

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-57~~F-56
Table of Contents
* Values expressed in thousands, except when indicated.
~~Breakdown by maturity~~
~~Gross investment in lease transactions~~
Thousand of reais 2020 2019 2018

Overdue 2,740 3,233 4,817
Due to:
Up to 1 year 952,172 978,748 975,183
From 1 to 5 years 1,394,525 1,442,244 1,160,986
Over 5 years 20,128 4,014 1,071
Total 2,369,565 2,428,239 2,142,057

* Values expressed in thousands, except when indicated.
g) Transfer of financial assets with retention of risks and benefits
On December 31, ~~2020~~,2021, the amount recorded on “Loans and advances to clients” related to loan portfolio assigned is R$~~55,284 (2019~~40,790 (2020 - R$~~76,028~~55,284 and ~~2018 –~~2019 - R$~~122,271)~~76,028) and R$~~55,105 (2019~~40,511 (2020 - R$~~75,500~~55,105 and ~~2018~~2019 - R$~~126,906)~~75,500) of “Other financial liabilities - Financial Liabilities Associated with Assets Transfer” (Note ~~21)~~20).
The assignment operation was carried out with a co-obligation clause, with compulsory repurchase in the following situations:
- defaulted contracts for a period of more than 90 consecutive days;
- contracts subject to renegotiation;
- contracts subject to portability, pursuant to Resolution 3,401 of the National Monetary Council (CMN);
- contracts subject to intervention.
10. Non-current assets held for sale
At December 31, 2021, 2020 ~~2019~~ and ~~2018~~,2019, the total amount of ~~non-current~~ assets held for sale includes foreclosed assets and other tangible assets. The change in the ~~"Non-current assets~~"Assets held for sale" is as follows:
Thousand of reais 2020 2019 2018

Balance at beginning of year 1,580,496 1,598,367 1,507,548
Loan repayments - repossession of assets 445,173 735,864 785,139
Capital Increase in Companies held for sale (1) - 55,245 -
Additions / disposals (net) due to change in the scope of consolidation (2) - - (130,713)
Sales (663,067) (808,980) (563,607)
Final balance, gross 1,362,602 1,580,496 1,598,367
Impairment losses (3) (269,693) (255,161) (218,136)
Impairment as a percentage of foreclosed assets 19.79% 16.14% 13.65%
Balance at end of year 1,092,909 1,325,335 1,380,231
Thousand of reais 2021 2020 2019

Balance at beginning of year 1,362,602 1,580,496 1,598,367
Loan repayments - repossession of assets 235,904 445,173 735,864
Capital Increase in Companies held for sale ⁽¹⁾ 66,197 -    55,245
Sales (599,283) (663,067) (808,980)
Final balance, gross 1,065,420   1,362,602 1,580,496
Impairment losses ⁽²⁾ (249,075) (269,693) (255,161)
Impairment as a percentage of foreclosed assets 23.38% 19.79% 16.14%
Balance at end of year 816,345 1,092,909 1,325,335
(1) ~~(1)~~ On September 20, 2019, Santander Holding Imobiliária completed the acquisition of the company Summer Empreendimentos ~~Ltda,~~Ltda. (“Summer”), whose main asset is a branch located on Avenida Faria Lima in the city of São Paulo, for the amount of R$45,245. ~~At the conclusion~~Upon completion of the transaction, a structured plan for the sale of this company to a third party ~~was formalized~~ in the short term was formalized. In December 2019, Santander Holding Imobiliária carried out a capital increase in Summer in the amount of R$10,000.
(2) ~~(2)~~ On June 30, 2018, Banco Santander management reevaluated its strategy on investing in Real TJK Empreendimento Imobiliário SA (currently called Rojo Entretenimento SA), a company that owns Teatro Santander, and decided to transfer the non-assets item -currents held for sale for investments in associates and controlled companies (Note 11).
~~(3)~~ In ~~2020, it~~2021, includes the amount of R$~~24,751 (2019~~182,448 (2020 – R$~~251,945 e 2018~~24,751 and 2019 – R$~~159,120)~~251,945) of reversal of provisions for devaluations on ~~properties~~real estate and R$~~122 (2019 –~~2,194 (2020 - R$~~3,216)~~122) of provisions for devaluations on vehicles ~~constituted~~, based on appraisal reports prepared by a specialized external consultancy, ~~recorded~~accounted for as a provision for ~~losses due to non-recovery (Impairment).~~impairment losses.
11. ~~11.~~ Investments in associates and joint ventures
Jointly controlled
Banco Santander considers investments classified as jointly controlled when they possess a shareholders' agreement, which sets that the strategic, financial and operating decisions requires the unanimous consent of all investors.
Significant Influence
Associates are entities over which the Bank is in a position to exercise significant influence (significant influence is the power to participate in the financial and operating decisions of the investee) but it does not control or has joint control over the investee.
~~Consolidated Financial Statements | December 31, 2020 | F-58~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
a) Breakdown
Jointly controlled and Significant Influence - Participation
Participation % Participation %
Jointly Controlled by Banco Santander Activity Country 2020 2019 2018 Jointly Controlled by Banco Santander Activity Country 2021 2020 2019
Banco RCI Brasil S.A. Bank Brazil 39.89 % 39.89 % 39.89 % Banco RCI Brasil S.A. Bank Brazil 39.89% 39.89% 39.89%
Norchem Participações e Consultoria S.A. (1) Other Activities Brazil 0.00 % 50.00 % 50.00 % Norchem Participações e Consultoria S.A. (1) Other Activities Brazil 0.00% 0.00% 50.00%
Cibrasec - Companhia Brasileira de Securitização(1)(2)(6) Securitization Brazil 0.00 % 0.00 % 9.72 %
Estruturadora Brasileira de Projetos S.A. - EBP (1)(2) Other Activities Brazil 11.11 % 11.11 % 11.11 % Estruturadora Brasileira de Projetos S.A. - EBP (1)(2) Other Activities Brazil 11.11% 11.11% 11.11%
Gestora de Inteligência de Crédito (1) Credit Bureau Brazil 20.00 % 20.00 % 20.00 % Gestora de Inteligência de Crédito (1) Credit Bureau Brazil 19.45% 20.00% 20.00%
Campo Grande Empreendimentos (5) Other Activities Brazil 25.32 % 25.32 % 25.32 % Campo Grande Empreendimentos (5) Other Activities Brazil 25.32% 25.32% 25.32%
Santander Auto S.A. Other Activities Brazil 50.00 % 50.00 % 50.00 % Santander Auto S.A. Other Activities Brazil 50.00% 50.00% 50.00%
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.)
Webmotors S.A. (3) Webmotors S.A. (3) Other Activities Brazil 70.00% 70.00% 70.00%
Tecnologia Bancária S.A. - TECBAN (1) Tecnologia Bancária S.A. - TECBAN (1) Other Activities Brazil 18.98% 18.98% 18.98%
Hyundai Corretora de Seguros Hyundai Corretora de Seguros Insurance Broker Brazil 50.00% 50.00% 50.00%
PSA Corretora de Seguros e Serviços Ltda. (4) Insurance Broker Brazil 50.00% 50.00% 50.00%
Jointly Controlled by Aymoré CFI
Solutions 4Fleet Other Activities Brazil 80.00% 0.00% 0.00%
Significant Influence of Banco Santander Significant Influence of Banco Santander
Norchem Holding e Negócios S.A. (1) Norchem Holding e Negócios S.A. (1) Other Activities Brazil 0.00% 0.00% 21.75%
~~Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.)~~
Webmotors S.A. (3) Other Activities Brazil 70.00 % 70.00 % 70.00 %
Tecnologia Bancária S.A. - TECBAN (1) Other Activities Brazil 18.98 % 18.98 % 19.81 %
Hyundai Corretora de Seguros Insurance Broker Brazil 50.00 % 50.00 % 0.00 %
PSA Corretora de Seguros e Serviços Ltda, (4) Insurance Broker Brazil 50.00 % 50.00 % 50.00 %

Significant Influence of Banco Santander
Norchem Holding e Negócios S.A. (1) Other Activities Brazil 0.00 % 21.75 % 21.75 %
Investments
2020 2019 2018
Jointly Controlled by Banco Santander 590,219 595,230 613,366
Banco RCI Brasil S.A. 544,236 509,890 458,292
Norchem Participações e Consultoria S.A. - 21,078 26,105
Cibrasec - Companhia Brasileira de Securitização - - 7,298
Estruturadora Brasileira de Projetos S.A. - EBP 1,273 3,889 3,690
Gestora de Inteligência de Crédito 28,680 47,744 59,098
Campo Grande Empreendimentos 255 255 255
Banco Hyundai Capital Brasil S.A. (anteriormente denomina da BHJV Assessoria e Consultoria Empresarial Ltda,) - - 51,073
Santander Auto S.A. 15,775 12,374 7,555
Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA) 504,766 454,280 419,016
Webmotors S.A. 316,597 296,216 273,721
Tecnologia Bancária S.A. - TECBAN 186,357 156,589 144,090
Hyundai Corretora de Seguros 1,044 934 -
PSA Corretora de Seguros e Serviços Ltda, 768 541 1,205

Significant Influence of Banco Santander - 21,252 20,933
Norchem Holding e Negócios S.A. - 21,252 20,933
Total 1,094,985 1,070,762 1,053,315
~~Consolidated Financial Statements | December 31, 2020 | F-59~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Results of Investments
2020 2019 2018
Jointly Controlled by Banco Santander 50,915 92,976 41,212
Banco RCI Brasil S.A. 72,057 105,250 46,244
Norchem Participações e Consultoria S.A. 333 975 1,120
Cibrasec - Companhia Brasileira de Securitização - 75 193
Estruturadora Brasileira de Projetos S.A. - EBP 9 199 (1,017 )
Gestora de Inteligência de Crédito (19,064 ) (11,354 ) (6,466 )
Banco Hyundai Capital Brasil S.A. (anteriormente denomina da
BHJV Assessoria e Consultoria Empresarial Ltda,) - - 1,083
Santander Auto S.A. (2,421 ) (2,169 ) 55
Jointly Controlled by Santander Corretora de Seguros (current corporate
name of Santander Participações SA)

61,380 55,936 24,161
Webmotors S.A. 38,823 42,848 30,626
Tecnologia Bancária S.A. - TECBAN 22,219 12,498 (6,929 )
Hyundai Corretora de Seguros 110 (66 ) -
PSA Corretora de Seguros e Serviços Ltda, 226 656 464

Significant Influence of Banco Santander (33 ) 576 585
Norchem Holding e Negócios S.A. (33 ) 576 585
Total 112,261 149,488 65,958

2020
Total assets Total liabilities
Total
Income ⁽¹¹⁾

Jointly Controlled by Banco Santander 12,900,571 11,255,396 51,847
Banco RCI Brasil S.A. 11,620,304 10,255,995 99,951
Norchem Participações e Consultoria S.A. 70,475 27,781 534
Estruturadora Brasileira de Projetos S.A. - EBP 11,562 39 148
Gestora de Inteligência de Crédito 1,126,424 933,115 (45,410 )
Santander Auto S.A. 71,807 38,466 (3,376 )

Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA) 2,952,308 1,692,770 68,469
Webmotors S.A. 512,687 78,856 21,529
Tecnologia Bancária S.A. - TECBAN 2,435,377 1,612,822 46,735
Hyundai Corretora de Seguros Ltda, 2,076 251 (43 )
PSA Corretora de Seguros e Serviços Ltda, 2,168 841 247

Significant Influence of Banco Santander 126,877 29,391 (225 )
Norchem Holding e Negócios S.A. 126,877 29,391 (225 )
Total 15,979,756 12,977,558 120,091

2019
Total assets Total liabilities Total Income ⁽¹¹⁾
Jointly Controlled by Banco Santander 14,121,618 12,502,780 206,482
Banco RCI Brasil S.A. 13,452,716 12,174,504 263,851
Norchem Participações e Consultoria S.A. 69,865 27,709 1,949
Estruturadora Brasileira de Projetos S.A. - EBP 35,314 311 1,790
Gestora de Inteligência de Crédito 527,362 288,643 (56,769 )
Santander Auto S.A. 36,361 11,613 (4,339 )

Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA) 2,873,140 1,628,364 125,439
Webmotors S.A. 484,454 60,734 61,212
Tecnologia Bancária S.A. - TECBAN 2,382,907 1,564,801 63,046
Hyundai Corretora de Seguros Ltda, 1,909 41 (132 )
PSA Corretora de Seguros e Serviços Ltda, 3,870 2,788 1,313

Significant Influence of Banco Santander 126,937 29,226 2,650
Norchem Holding e Negócios S.A. 126,937 29,226 2,650
Total 17,121,695 14,160,370 334,571

~~Consolidated Financial Statements | December 31, 2020 | F-60~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
2018
Total assets Total liabilities Total Income ⁽¹¹⁾
Jointly Controlled by Banco Santander 10,500,055 8,755,688 80,954
Banco RCI Brasil S.A. 9,849,508 8,679,715 115,928
Norchem Participações e Consultoria S.A. 79,633 27,423 2,240
Cibrasec - Companhia Brasileira de Securitização 80,300 3,893 1,989
Estruturadora Brasileira de Projetos S.A. - EBP 33,389 176 (9,151 )
Gestora de Inteligência de Crédito 338,382 42,894 (32,328 )
Banco Hyundai Capital Brasil S.A. 103,703 1,557 2,166
Santander Auto S.A. 15,140 30 110

Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA) 2,463,262 1,573,082 9,703
Webmotors S.A. 221,313 60,905 43,751
Tecnologia Bancária S.A. - TECBAN 2,238,156 1,510,794 (34,976 )
PSA Corretora de Seguros e Serviços Ltda, 3,793 1,383 928

Significant Influence of Banco Santander 123,959 27,714 2,690
Norchem Holding e Negócios S.A. 123,959 27,714 2,690
Total 13,087,276 10,356,484 93,347
(1) Companies with a one-month ~~delay~~lag in the equity calculation. To account for the equity ~~accounting. For accounting of equity in earnings, used on 12/31/2020~~income, the position of 11/30/~~2020.~~2021 was used on 12/31/2021.
(2) Although the ~~participation~~interest is less than 20%, the Bank exercises joint control ~~over~~in the entity with the other majority shareholders, through a ~~shareholders~~shareholders' agreement ~~where~~in which no business decision can be taken by a single shareholder.
(3) Although the ~~participation is greater than~~interest exceeds 50%, in accordance with the ~~shareholders~~shareholders' agreement, control is shared by Santander Corretora de Seguros and Carsales.com Investments PTY LTD. (Carsales).
(4) In accordance with the ~~shareholders~~shareholders' agreement, control is shared by Santander Corretora de Seguros and PSA Services LTD.
(5) ~~Participation~~Interest arising from credit recovery of Banco Comercial e de Investimentos Sudameris S.A., merged in 2009 by Banco ABN AMRO Real S.A., which in the same year was merged byinto Banco Santander (Brasil) S.A., one of the Company's partners. The partners are conducting the procedures for the ~~extinction~~dissolution of the company, which depends on the sale of a property. Once sold, the company will be liquidated and each partner will receive their share of the equity.

Consolidated Financial Statements | December 31, 2021 | F-57
Table of Contents

* Values expressed in thousands, except when indicated.
~~(6) On July 24, 2019, Banco Santander sold its entire stake in CIBRASEC~~Jointly controlled and Significant Influence - ~~Companhia Brasileira de Securitização (“CIBRASEC”), corresponding to 4,000 common shares~~Investments
Investments
2021 2020 2019
Jointly Controlled by Banco Santander 628,040 590,219 595,230
Banco RCI Brasil S.A. 591,745 544,236 509,890
Norchem Participações e Consultoria S.A. -    -    21,078
Estruturadora Brasileira de Projetos S.A. - EBP 1,257 1,273 3,889
Gestora de Inteligência de Crédito 13,522 28,680 47,744
Campo Grande Empreendimentos 255 255 255
Santander Auto S.A. 21,261 15,775 12,374

Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) 593,002 504,766 454,280
Webmotors S.A. 359,092 316,597 296,216
Tecnologia Bancária S.A. - TECBAN 232,109 186,357 156,589
Hyundai Corretora de Seguros 1,260 1,044 934
PSA Corretora de Seguros e Serviços Ltda. 541 768 541
Jointly Controlled by Aymoré CFI 11,604 -    -
Solutions 4Fleet 11,604 -    -
Significant Influence of Banco Santander -    -    21,252
Norchem Holding e Negócios S.A. -    -    21,252
Total 1,232,646 1,094,985 1,070,762
Jointly controlled and ~~50 preferred shares, to ISEC Securitizadora SA for the amount~~Significant Influence - Results of ~~R$9,845,611,54. Due to the closing of the transaction, Banco Santander is no longer a shareholder of CIBRASEC.~~Investments
Results of Investments

2021 2020 2019
Jointly Controlled by Banco Santander 54,493 50,915 92,976
Banco RCI Brasil S.A. 62,813 72,057 105,250
Norchem Participações e Consultoria S.A. -    333 975
Cibrasec - Companhia Brasileira de Securitização -    -    75
Estruturadora Brasileira de Projetos S.A. - EBP (16) 9 199
Gestora de Inteligência de Crédito (14,419) (19,064) (11,354)
Santander Auto S.A. 6,115 (2,421) (2,169)

Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) 91,833 61,380 55,936
Webmotors S.A. 45,817 38,823 42,848
Tecnologia Bancária S.A. - TECBAN 45,752 22,219 12,498
Hyundai Corretora de Seguros 216 110 (66)
PSA Corretora de Seguros e Serviços Ltda. 48 226 656

Jointly Controlled by Aymoré CFI (2,142) -    -
Solutions 4Fleet (2,142) -    -

Significant Influence of Banco Santander -    (33) 576
Norchem Holding e Negócios S.A. -    (33) 576
Total 144,184 112,261 149,488
~~(*)~~
Consolidated Financial Statements | December 31, 2021 | F-58
Table of Contents

* Values expressed in thousands, except when indicated.
Jointly controlled and Significant Influence - Total
2021
Total Assets Total Liabilities Total Income
Jointly Controlled by Banco Santander 12,488,103 12,473,458 95,420
Banco RCI Brasil S.A. 11,147,493 11,080,238 157,462
Estruturadora Brasileira de Projetos S.A. - EBP 11,339 11,476 (136)
Gestora de Inteligência de Crédito 1,173,234 1,237,937 (74,136)
Santander Auto S.A. 156,037 143,807 12,230

Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) 3,055,130 2,824,094 231,035
Webmotors S.A. 342,195 276,743 65,452
Tecnologia Bancária S.A. - TECBAN 2,707,571 2,542,515 165,056
Hyundai Corretora de Seguros Ltda. 3,353 2,921 431
PSA Corretora de Seguros e Serviços Ltda. 2,011 1,915 96

Controlled by Aymoré CFI 14,871 17,548 (2,677)
Solutions 4Fleet. 14,871 17,548 (2,677)
Total 15,558,104 15,315,100 323,778

2020
Total Assets Total Liabilities Total Income
Jointly Controlled by Banco Santander 12,900,571 11,255,396 51,847
Banco RCI Brasil S.A. 11,620,304 10,255,995 99,951
Norchem Participações e Consultoria S.A. 70,475 27,781 534
Estruturadora Brasileira de Projetos S.A. - EBP 11,562 39 148
Gestora de Inteligência de Crédito 1,126,424 933,115 (45,410)
Santander Auto S.A. 71,807 38,466 (3,376)

Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações SA) 2,952,308 1,692,770 68,469
Webmotors S.A. 512,687 78,856 21,529
Tecnologia Bancária S.A. - TECBAN 2,435,377 1,612,822 46,735
Hyundai Corretora de Seguros Ltda. 2,076 251 (43)
PSA Corretora de Seguros e Serviços Ltda. 2,168 841 247

Significant Influence of Banco Santander 126,877 29,391 (225)
Norchem Holding e Negócios S.A. 126,877 29,391 (225)
Total 15,979,756 12,977,558 120,091

2019
Total Assets Total Liabilities Total Income
Jointly Controlled by Banco Santander 14,121,618 12,502,780 206,482
Banco RCI Brasil S.A. 13,452,716 12,174,504 263,851
Norchem Participações e Consultoria S.A. 69,865 27,709 1,949
Estruturadora Brasileira de Projetos S.A. - EBP 35,314 311 1,790
Gestora de Inteligência de Crédito 527,362 288,643 (56,769)
Santander Auto S.A. 36,361 11,613 (4,339)

Jointly Controlled by Santander Corretora de Seguros (current corporate name of Santander Participações S.A.) 2,873,140 1,628,364 125,439
Webmotors S.A. 484,454 60,734 61,212
Tecnologia Bancária S.A. - TECBAN 2,382,907 1,564,801 63,046
Hyundai Corretora de Seguros Ltda. 1,909 41 (132)
PSA Corretora de Seguros e Serviços Ltda. 3,870 2,788 1,313

Significant Influence of Banco Santander 126,937 29,226 2,650
Norchem Holding e Negócios S.A. 126,937 29,226 2,650
Total 17,121,695 14,160,370 334,571
Consolidated Financial Statements | December 31, 2021 | F-59
Table of Contents

* Values expressed in thousands, except when indicated.
The Bank has no guarantees granted to companies with joint control and significant influence.
~~(**)~~ The Bank does not have contingent liabilities with significant possible risk of loss related to investments for companies with joint control and significant influence.
~~Consolidated Financial Statements | December 31, 2020 | F-61~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
b) Changes
The changes in the balance of this item in the years ended December 31, 2021, 2020 and 2019 were:
Jointly controlled and ~~2018 were:~~Significant Influence - Changes in the balance
2020 2019 2018 2021 2020 2019
Jointly Controlled by Banco Santander Jointly Controlled by Banco Santander
Balance at beginning of year 1,049,510 1,032,382 845,704 1,094,985 1,049,510 1,032,382
Additions / disposals (net) due to change in the scope of consolidation (41,851 ) (51,073 ) - Additions / disposals (net) due to change in the scope of consolidation (739) (41,851) (51,073)
Additions /disposals 13,571 746 119,557 13,746 13,571 746
Capital reduction - - 36,051
Share of results of entities accounted for using the equity method 112,294 148,912 65,373 Share of results of entities accounted for using the equity method 144,184 112,293 148,912
Dividends proposed/received (59,784 ) (69,904 ) (35,351 ) (66,878) (59,784) (69,904)
Others 21,246 (11,553 ) 1,048 47,348 21,246 (11,553)
Balance at end of year 1,094,985 1,049,510 1,032,382 1,232,646 1,094,985 1,049,510

Significant Influence of Banco Santander Significant Influence of Banco Santander
Balance at beginning of year 21,252 20,933 20,860 -    21,252 20,933
Share of results of entities accounted for using the equity method (33 ) 576 585 Share of results of entities accounted for using the equity method -    (33) 576
Dividends proposed/received (239 ) (257 ) (512 ) -    (239) (257)
Disposals (20,980 ) - -
Alienation -    (20,980) -
Balance at end of year - 21,252 20,933 -    -    21,252

c) Impairment losses
No impairment losses were recognized on investments in associates and joint ventures in 2021, 2020 ~~2019~~ and ~~2018.~~2019.
d) Other information
Details of the principal jointly controlled entities:
Banco RCI Brasil S.A.:A company incorporated in the form of a joint stock company with headquarters in Paraná, aims to the main practice of investment, leasing, credit, financing and investment operations, with a view to sustain the growth of the automotive brands Renault and Nissan in the Brazilian market, with operations focused on, mainly to financing and leasing to the final consumer. It is a financial institution that is part of the RCI Group Banque and Santander Conglomerate, their operations being conducted in the context of a set of institutions that operate in the financial market. According to the ~~Shareholders~~Shareholders' Agreement, the main decisions that impact this company is taken jointly between Banco Santander and other controlling shareholders.
Webmotors S.A.: A company incorporated in the form of a privately held company with headquarters in São Paulo and has as its object development, implementation and / or availability of electronic catalogs, space, product, services or means for the sale of products and / or services related to the automobile industry, on the Internet through the "website" www.webmotors.com.br (owned by Webmotors) or other means related to electronic commerce activities and other uses or applications of the Internet, as well as participation in the capital of other companies and the management of related businesses and ventures. It is a member of the Santander Economic-Financial Conglomerate (Conglomerado Santander) and Carsales.com Investments PTY LTD (Carsales), with its operations conducted in the context of a set of institutions that act in an integrated manner. According to the ~~Shareholders~~Shareholders' Agreement, the main decisions that impact this company are taken jointly between Banco Santander and other controllers.

2020 2019 2018
Banco RCI Brasil Webmotors Banco RCI Brasil Webmotors Banco RCI Brasil Webmotors
Current assets 11,270,565 276,168 12,052,008 241,919 9,849,508 221,313
Current liabilities 9,825,654 220,707 10,781,921 61,290 8,679,715 60,905
Cash and cash equivalents 201,142 1,411 489,400 1,667 37,115 1,034
Depreciation and amortization (1,577 ) (14,949 ) (1,666 ) (9,234 ) (977 ) (7,423 )
Revenue 732,253 277,270 661,215 165,049 1,316,687 167,881
Interest income 1,354,283 2,283 1,401,154 5,079 1,290,703 4,134
Interest expense (483,506 ) —   (547,546 ) —   (575,944 ) —
Tax Income / (expense) (169,957 ) (26,314 ) (83,455 ) (26,863 ) (147,266 ) (16,013 )
Current financial liabilities (excluding trade and other payables and provisions) —   —   4,178,761 53,807 3,130,908 49,709
Non-current financial liabilities (excluding trade and other payables and provisions) 470,081 —   470,081 1,006 4,813,909 5,458

Consolidated Financial Statements | December 31, 2021 | F-60
Table of Contents

* Values expressed in thousands, except when indicated.
Principal jointly controlled entities
2021 2020 2019
Banco RCI Brasil Webmotors Banco RCI Brasil Webmotors Banco RCI Brasil Webmotors
Current assets 10,187,883 342,195 11,270,565 276,170 12,052,008 241,919
Current liabilities 8,754,744 71,742 9,825,654 220,707 10,781,921 61,290
Cash and cash equivalents 341,015 2,746 201,142 1,411 489,400 1,667
Depreciation and amortization (1,628) (19,152) (1,577) (14,949) (1,666) (9,234)
Revenue 637,856 331,586 732,253 277,270 661,215 165,049
Interest income 1,308,649 3,938 1,354,283 2,283 1,401,154 5,079
Interest expense (592,776) -    (483,506) -    (547,546) 0
Tax Income / (expense) (105,266) (32,819) (169,957) (26,314) (83,455) (26,863)
Current financial liabilities (excluding trade and other payables and provisions) 3,293,251 58,910 3,279,806 58,910 4,178,761 53,807
Non-current financial liabilities (excluding trade and other payables and provisions) 5,218,945 796 5,947,683 796 470,081 1,006
12. ~~Tangible assets~~Property, plant and equipment
Tangible assets of the Bank relate to property ~~plant and equipment~~ for ~~the~~ its own use.
~~Consolidated Financial Statements | December 31, 2020 | F-62~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
a) Breakdown
The detail, by class of asset, of the tangible assets in the consolidated balance sheets is as follows:
Tangible assets in the consolidated balance sheets
Thousand of reais
Cost Land and buildings IT equipment and fixtures Furniture and vehicles Leased Fixed Assets Others Total Land and buildings IT equipment and fixtures Furniture and vehicles Leased Fixed Assets Others Total
Balance at December 31, 2017 2,649,312 4,288,216 7,830,143 - 3,759 14,771,430
Balance on December 31, 2018 2,779,038 4,628,325 9,231,131 -    1,683 16,640,177
Initial adoption IFRS 16 -    -    -    2,465,750 -    2,465,750
Additions 2,534 449,489 941,895 - 381 1,394,299 85,333 826,685 1,012,395 -    370 1,924,783
Additions resulting mergers - 1,368 463 - 1,831 -    -    -    689,982 -    689,982
Cancellation of lease agreements -    -    -    (72,951) -    (72,951)
Write-off (18,230 ) (162,497 ) (199,877 ) - - (380,604 ) (17,041) (122,926) (122,279) -    -    (262,246)
Change in scope of consolidation 99,759 19,517 17,749 1,302 138,327
Transfers 45,663 32,232 640,758 - (3,759 ) 714,894 (7,160) 13,236 51,445 -    -    57,521
Balance at December 31, 2018 2,779,038 4,628,325 9,231,131 - 1,683 16,640,177
Balance on December 31, 2019 2,840,170 5,345,320 10,172,692 3,082,781 2,053 21,443,016

Initial adoption IFRS 16 - - - 2,465,750 - 2,465,750 -    -    -    -    -    -
Additions 85,333 826,685 1,012,395 - 370 1,924,783 8,831 559,388 667,704 -    -    1,235,923
Additions resulting mergers - - - 689,982 - 689,982 -    -    -    738,603 -    738,603
Cancellation of lease agreements - - - (72,951 ) - (72,951 ) -    -    -    (246,308) -    (246,308)
Write-off (17,041 ) (122,926 ) (122,279 ) (262,246 ) (23,771) (2,241,220) (416,600) -    (2,681,591)
Change in scope of consolidation - - - - - -
Transfers (7,160 ) 13,236 51,445 - - 57,521 (8,485) 120,158 39,861 -    (806) 150,728
Balance at December 31, 2019 2,840,170 5,345,320 10,172,692 3,082,781 2,053 21,443,016
Balance on December 31, 2020 2,816,745 3,783,646 10,463,657 3,575,076 1,247 20,640,371

Initial adoption IFRS 16 - - - - - - -    -    -    -    -    -
Additions 8,831 559,388 667,704 - - 1,235,923 32,959 435,858 693,957 -    -    1,162,774
Additions by Company Acquisition - - - 738,603 - 738,603 -    -    -    103,449 -    103,449
Cancellation of lease agreements - - - (246,308 ) (246,308 ) -    -    -    (254,101) -    (254,101)
Write-off (23,771 ) (2,241,220 ) (416,600 ) - - (2,681,591 ) (50,181) (1,584,956) (402,817) -    -    (2,037,954)
Change in scope of consolidation - - - - - -
Transfers (8,485 ) 120,158 39,861 - (806 ) 150,728 -    651,607 (468,561) -    -    183,046
Balance at December 31, 2020 2,816,745 3,783,646 10,463,657 3,575,076 1,247 20,640,371
Balance on December 31, 2021 2,799,523 3,286,155 10,286,236 3,424,424 1,247 19,797,585

Accumulated depreciation Land and buildings IT equipment and fixtures Furniture and vehicles Leased Fixed Assets Others Total
Balance at December 31, 2017 (629,250 ) (3,291,697 ) (4,332,047 ) - - (8,252,994 )
Additions (82,714 ) (484,629 ) (649,361 ) - - (1,216,704 )
Additions resulting mergers - (978 ) (196 ) - - (1,174 )
Write-off 8,816 140,332 109,447 - - 258,595
Transfers (52,094 ) (76,292 ) (631,965 ) - - (760,351 )
Balance at December 31, 2018 (760,844 ) (3,714,712 ) (5,511,258 ) - - (9,986,814 )

Additions (93,455 ) (482,256 ) (730,993 ) (564,132 ) - (1,870,836 )
Additions by Company Acquisition 10,517 148,486 65,016 8,316 - 232,335
Write-off 15,091 10,272 (9,183 ) - - 16,180
Change in scope of consolidation - - - - - -
Transfers - - - - - -
Balance at December 31, 2019 (828,691 ) (4,038,210 ) (6,186,418 ) (555,816 ) - (11,609,135 )

Additions (86,954 ) (537,908 ) (846,881 ) (568,062 ) - (2,039,805 )
Write-off 11,020 2,263,857 359,618 - - 2,634,495
Transfers 1,765 66,717 (88,612 ) - - (20,130 )
Additions by Company Acquisition - - - - - -
Change in scope of consolidation - - - - - -
Balance at December 31, 2020 (902,860 ) (2,245,544 ) (6,762,293 ) (1,123,878 ) - (11,034,575 )

Losses from non-recovery (impairment)
Balance at December 31, 2017 (3,247 ) - (5,306 ) - - (8,553 )
Impacts on results (10,607 ) - (49,556 ) - - (60,163 )
Transfers (5 ) - 4,333 - - 4,328
Balance at December 31, 2018 (13,859 ) - (50,529 ) - - (64,388 )

Impacts on results (587 ) - 13,050 - - 12,463
Transfers - - - - - -
Balance at December 31, 2019 (14,446 ) - (37,479 ) - - (51,925 )

Impacts on results (11,162 ) - 7,789 - (13,387 ) (16,760 )
Transfers - - - - - -
Balance at December 31, 2020 (25,608 ) - (29,690 ) - (13,387 ) (68,685 )

Carrying amount
Balance at December 31, 2018 2,004,335 913,613 3,669,344 - 1,683 6,588,975
Balance at December 31, 2019 1,997,033 1,307,110 3,948,795 2,526,965 2,053 9,781,956
Balance at December 31, 2020 1,888,277 1,538,102 3,671,674 2,451,198 (12,140 ) 9,537,111

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-63~~F-61
Table of Contents
* Values expressed in thousands, except when indicated.

* Values expressed in thousands, except when indicated.
Accumulated depreciation Land and buildings IT equipment and fixtures Furniture and vehicles Leased Fixed Assets Others Total
Balance on December 31, 2018 (760,844) (3,714,712) (5,511,258) -    -    (9,986,814)
Additions (93,455) (482,256) (730,993) (564,132) -    (1,870,836)
Write-off 10,517 148,486 65,016 8,316 -    232,335
Transfers 15,091 10,272 (9,183) -    -    16,180
Balance on December 31, 2019 (828,691) (4,038,210) (6,186,418) (555,816) -    (11,609,135)

Additions (86,954) (537,908) (846,881) (568,062) -    (2,039,805)
Write-off 11,020 2,263,857 359,618 -    -    2,634,495
Transfers 1,765 66,717 (88,612) -    -    (20,130)
Balance on December 31, 2020 (902,860) (2,245,544) (6,762,293) (1,123,878) -    (11,034,575)

Additions (108,946) (291,174) (896,705) (553,955) -    (1,850,780)
Write-off 38,337 940,737 448,471 572,833 -    2,000,378
Transfers -    10 (102,187) -    -    (102,177)
Additions by Company Acquisition -    -    -    -    -    -
Change in scope of consolidation -    -    -    -    -    -
Balance on December 31, 2021 (973,469) (1,595,971) (7,312,714) (1,105,000) -    (10,987,154)

Losses from non-recovery (impairment)
Balance on December 31, 2018 (13,859) -    (50,529) -    -    (64,388)
Impacts on results (587) -    13,050 -    -    12,463
Balance on December 31, 2019 (14,446) -    (37,479) -    -    (51,925)

Impacts on results (11,162) -    7,789 -    (13,387) (16,760)
Balance on December 31, 2020 (25,608) -    (29,690) -    (13,387) (68,685)

Impacts on results 3,310 -    38,729 -    -    42,039
Balance on December 31, 2021 (22,298) -    9,039 -    (13,387) (26,646)

Carrying amount
Balance on December 31, 2019 1,997,033 1,307,110 3,948,795 2,526,965 2,053 9,781,957
Balance on December 31, 2020 1,888,277 1,538,102 3,671,674 2,451,198 (12,140) 9,537,111
Balance on December 31, 2021 1,803,756 1,690,184 2,982,561 2,319,424 (12,140) 8,783,785
The depreciation expenses has been included in the heading “Depreciation and amortization” in the income statement.
b) Tangible asset purchase commitments
On December 31, ~~2020~~2021 the Bank ~~has no contractual~~owns R$58,413 on commitments for the acquisition of tangible assets ~~(2019~~(2020 - R$0 and ~~2018~~2019 R$~~3,2~~0 million).
13. Intangible assets - Goodwill
Goodwill is the ~~difference~~excess between the acquisition cost and the Bank's ~~participation~~interest in the net fair value of the acquiree's assets, liabilities and contingent ~~liabilities of the acquired company.~~liabilities. When the ~~difference~~excess is negative (negative goodwill), it is immediately recognized ~~immediately through~~in the income statement. In accordance with IAS 36, ~~the~~ goodwill is tested annually for impairment purposes or whenever there is an evidence of ~~reduction on the recoverable value~~impairment of the ~~cash generating~~cash-generating unit to which ~~the goodwill~~it was allocated. Goodwill is ~~recognized~~recorded at cost ~~considering the~~less accumulated impairment losses. ~~Impairment~~Recognized impairment losses ~~related to~~on goodwill are not ~~reversible.~~reversed. Gains and losses ~~related to~~on the ~~sale~~disposal of an entity include the carrying amount of goodwill relating to the entity sold.
The goodwill recorded is subject to impairment test (note ~~2.o.i)~~2.n.i) and has been allocated according to the operating segments (note 44).
Based on the assumptions described ~~bellow,~~below, no impairment loss was recognized for goodwill at December 31, 2021, 2020 ~~2019~~ and ~~2018~~.2019.
Thousand of reais 2020 2019 2018

Breakdown
Banco ABN Amro Real S.A. (Banco Real) 27,215,749 27,217,565 27,217,565
Olé Consignado (Current Company name of Banco Bonsucesso Consignado) 62,800 62,800 62,800
Super Pagamentos e Administração de Meios Eletrônicos Ltda, (Super) - 13,050 13,050
Banco PSA Finance Brasil S.A. 1,557 1,557 1,557
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Santander Getnet) 1,039,304 1,039,304 1,039,304
Return Capital Serviços de Recuperação de Créditos S.A. (Current Company name of Ipanema Empreendimentos e Participações S.A.) 24,346 24,346 27,630
Santander Brasil Tecnologia S.A. 16,381 16,382 16,382
Total 28,360,137 28,375,004 28,378,288

Commercial Banking
2020 2019 2018
Main assumptions:
Basis of determining recoverable amounts Value in use: cash flows
Period of the projections of cash flows ⁽¹⁾ 5 years 5 years 5 years
Growth rate perpetual (1) 4.3 % 4.8 % 5.1 %
Discount rate ⁽²⁾ 12.4 % 12.5 % 13.6 %
(1) The projections of cash flow are prepared using management´s growth plans and internal budget, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.
~~(2) The discount rate is calculated based on the capital asset pricing model (CAPM), The discount rate before tax is 19.56% (2019 – 17.88% and 2018 – 19.33%).~~

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-64~~F-62
Table of Contents

* Values expressed in thousands, except when indicated.
Breakdown
Thousand of reais 2021 2020 2019

Breakdown
Banco ABN Amro Real S.A. (Banco Real) 27,217,565 27,215,749 27,217,565
Toro Corretora de Títulos e Valores Mobiliários Ltda. 305,937 - -
Liderança Serviços Especializados em Cobranças Ltda. 237,663 - -
Olé Consignado (current denomination of Banco Bonsucesso Consignado) 62,800 62,800 62,800
Solutions 4Fleet Consultoria Empresarial S.A. 32,613 - -
Return Capital Serviços de Recuperação de Créditos S.A. (current denomination of
Ipanema Empreendimentos e Participações S.A.) 24,346 24,346 24,346
Santander Brasil Tecnologia S.A. 16,381 16,381 16,382
Paytec Tecnologia em Pagamentos Ltda. 11,336 - -
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A. 5,271     -     -
Banco PSA Finance Brasil S.A. 1,557     1,557     1,557
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Santander Getnet) -     1,039,304     1,039,304
Super Pagamentos e Administração de Meios Eletrônicos Ltda. (Super) -     -     13,050
Total 27,915,469 28,360,137 28,375,004
Main assumptions

Commercial Banking
2021 2020 2019
Main assumptions:
Basis of determining recoverable amounts Value in use: cash flows
Period of the projections of cash flows ⁽¹⁾ 5 years 5 years 5 years
Growth rate perpetual ⁽¹⁾ 4.8% 4.3% 4.8%
Discount rate ⁽²⁾ 12.3% 12.4% 12.5%
(1) The projections of cash flow are prepared using Management´s growth plans and internal budget, based on historical data, market expectations and conditions such as industry growth, interest rate and inflation.
(2) The discount rate is calculated based on the capital asset pricing model (CAPM). The discount rate before tax is 18.77% (2020 – 19.56% and 2019 – 17.88%).
~~Table~~
Changes of ~~Contents~~goodwill
Thousand of reais 2021 2020 2019

Balance at beginning of the year 28,360,137 28,375,004 28,378,288
Additions (loss):
Getnet Adquirência e Serviços para Meios de Pagamento S.A. (Santander Getnet) (1,039,304) - -
Toro Corretora de Títulos e Valores Mobiliários Ltda. 305,937 - -
Liderança Serviços Especializados em Cobranças Ltda. 237,663 - -
Solution 4Fleet Consultoria Empresarial S.A. 32,613 - -
Paytec Tecnologia em Pagamentos Ltda. 11,336 - -
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A. 5,271 - -
Others 1,816 (14,867) (3,284)
Balance at end of the year 27,915,469 28,360,137 28,375,004
* Values expressed in thousands, exceptGoodwill tests are performed annually or when ~~indicated.~~
Thousand of reais 2020 2019 2018

Balance at beginning of the year 28,375,004 28,378,288 28,364,256
Additions (loss):
Super (Note 3) (13,050 ) - -
Banco ABN Amro Real S.A. (Banco Real) (1,817 ) - -
Return Capital Serviços de Recuperação de Créditos S.A. (current name of Ipanema Empreendimentos e Participações S.A.) - (3,284 ) (490 )
Produban Serviços de Informática S.A. - - 16,382
Others - - (1,860 )
Balance at end of the year 28,360,137 28,375,004 28,378,288
there are indications of impairment. A quantitative goodwill impairment test ~~of goodwill~~ is carried out ~~on an annual basis at~~annually in the second half of ~~the year. At~~2021 and at the end of each year ~~a qualitative assessment~~an analysis is carried out ~~in order to check~~on the existence of signs of impairment. For the ~~years 2020, 2019 and 2018, no indication of impairment was identified. During the~~ year ~~ended December 31,~~2021, 2020 and ~~the prior years~~2019, there ~~was~~were no ~~evidence~~indications of impairment.
In the goodwill impairment test, discount rates and perpetuity growth are the most sensitive assumptions for calculating the present value (value in use) of discounted future cash flows. With a variation of +0.25% or -0.25% in these rates, the value of future cash flows discounted to present value continues to indicate the absence of impairment.

Consolidated Financial Statements | December 31, 2021 | F-63
Table of Contents~~14.~~

* Values expressed in thousands, except when indicated.
14. Intangible assets - Other intangible assets
The details, by asset category, of the other intangible assets in the consolidated balance sheets are as follows:
Cost IT developments Other assets Total
Balance at December 31, 2017 6,570,681 410,974 6,981,655
Additions 804,782 137 804,919
Write-off 11,567 - 11,567
Transfers 87 - 87
Balance at December 31, 2018 6,910,273 411,071 7,321,344

Additions 1,290,686 15,757 1,306,443
Write-off (2,544,403 ) (130,622 ) (2,675,025 )
Transfers (26,758 ) (2,481 ) (29,239 )
Balance at December 31, 2019 5,629,798 293,725 5,923,523

Additions 990,184 6,969 997,153
Write-off (240,626 ) (7,803 ) (248,429 )
Transfers (25,515 ) 3,036 (22,479 )
Balance at December 31, 2020 6,353,841 295,927 6,649,768

Accumulated amortization
Balance at December 31, 2017 (3,552,435 ) (292,762 ) (3,845,197 )
Additions (504,009 ) (19,246 ) (523,255 )
Write-off (1,000,893 ) 58 (1,000,835 )
Transfers (15 ) - (15 )
Balance at December 31, 2018 (5,032,693 ) (311,950 ) (5,344,643 )

Additions (501,682 ) (19,339 ) (521,021 )
Write-off 2,326,982 79,945 2,406,927
Transfers (241,395 ) (288 ) (241,683 )
Balance at December 31, 2019 (3,448,788 ) (251,632 ) (3,700,420 )

Additions (534,000 ) (5,322 ) (539,322 )
Balance at December 31, 2020 (3,982,788 ) (256,954 ) (4,239,742 )
Cost IT Developments Other Assets Total
Balance on December 31, 2018 6,910,273 411,071 7,321,344
Additions 1,290,686 15,757 1,306,443
Write-off (2,544,403) (130,622) (2,675,025)
Transfers (26,758) (2,481) (29,239)
Balance on December 31, 2019 5,629,798 293,725 5,923,523

Additions 990,184 73,238 1,063,422
Write-off (240,626) (7,803) (248,429)
Transfers (25,515) 3,036 (22,479)
Balance on December 31, 2020 6,353,841 362,196 6,716,037

Additions 1,429,459 71,103 1,500,562
Write-off (633,534) (3,270) (636,804)
Transfers (124,157) -    (124,157)
Balance on December 31, 2021 7,025,609 430,029 7,455,638

Accumulated amortization
Balance on December 31, 2018     (5,032,693) (311,950) (5,344,643)
Additions (501,682) (19,339) (521,021)
Write-off 2,326,982 79,945 2,406,927
Transfers (241,395) (288) (241,683)
Balance on December 31, 2019 (3,448,788) (251,632) (3,700,420)

Additions (534,000) (5,322) (539,322)
Balance on December 31, 2020 (3,982,788) (256,954) (4,239,742)

Additions (569,370) (13,771) (583,141)
Write-off 343,216 (4,558) 338,658
Balance on December 31, 2021 (4,208,942) (275,283) (4,484,225)

Losses from non-recovery (Impairment) - IT IT developments Other assets Total
Balance on December 31, 2018 (320,710) (15,291) (336,001)
Impact on net profit (1) 110,466 -    110,466
Write-off 207,925 15,291 223,216
Balance on December 31, 2019 (2,319) -    (2,319)

Impact on net profit (1) (66,269)            -    (66,269)
Transfers (1,346) -    (1,346)
Balance on December 31, 2020 (69,934) -    (69,934)

Impact on net profit (1) (23,066) (7,094) (30,160)
Write-off -    -    -
Balance on December 31, 2021 (93,000) (7,094) (100,094)

Carrying amount
Balance on December 31, 2019 2,178,691 42,093 2,220,784
Balance on December 31, 2020 2,301,119 105,242 2,406,361
Balance on December 31, 2021 2,723,667 147,652 2,871,319
(1) ~~Consolidated Financial Statements | December 31, 2020 | F-65~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Losses from non-recovery (Impairment) - IT IT developments Other assets Total
Balance at December 31, 2017 (1,283,380 ) (15,291 ) (1,298,671 )
Impact on net profit (1) (300,865 ) - (300,865 )
Write-off 1,263,535 - 1,263,535
Balance at December 31, 2018 (320,710 ) (15,291 ) (336,001 )

Impact on net profit (1) 110,466 - 110,466
Transfers 207,925 15,291 223,216
Balance at December 31, 2019 (2,319 ) - (2,319 )

Impact on net profit (1) (66,269 ) - (66,269 )
Write-off (1,346 ) - (1,346 )
Balance at December 31, 2020 (69,934 ) - (69,934 )

Carrying amount
Balance at December 31, 2018 1,556,870 83,830 1,640,700
Balance at December 31, 2019 2,178,691 42,093 2,220,784
Balance at December 31, 2020 2,301,119 105,242 2,406,361
~~(1)~~ Refers to the impairment of assets in the acquisition and development of software. The loss in the acquisition and development of ~~software was recorded due to the obsolescence and discontinuity of the referred systems.~~

~~The amortization~~software was recorded due to obsolescence and discontinuity of the referred systems.
Amortization expenses ~~has been~~were included ~~in the heading “Depreciation~~under "Depreciation and ~~amortization”~~amortization" in the income statement.

Consolidated Financial Statements | December 31, 2021 | F-64
Table of Contents~~15.~~

* Values expressed in thousands, except when indicated.
15. Other assets
The breakdown of the balance of “Other assets” is as ~~follows:~~follows:
Thousand of reais 2020 2019 2018

Customer relationships 1,873,048 1,926,536 1,674,187
Prepayments and accrued income 1,007,792 1,059,223 685,755
Contractual guarantees of former controlling stockholders (Note 22.a) 496 103,272 605,638
Actuarial asset (Note 22) 361,149 346,422 273,281
Other receivable (1) 3,979,926 1,625,884 1,561,606
Total 7,222,411 5,061,337 4,800,467
~~(1) Corresponds mainly to amounts receivable from third parties and contractual pre payments related to payroll services.~~
Thousand of reais 2021 2020 2019

Customer relationships 922,860 1,873,048 1,926,536
Prepayments and accrued income 797,365 1,007,792 1,059,223
Contractual guarantees of former controlling stockholders (Note 22.c.5) 496 496 103,272
Actuarial asset (Note 21) 287,808 361,149 346,422
Other receivables ⁽¹⁾ 4,040,499 3,979,926 1,625,884
Total 6,049,028 7,222,411 5,061,337
(1) ~~Consolidated Financial Statements | December 31, 2020 | F-66~~ Corresponds mainly to receivables from third parties.
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
16. Deposits from the Brazilian Central Bank and Deposits from credit institutions
The breakdown, by classification, type and currency, of the balances of these items is as follows:
Thousand of reais 2020 2019 2018

Classification:
Financial liabilities at amortized cost 131,656,962 99,271,415 99,022,806
Total 131,656,962 99,271,415 99,022,806

Type:
Deposits on demand ⁽¹⁾ 296,340 685,026 709,605
Time deposits ⁽²⁾ 76,489,490 56,602,470 47,227,456
Repurchase agreements 54,871,132 41,983,919 51,085,745
Of which:
Backed operations with Private Securities ⁽³⁾ 13,843,463 9,506,255 6,977,766
Backed operations with Government Securities 41,027,669 32,477,663 44,107,979
Total 131,656,962 99,271,415 99,022,806
~~(1) Non-interest bearing accounts.~~
~~(2) Includes operations with credit institutions resulting from export~~Classification, type and ~~import financing lines, transfers from~~currency, of the ~~country (BNDES and Finame) and abroad, and other credit lines abroad.~~balances
~~(3) Refers primarily to repurchase agreements backed by own-issued debentures.~~
Thousand of reais 2020 2019 2018

Currency:
Reais 77,743,482 58,282,793 74,159,613
Euro 13,156 39,522 105,119
US dollar 53,900,324 40,949,100 24,758,074
Total 131,656,962 99,271,415 99,022,806
Thousand of reais 2021 2020 2019

Classification:
Financial liabilities at amortized cost 121,005,909 131,656,962 99,271,415
Total 121,005,909 131,656,962 99,271,415

Type:
Deposits on demand ⁽¹⁾ 126,203 296,340 685,026
Time deposits ⁽²⁾ 75,754,363 76,489,490 56,602,470
Repurchase agreements 45,125,343 54,871,132 41,983,919
Of which:
Backed operations with Private Securities ⁽³⁾ 13,478,131 13,843,463 9,506,255
Backed operations with Government Securities 31,647,212 41,027,669 32,477,663
Total 121,005,909 131,656,962 99,271,415
(1) ~~Consolidated Financial Statements | December 31, 2020 | F-67~~ Non-interest bearing accounts.
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
(2) ~~17.~~ ~~Client deposits~~Includes operations with credit institutions resulting from export and import financing lines, transfers from the country (BNDES and Finame) and abroad, and other credit lines abroad.
(3) Refers primarily to repurchase agreements backed by own-issued debentures.

Deposits from the Brazilian Central Bank and Deposits from credit institutions - by currency
Thousand of reais 2021 2020 2019

Currency:
Reais 62,322,887 77,743,482 58,282,793
Euro 9,309 13,156 39,522
US dollar 58,673,713 53,900,324 40,949,100
Total 121,005,909 131,656,962 99,271,415
17. Client deposits
The breakdown, by classification and type, of the balance of “Customer deposits” is as follows:
Balance of Customer deposits
Thousand of reais 2020 2019 2018

Classification:
Financial liabilities at amortized cost 445,813,972 336,514,597 304,197,800
Total 445,813,972 336,514,597 304,197,800

Type:
Demand deposits
Current accounts ⁽¹⁾ 35,550,105 28,231,479 18,853,519
Savings accounts 62,210,443 49,039,857 46,068,346
Time deposits 269,929,085 200,739,544 190,982,541
Repurchase agreements 78,124,340 58,503,717 48,293,394
Of which:
Backed operations with Private Securities ⁽²⁾ 14,944,250 9,506,255 6,977,766
Backed operations with Government Securities 63,180,090 48,997,462 41,315,628
Total 445,813,972 336,514,597 304,197,800
~~(1) Non-interest bearing accounts.~~
~~(2) Refers primarily to repurchase agreements backed by own-issued debentures.~~
Thousand of reais 2021 2020 2019

Classification:
Financial liabilities at amortized cost 468,961,069 445,813,972 336,514,597
Total   468,961,069 445,813,972 336,514,597

Type:
Demand deposits
Current accounts ⁽¹⁾ 41,742,247 35,550,105 28,231,479
Savings accounts     65,248,913 62,210,443 49,039,857
Time deposits   280,955,456 269,929,085 200,739,544
Repurchase agreements   81,014,453 78,124,340 58,503,717
Of which:
Backed operations with Private Securities ⁽²⁾    20,103,099 14,944,250 9,506,255
Backed operations with Government Securities   60,911,354 63,180,090 48,997,462
Total 468,961,069 445,813,972 336,514,597
(1) Non-interest bearing accounts.
(2) Refers primarily to repurchase agreements backed by own-issued debentures.

Note 43-d contains a detail of the residual maturity periods of financial liabilities at amortized cost.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-68~~F-65
Table of Contents
* Values expressed in thousands, except when indicated.

* Values expressed in thousands, except when indicated.
18. Marketable debt securities
The breakdown, by classification and type, of the balance of “Marketable debt securities” is as follows:
Thousand of reais 2020 2019 2018

Classification:
Financial liabilities at amortized cost 56,875,514 73,702,474 74,626,232
Total 56,875,514 73,702,474 74,626,232

Type:
Real estate credit notes - LCI (1) 18,846,138 21,266,079 27,159,982
Eurobonds 9,399,277 8,715,382 4,516,647
Treasury Bills (2) 12,749,911 27,587,340 30,721,206
Agribusiness credit notes - LCA 14,746,831 14,776,877 11,925,018
Guaranteed Real Estate Credit Notes (3) 1,133,356 1,356,796 303,379
Total 56,875,514 73,702,474 74,626,232
(1) Real Estate Credit Notes are fixed income securities pegged by mortgages and mortgage-backed securities or liens on property. On December 31, 2020, have maturities between 2021 and 2027 (2019 – maturities between 2020 and 2026 and 2018 – maturities between 2019
Thousand of reais 2021 2020 2019

Classification:
Financial liabilities at amortized cost 79,036,792 56,875,514 73,702,474
Total 79,036,792 56,875,514 73,702,474

Type:
Real estate credit notes - LCI ⁽¹⁾ 21,459,182 18,846,138 21,266,079
Eurobonds 12,952,068 9,399,277 8,715,382
Treasury Bills ⁽²⁾ 25,074,264 12,749,911 27,587,340
Agribusiness credit notes - LCA 16,989,434 14,746,831 14,776,877
Guaranteed Real Estate Credit Notes ⁽³⁾ 2,561,845 1,133,356 1,356,796
Total 79,036,792 56,875,514 73,702,474
(1) Real estate credit bills are fixed-income securities backed by real estate credits and guaranteed by mortgage or fiduciary sale of real estate. On December 31, 2021, they mature between 2022 and 2028 (2020 - with maturity between 2021 to 2027 2019 - with maturity between 2020 to 2026).
(2) The main characteristics of the financial bills are a minimum term of two years, a minimum face value of R$50 and early redemption permit of only 5% of the issued amount. As of December 31, 2021, they mature between 2022 and 2031 (2020 – with maturity between 2021 to 2025 and 2019 – with maturity between 2020 to 2025).
(3) Guaranteed Real Estate Bills are fixed-income securities backed by real estate credits guaranteed by the issuer and by a pool of real estate credits separated from the other assets of the issuer. As of December 31, 2021, they have a maturity period between 2022 and 2035 (12/31/20120- with a maturity period between 2021 and 2023).
(2) The main features of the Treasury Bills are the minimum period of two years, minimum notional of R$50 and permission for early redemption of only 5% of the issued amount, On December 31, 2020, have a maturity between 2021 to 2025 (2019 – maturities between 2020 and 2025 and 2018 – maturities between 2019 and 2025).
(3) Guaranteed Real Estate Letters are real estate investment securities guaranteed by the issuer and by a pool of real estate credits separated from the other assets of the issuer, As of December 31, 2020, maturity until 2021 and 2023 (12/31/2019 - have a maturity between 2021 e 2022).
Indexers
Indexers: ~~Domestic~~ ~~Abroad~~ Domestic Abroad
Treasury Bills 100% to 112% of CDI -
100% of IGPM -
100% of IPCA -
Pre fixed: 3.41% to 16.97% -
104.75% of SELIC -
Real estate credit notes - LCI 86% to 105.8% of CDI -
Pre fixed: 3.03% of 13.29% -

~~Treasury Bills~~ ~~100% to 112% of CDI~~ -
~~100% of IGPM~~ -
100% of IPCA -
~~Pre fixed: 3.41% to 16.97%~~ -
~~104.75% of SELIC~~ -
~~Real estate credit notes - LCI~~ ~~80% to 102.5% of CDI~~ -
~~Pre fixed: 2.4% of 10.33%~~ -
~~1.5~~1.5% to 1.7% of IPCA -
~~1.65%~~ 100% of TR -
Agribusiness credit notes - LCA ~~85%~~ 70% to ~~102,5%~~104% of CDI -
3.33% to 12.33% da SELIC
Guaranteed Real Estate Credit Notes - LIG 94% to 98% of CDI -

~~Eurobonds~~ - ~~0.0% to 10%~~95% TO 108.5 do IPCA
Eurobonds - - 0.0% to 9%
- CDI+6.4%
Consolidated Financial Statements | December 31, 2021 | F-66
Table of Contents

* Values expressed in thousands, except when indicated.
The breakdown, by currency, of the balance of this account is as follows:
Thousand of reais
Currency: 2021 2020 2019

Real 66,084,725 47,490,706 64,987,092
US dollar 12,952,068 9,384,808 8,715,382
Total 79,036,792 56,875,514 73,702,474

Thousand of reais
Currency: 2020 2019 2018

Real 47,490,706 64,987,092 70,109,585
US dollar 9,384,808 8,715,382 4,516,647
Total 56,875,514 73,702,474 74,626,232

Average interest (%)
Currency: 2020 2019 2018

Real 2.5 % 5.0 % 5.5 %
US dollar 5.2 % 4.1 % 5.9 %
Total 3.9 % 4.5 % 5.6 %

Average interest (%)
Currency: 2021 2020 2019

Real 1.5% 2.5% 5.0%
US dollar 5.7% 5.2% 4.1%
Total 3.5% 3.9% 4.5%
~~Consolidated Financial Statements | December 31, 2020 | F-69~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
The variations in the balance “Obligations for bonds and securities” were as ~~follows:~~follows:
Thousand of reais 2020 2019 2018

Balance at beginning of year 73,702,474 74,626,232 70,247,012
Issuances 60,047,656 53,017,039 73,765,081
Payments (82,900,914 ) (61,914,716 ) (78,903,009 )
Taxes (note 32) 2,785,942 5,138,306 4,606,949
Exchange variation and others (1) 3,240,356 2,835,613 4,910,199
Balance at the end of the year 56,875,514 73,702,474 74,626,232
~~(1) In 2020, the Foreign Exchange Variation linked to “Bonds and Securities” is~~
Thousand of reais 2021 2020 2019

Balance at beginning of the year 56,875,514 73,702,474 74,626,232
Issuances 101,784,961 60,047,656 53,017,039
Payments (97,220,580) (82,900,914) (61,914,716)
Interest (Note 32) 4,536,849 2,785,942 5,138,306
Exchange differences and Others⁽¹⁾ 13,060,048 3,240,356 2,835,613
Balance at end of the year 79,036,792 56,875,514 73,702,474
(1) Exchange variation linked to “Obligations for bonds and securities” are related to Eurobonds.
On December 31, 2021, 2020 ~~2019~~ and ~~2018,~~2019, none of these instruments was convertible into Bank shares or granted privileges or rights which, in certain circumstances, make them convertible into shares.
The note 43-d contains a detail of the residual maturity periods of financial liabilities at amortized cost in each year.
The breakdown of "Bonds and other securities" is as ~~follows:~~follows:

Issuance

Maturity

Currency

Interest rate (p,y) 2020 2019 2018

Eurobonds 2017 2019 USD LIBOR 3M + 1.00% - - 194,243
Eurobonds 2017 2021 BRL 4.4% 14,469 63,181 855,035
Eurobonds 2017 2024 USD 2.4% to 10.0% 853,929 664,996 19,386
Eurobonds 2018 2019 USD Zero Coupon to 9% - - 197,055
Eurobonds 2018 2019 USD LIBOR 3M + 0.95% - - 34,776
Eurobonds 2018 2020 USD Up to 3.5% - 37,476 1,211,361
Eurobonds 2018 2019 USD LIBOR 1M + 1.5% - - 1,287,821
Eurobonds 2017 2020 BRL 4.4% - 929,042 639,275
Eurobonds 2018 2020 USD Above 3.5% - 35,438 -
Eurobonds 2018 2024 USD 6.6% to 6.7% 1,625,192 1,260,099 -
Eurobonds 2018 2025 USD Up to 9% 1,720,187 1,427,601 -
Eurobonds 2019 2020 USD 0% to 4.4% - 3,556,724 -
Eurobonds 2019 2027 USD CDI + 6.4% 1,279,506 727,118 -
Eurobonds 2020 2021 USD CDI + 1.9% 170,257 - -
Eurobonds 2020 2021 USD 0% to 4% 3,252,482 - -
Eurobonds 2020 2022 USD 0% to 4% 16,923 - -
Eurobonds 2020 2022 USD CDI + 1.9% 121,926 - -
Eurobonds 2020 2023 USD 0% to 8% 22,888 - -
Eurobonds 2020 2023 USD CDI + 1.9% 223,435 - -
Eurobonds 2020 2024 USD CDI + 1.9% 98,082 - -
Other 13,707 77,695
Total 9,399,277 8,715,382 4,516,647

Issuance Maturity Currency Interest rate (p.y) 2021 2020 2019

Eurobonds 2017 2020 BRL 4.4% -    -    929,042
Eurobonds 2018 2020 USD Until 3.5% -    -    37,476
Eurobonds 2018 2020 USD Over 3.5% -    -    35,438
Eurobonds 2019 2020 USD 0% to 4.4% -    -    3,556,724
Eurobonds 2017 2025 USD 4.4% 117,150 14,469 63,181
Eurobonds 2018 2025 USD 0% to 4.4% 771,300 -
Eurobonds 2017 2024 USD 2.4% to 10% - 853,929 664,996
Eurobonds 2018 2024 USD 6.6% to 6.7% - 1,625,192 1,260,099
Eurobonds 2018 2025 USD Until 9% - 1,720,187 1,427,601
Eurobonds 2019 2025 USD 0% to 4.4% 225,533 -    -
Eurobonds 2019 2026 USD 4.4% 75,716 -    -
Eurobonds 2019 2027 USD 0% to 4.4% 632,831 -    -
Eurobonds 2020 2022 USD 4.4% 306,253 -    -
Eurobonds 2020 2023 USD 0% to 4.4% 455,666 -    -
Eurobonds 2019 2027 USD CDI+6.4% - 1,279,506 727,118
Eurobonds 2020 2021 USD 0% to 4% - 3,252,482 -
Eurobonds 2020 2021 USD CDI+1.9% - 170,257 -
Eurobonds 2020 2022 USD 0% to 4% - 16,923 -
Eurobonds 2020 2022 USD CDI+1.9% - 121,926 -
Eurobonds 2020 2025 USD 0% to 8%                 46,655 22,888 -
Eurobonds 2020 2023 USD CDI+1.9% - 223,435 -
Eurobonds 2020 2024 USD CDI+1.9% - 98,082 -
Eurobonds 2021 2022 USD 0% a 4.4%             2,005,534 -    -
Eurobonds 2021 2022 USD Until 9% 41,749 -    -
Eurobonds 2021 2022 USD CDI+1.9% 205,624 -    -
Eurobonds 2021 2022 USD CDI + 2.65% 181,116 -    -
Eurobonds 2021 2023 USD 0% to 4.4% 408,824 -    -
Eurobonds 2021 2023 USD CDI+1.9% 157,370 -    -
Eurobonds 2021 2023 USD CDI + 2.65% 5,316 -    -
Eurobonds 2021 2024 USD 0% to 4.4% 246,192 -    -
Eurobonds 2021 2025 USD 0% to 4.4% 593,036 -    -
Eurobonds 2021 2026 USD 0% to 4.4% 3,890,578 -    -
Eurobonds 2021 2026 USD CDI + 2.65% 210,639 -    -
Eurobonds 2021 2027 USD 0% to 4.4% 101,029 -    -
Eurobonds 2021 2028 USD Until 9% 30,126 -    -
Eurobonds 2021 2028 USD CDI+6.4% 26,018 -    -
Eurobonds 2021 2031 USD 0% a 4.4% 2,217,811 -    -
Other -      -    13,707
Total 12,952,068 9,399,276 8,715,382

19. Debt Instruments Eligible to Compose Capital
Details of the balance of "Debt Instruments Eligible to Compose Capital" for the issuance of such instruments to compose the Tier I and Tier II of regulatory capital due to the Regulatory Capital Optimization Plan, are as follows:

2020 2019 2018
Issuance    Maturity Issuance Value Interest Rate (a.a,) ⁽¹⁾
Tier I (2) nov-18 no maturity (perpetual) US$1,250 7.250 % 6,554,451 5,092,153 4,893,668
Tier II (2) nov-18    nov/18 US$1,250 6.125 % 6,565,209 5,083,808 4,886,276
Total 13,119,660 10,175,961 9,779,944
Consolidated Financial Statements | December 31, 2021 | F-67
Table of Contents

* Values expressed in thousands, except when indicated.
2021 2020 2019
Issuance Maturity Issuance Value Interest Rate (p.a.)
Tier I ⁽¹⁾ nov-18 No-Maturity
(Perpetual) US$1,250 7.250% 7,050,080 6,554,451 5,092,153
Tier II ⁽¹⁾ nov-18 nov/28 US$1,250 6.125% 7,038,527 6,565,209 5,083,808
Financial Bills - Tier II ⁽²⁾ nov-21 nov-31 R$ 5,300 CDI+2% 5,351,046 -    -
Financial Bills - Tier II ⁽²⁾ dez-21 dez-31 R$ 200 CDI+2% 201,755 -    -
Total 19,641,408 13,119,660 10,175,961
(1) The ~~debt instruments issued in November 2018~~issues were ~~released~~carried out through the Cayman ~~Agency~~Branch and ~~consequently,~~ there is no ~~incidence of withholding tax.~~
~~(2)~~ ~~Interest~~Income Tax at source, and interest is paid semiannually, as of May 8, 2019.
(2) ~~Consolidated Financial Statements | December 31, 2020 | F-70~~ Letras Financeiras issued in November 2021 have a redemption and repurchase option.
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
2020 2019 2018
Balance at beginning of the year 10,175,961 9,779,944 8,436,901
Issuance - Tier I - - 4,673,875
Issuance - Tier II - - 4,673,875
Interest payment Tier I (1) 506,771 272,947 331,677
Interest payment Tier II (1) 402,622 230,594 272,539
Exchange differences / Others 2,948,951 221,368 1,960,467
Payments of interest - Tier I (495,789 ) (178,278 ) (381,008 )
Payments of interest - Tier II (418,856 ) (150,614 ) (302,775 )
Repurchase - - (9,885,607 )
Balance at end of the year 13,119,660 10,175,961 9,779,944
(1) The remuneration of interest relating to the Debt Instruments Eligible to Compose Capital Tier I and II was recorded against income for the period as "Interest expense and similar charges" (Note 32).
On November 5, 2018, the Board of Directors approved the issuance of the equity instruments, which was held on November 8, 2018. Such issuance was in the form of Notes issued in US dollars, US$2.5 billion, for payment in Tier I and Tier II of Reference Equity. The offer of these notes was made outside Brazil and the United States of America, for non-US Persons, based on Regulation S under the Securities Act, and was fully paid in by Santander España, controlling shareholder of Banco Santander Brasil. On the same date, the Board of Directors approved the redemption of the Tier I and Tier II notes issued on January 29, 2014, in the total amount of U$2.5 billion (Note 26,e).
The specific characteristics of Notes issued to make up Tier I are: (a) Principal: US$1.250 billion (b) Interest Rate: 7.25% p.a; (c) no maturity (perpetual); (d) Periodicity of payment of interest: semiannually from May 8, 2019.
The specific characteristics of Notes issued to make up Tier II are: (a) Principal: US$1.250 billion; (b) Interest Rate: 6.125% p.a.; (c) Maturity Term: on November 8, 2028; and (d) Periodicity of payment of interest: semiannually, as of May 8, 2019.
Notes have the following common characteristics:
(a) Unit value of at least US$150 thousand and in integral multiples of US$1 thousand ~~in excess of~~which exceeds such minimum value;
(b) The Notes may be repurchased or redeemed by Banco Santander after the ~~fifth~~5th (fifth) anniversary ~~as of~~from the date of issue of the Notes, at the Bank's sole discretion ~~of the Bank~~ or ~~as a result of~~due to changes in the tax legislation applicable to the Notes; or at any time, due to the occurrence of certain regulatory events.
Changes in the balance of Debt Instruments Eligible to Compose Capital
2021 2020 2019
Balance at beginning of the year 13,119,660 10,175,961 9,779,944
Issuance - Tier II 5,500,000 -    -
Interest payment Tier I ⁽¹⁾ 505,300 506,771 272,947
Interest payment Tier II ⁽¹⁾ 449,899 402,622 230,594
Exchange differences / Others 977,855 2,948,951 221,368
Payments of interest - Tier I (493,071) (495,789) (178,278)
Payments of interest - Tier II (418,235) (418,856) (150,614)
Balance at end of the year 19,641,408 13,119,660 10,175,961
(1) ~~20.~~ The remuneration of interest relating to the Debt Instruments Eligible to Compose Capital Tier I and II was recorded against income for the period as "Interest expense and similar charges" (Note 32).
20. Other financial liabilities
The breakdown of the balances of these items is as follows:
Thousand of reais 2020 2019 2018 2021 2020 2019

Credit card obligations 48,912,963 38,531,519 39,761,739 45,976,315 48,912,963 38,531,519
Unsettled financial transactions ~~(2)~~(1) 7,210,396 7,239,785 3,356,871 10,861,143 7,210,396 7,239,785
Dividends and Interest on Capital payable 1,223,310 7,826,247 4,508,569 1,029,952 1,223,310 7,826,247
Tax collection accounts - Tax payables 864,292 883,768 1,205,746 969,939 864,292 883,768
Liability associated with the transfer of assets (Note 9.g) 55,105 75,500 126,906 Liability associated with the transfer of assets (Note 9.g) 40,511 55,105 75,500
Other financial liabilities ~~(1)~~(2) 8,595,084 6,328,551 2,769,005 10,030,440 8,595,084 6,328,551
Total 66,861,150 60,885,370 51,728,836 68,908,300 66,861,150 60,885,370
(1) Includes operations to settle with B3 S.A. (Current Company Name of BM&FBovespa) and payment orders in foreign currency.
(2) Refers substantially to cancelable financial liabilities, designated at fair value through profit or loss.
(1) On December 31, 2020, it includes the financial liability in the total amount of R$0 million (2019 - R$1,600 million and 2018 - R$519 million), related to the commitment of the put option of the shares held by Banco Bonsucesso (Note 3,a ) and R$0 (2019 - R$0 million and 2018 - R$1,427 million), related to the put option for the shares issued by Getnet SA, which was authorized by BACEN on February 18, 2019 and settled on February 25, 2019.
~~(2) Includes operations to settle with B3 S.A. (Current Company Name of BM&FBovespa) and payment orders in foreign currency.~~
21. ~~21.~~ Provisions for pensions and similar obligations
On December 31, ~~2020~~2021 the balance of provisions for pension funds and similar obligations totaled R$~~3,929,265 (2019~~2,728,126 (2020 - R$~~4,960,620~~3,929,265 and 2018 - R$~~3,357,654)~~4,960,620).

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-71~~F-68
Table of Contents
* Values expressed in thousands, except when indicated.

* Values expressed in thousands, except when indicated.
I. Supplemental Pension Plan
Banco Santander and its subsidiaries sponsor the closed pension entities for the purpose of granting pensions and supplementary pensions over those granted by the Social Security, as defined in the basic regulations of each plan.
·● Banesprev - Fundo Banespa de Seguridade Social (Banesprev)
- Plan I: defined benefit plan fully sponsored by Banco Santander, it covers employees hired after May 22, 1975 called Participants Recipients, and those hired until May 22, 1975 called Participants Aggregates, who are also entitled to death benefits. This plan is closed to new entrants since March 28, 2005.
- Plan II: defined benefit plan, constituted from July 27, 1994, effective of the new text of the Statute and Regulations of the Basic Plan II, Plan I participants who chose the new plan began to contribute to the rate of 44.9% stipulated by the actuary for funding each year, introduced in April 2012 extraordinary cost to the sponsor and participants, as agreed with the PREVIC - Superintendence of Pension Funds, due to deficit in the plan. This plan is closed to new entrants since June 3, 2005.
- Plan III: defined benefit plan fully sponsored by Banco Santander, it covers employees hired until May 22, 1975, closed and paid off.
- Supplemental Pension Plan Pré 75: defined benefit plan was created in view of the privatization of Banespa and is managed by Banesprev and offered only to employees hired before May 22, 1975, which its effective date is January 1, 2000. This plan is closed to new entrants since April 28, 2000.
- Plan I: variable contribution plan, for employees hired after May 22,1975, previously served by the Plans I and II. This plan receives contributions from the sponsor and the participants. The benefits are in the form of defined contribution during the period of contribution and defined benefit during the receipt of benefit, if paid as monthly income for life. Plan is closed to new entrants since September 1, 2005.
- Plan II: variable contribution plan, designed for employees hired as of November 27, 2000, in which the sponsor only contributes to the risk benefits and administrative expenses. In this plan the benefit is set in the form of defined contribution during the period of contribution and defined benefit during the receipt of benefits in the form of monthly income for life, in whole or in part of the benefit. The risk benefits of the plan are in defined benefit. This plan is closed to new entrants since July 23, 2010.
- Three plans (DCA, DAB and CACIBAN): additional retirement and former employees associated pension, arising from the process of acquisition of the former Banco Meridional, established under the defined benefit plan. The plans were closed to new participants prior to the acquisition of Grupo Bozano Simonsen by Banco Santander in November 1999.
- Plan Sanprev I: defined benefit plan, established on September 27, 1979, covering employees enrolled in the plan sponsor and it is in process of extinction since June 30, 1996.
- Plan Sanprev II: plan that provides insurance risk, pension supplement temporary, disability retirement annuity and the supplemental death and sickness allowance and birth, including employees enrolled in the plan sponsor and is funded solely by sponsors through monthly contributions, as indicated by the actuary. This plan is closed to new entrants since March 10, 2010.
- Plan Sanprev III: variable contribution plan covering employees of the sponsors who made the choice to contribute, by contribution freely chosen by participants from 2% of their salary. That the benefit plan is a defined contribution during the contribution and defined benefit during the receipt of the benefit, being in the form of monthly income for life, in whole or in part of the benefit. This plan is closed to new entrants since March 10, 2010.
·● Sanprev – Santander Associação de Previdência (Sanprev)
Closed-End Private Pension Entity ~~(EFPC)~~ that used to manage three benefit plans, 2 in the Defined Benefit modality and 1 in the modality of Variable Contribution, whose process of management transfer of these plans to Banesprev occurred in January 2017. According to Portaria 389 of PREVIC, of May 8, 2018, it was approved the closure of the authorization of operation of Sanprev.
·● Bandeprev - Bandepe Previdência Social (Bandeprev)
Defined benefit plan, sponsored by Banco Bandepe and Banco Santander, managed by Bandeprev. The plans are divided into basic plan and special retirement supplement plan, with different eligibility requirements, contributions and benefits by subgroups of participants. The plans are closed to new entrants since 1999 for Banco Bandepe’s employees and for others since 2011.
~~Consolidated Financial Statements | December 31, 2020 | F-72~~● Other Plans
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
· ~~Other Plans~~
SantanderPrevi - Sociedade de Previdência Privada (SantanderPrevi): it´s a closed-end private pension ~~entity~~entity with the purpose of constitution and implementation of social security pension plans, complementary to the social security contribution, in the form of actual legislation.
Consolidated Financial Statements | December 31, 2021 | F-69
Table of Contents

* Values expressed in thousands, except when indicated.

The Retirement Plan of SantanderPrevi is structured as Defined Contribution and closed to new members since July 2018 as approved by PREVIC, with contributions shared between sponsors and plan participants. The appropriate values by the sponsors in the year of ~~2020~~2021 was R$69,142 (~~2019~~ (2020 – R$~~110,325~~69,142 e ~~2018~~2019 – R$~~89,959)~~110,325).
It has 10 cases of lifetime income with benefits arising from the previous plan.

SBPREV - Santander Brasil Open Pension Plan: As from January 2, 2018, Santander started to offer this new optional supplementary pension plan for new employees hired and for employees who are not enrolled in any other pension plan managed by the Closed Entities Complementary Pension Plan of the Group. This new program includes the PGBL- Free Benefit Generation Plan and VGBL-Free Benefit Generator Life managed by Icatu Seguros, the Open Entity of Complementary Pension Plan, which are open for new accessions, with similar characteristics to SantanderPrevi's ~~plan,~~plan. the instituting / stipulating companies and the participants in the plans. The appropriated values by the sponsors in the year of ~~2020~~2021 were R$~~14,054 (2019~~17,880 (2020 – R$~~8,917)~~14,054).

II. Health and Dental Care Plan

• Cabesp - Caixa Beneficente dos Funcionários do Banco do Estado de São Paulo S.A.:

Entity that covers health and dental care expenses of employees hired until Banespa privatization in 2000, as defined in the entity's bylaws.

• HolandaPrevi’s Retirees (current corporate name of SantanderPrevi):

For the health care plan Retirement has lifetime nature and is a closed group. In his termination the employee should have completed 10 years of employment with Banco Real and 55 years of age. In this case it was offered the continuity of health care plan where the employee pays 70% and the Bank pays 30% of the monthly payment. This rule lasted until December, 2002 and after this period that the employee got terminated with the status Retired Holandaprevi, he pays 100% of the health plan monthly payment.

• Former employees of Banco Real S.A. (Retiree by Circulars):

It grants entitlement to healthcare to former employees of Banco Real, with lifetime benefit it was granted in the same condition as the active employee, in this case, with the same coverage and plan design.

Eligible only for basic plans and premium apartment, if the beneficiary chooses for the apartment plan he pays the difference between the plans plus the co-participation in the basic plan. Not allowed new additions of dependents. It is subsidized in 90% of the plan.

• Bandeprev’s retirees:

Health care plan granted to Bandeprev’s retirees as a lifetime benefit, for which Banco Santander is responsible for subsidizing 50% of the benefits of employees retired until November 27, 1998. For whom retired after this date, the subsidy is 30%.

• Directors with Lifetime Benefits (Lifetime Directors):

Lifetime health care benefit granted to a small closed group of former directors coming from Banco Sudameris, being 100% subsidized by the Bank.

• Health Directors:

Directors, Executive Directors, Vice-President Directors and Chief Executive Officer, may, by choice, choose to remain medical assistance, in case of termination of the link with Banco Santander or companies in its conglomerate without cause; as long as they comply the following requirements: have contributed for at least 3 (three) years to the health plan; having served as a director at Banco Santander or companies its conglomerate for at least 3 (three) years; be 55 years of age. The plan will be maintained in the same way as the DIRECTOR enjoyed at the time of his dismissal, including the payment of his share, which must be paid by bank slip. The dependents active at the time of termination will be kept on the same plan as the director, and the inclusion of new dependents in no chance.

~~Consolidated Financial Statements | December 31, 2020 | F-73~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
• Free Clinic:

Health care plan (free clinic) is offered for a lifetime to retirees who have contributed to the Foundation Sudameris for at least 25 years and has difference in default if the user chooses apartment. The plan is only offered in standard infirmary where the cost is 100% of the Foundation Sudameris.

Consolidated Financial Statements | December 31, 2021 | F-70
Table of Contents

* Values expressed in thousands, except when indicated.
• Life insurance for Banco Real’s retirees (Life Insurance):

For Retirees from Circulars: indemnity in case of Natural Death, Disease Disability, Accidental Death. The subsidy is 45% of the value. It is a closed group.

• Life Insurance Assistance Boxes (Life Insurance):

Included in the bulk of the life insurance in December 2018 the insurance of the retirees of the DCA, DAB and CACIBAN plans. This insurance was granted to retirees of the former Southern Bank, coverage was according to the choice of retiree at the time of joining the benefit. The Bank's allowance is 50% of the premium amount for the holder and some retirees have the spouse clause bearing 100% of the cost. The plan is closed for new participants.

Additionally, it is assured to retired employees, since they meet to certain legal requirements and fully pay their respective contributions, the right to be maintaining as a beneficiary of the Banco Santander health plan, in the same conditions for healthcare coverage, taken place during their employment contract. Banco Santander provisions related to ~~this~~these retired employees are calculated using actuarial based in the present value of the current cost.

III. Actuarial Techniques

The amount of the defined benefit obligations was determined by independent actuaries using the following actuarial techniques:

• Valuation method:

Projected unit credit method, which uses each year of service as giving rise to an additional unit of benefit entitlement and measures each unit separately.

• Nominal discount rate for actuarial obligation and calculation of interest on ~~assets:~~
assets
- Banesprev, Sanprev, SantanderPrevi, Bandeprev and Other Plans – ~~6.8% (2019~~8.39% (2020 – ~~7.1% and~~ ~~2018~~6.8% e 2019 – ~~9.1%~~7.1%).
- Cabesp, Law 9,656 and others obligations – ~~7.1% (2019~~8.44% (2020 – ~~7.2%~~ 7.1% e ~~2018~~2019 – ~~9.3%~~ 7.2%).

• Estimated long-term inflation ~~rate:~~
rate
- Banesprev, Sanprev, SantanderPrevi, Bandeprev and Other Plans – ~~3.3% (~~3.0% (2020 – 3.3% e 2019 – ~~3.5% e~~ ~~2018~~ ~~– 4.0%~~3.5%).

• Estimate salary increase ~~rate:~~
rate
- Banesprev, Sanprev, SantanderPrevi, Bandeprev Básico and Other Plans – ~~3.8% (2019~~3.52% (2020 – ~~4.0%~~ 3.8% e ~~2018~~2019 – ~~5.0%~~ 4.0%).

~~Consolidated Financial Statements | December 31, 2020 | F-74~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
The funding status of the defined benefit obligations in ~~2020~~2021 and in the last 2 years are as follows:
Funding status of the defined benefit obligations
2020 2019 2018 2021 2020 2019

Present value of the obligations - Post-employment plans: Present value of the obligations - Post-employment plans:
To current employees 478,837 687,786 716,492 320,202 478,837 687,786
Vested obligations to retired employees 28,202,580 27,369,696 23,296,715 Vested obligations to retired employees 26,183,758 28,202,580 27,369,696
28,681,417 28,057,482 24,013,207
Total 26,503,960 28,681,417 28,057,482

Less:
Fair value of plan assets 28,634,891 25,822,890 22,708,990 28,321,826 28,634,891 25,822,890
Unrecognized assets ⁽¹⁾ (2,762,220 ) (1,346,547 ) (1,079,808 ) (3,645,083) (2,762,220) (1,346,547)
Provisions – Post-employment plans, net 2,808,746 3,581,139 2,384,025 Provisions – Post-employment plans, net 1,827,217 2,808,746 3,581,139

Present value of the obligations - Other similar obligations: Present value of the obligations - Other similar obligations:
To current employees 135,902 204,439 184,606 97,004 135,902 204,439
Vested obligations to retired employees 5,782,124 6,047,368 4,604,466 Vested obligations to retired employees 5,026,865 5,782,124 6,047,368
5,918,026 6,251,807 4,789,072
Total 5,123,869 5,918,026 6,251,807

Less:
Fair value of plan assets 5,398,667 5,222,517 4,157,251 5,096,262 5,398,667 5,222,517
Unrecognized assets ⁽¹⁾ (240,010 ) - (68,527 ) (585,495) (240,010) -
Provisions – Other similar obligations, net 759,370 1,029,290 700,347 Provisions – Other similar obligations, net 613,101 759,370 1,029,290

Total provisions for pension plans, net 3,568,115 4,610,429 3,084,373 Total provisions for pension plans, net 2,440,318 3,568,115 4,610,429
Of which:
Actuarial provisions 3,929,265 4,960,620 3,357,654 2,728,126 3,929,265 4,960,620
Actuarial assets (note 15) 361,149 350,191 273,281 287,808 361,149 350,191
(1) Refers to fully funded surplus plans Banesprev I and III, Sanprev I,II and III and Bandeprev.
On the fourth quarter of 2018, the management settled the actuarial deficit of Banesprev V and DAB in 2017 in the amount of R$295,529 and R$1,246, respectively, and the contribution in the estimated amount of R$152,329 to cover the actuarial deficit from 2018 to Banesprev Pré 75.
Consolidated Financial Statements | December 31, 2021 | F-71
Table of Contents

* Values expressed in thousands, except when indicated.

In the first half of 2018, there was an increase in the cost contribution established for a post-employment benefit plan, which is calculated as a percentage of the total monthly compensation of members. The increase in the contribution resulted in a decrease in the past service cost due to changes in the plan. The envisaged changes implied a reduction in the present value of the obligations of the defined benefit plan, which is supported by actuarial valuations.
~~The~~ amounts recognized in the consolidated income statement in relation to the aforementioned defined benefit obligations are as follows:
Post-Employment Plans
2020 2019 2018

Staff costs - Current service costs (note 39) 4,186 2,774 3,142
Interest and similar income and expenses - Interest cost (net) (notes 31 and 32) 108,268 149,232 124,754
Interest and similar income and expenses - Interest on unrecognized assets (notes 31 and 32) 97,291 100,346 104,160
Other movements -
Extraordinary charges 16,786 (1,101 ) 12,432
Total 226,532 251,251 244,488

Other Similar Obligations
2020 2019 2018

Staff costs - Current service costs (note 40) 5,860 8,142 5,797
Interest and similar income and expenses - Interest cost (net) (notes 32 and 33) 71,374 61,845 76,124
Interest and similar income and expenses - Interest on unrecognized assets (notes 32 and 33) - 3,173 15,521
Other movements - Extraordinary charges (2) (142 ) 22,624 (816,230 )
Total 77,092 95,784 (718,788 )
~~Consolidated Financial Statements | December 31, 2020 | F-75~~
~~Table of Contents~~

Post-Employment Plans
2021 2020 2019

Staff costs - Current service costs (note 39) 1,799 4,186 2,774
Interest and similar income and expenses - Interest cost (net) (notes 31 and 32) (81,681) 108,268 149,232
Interest and similar income and expenses - Interest on unrecognized assets (notes 31 and 32) 252,608 97,291 100,346
Other movements -
Extraordinary charges 2,117 16,786 (1,101)
Total 174,843 226,532 251,251

* Values expressedAmounts recognized in ~~thousands, except when indicated.~~the consolidated income statement in relation to defined benefit obligations - Other Similar Obligations

Other Similar Obligations
2021 2020 2019

Staff costs - Current service costs (note 39) 6,820 5,860 8,142
Interest and similar income and expenses - Interest cost (net) (notes 31 and 32) 14,985 71,374 61,845
Interest and similar income and expenses - Interest on unrecognized assets (notes 31 and 32) 31,500 -    3,173
Other movements -
Extraordinary charges(2) (135) (142) 22,624
Total 53,170 77,092 95,784

The changes in the present value of the accrued defined benefit obligations were as follows:

Post-Employment Plans
2020 2019 2018

Present value of the obligations at beginning of year 28,057,482 24,013,207 22,001,609
Current service cost (Note 40) 4,186 2,774 3,142
Interest cost 1,940,515 2,087,484 2,029,099
Benefits paid (2,060,960 ) (1,960,103 ) (1,876,014 )
Actuarial (gains)/losses 722,261 3,908,350 1,674,908
Others 17,933 5,770 180,463
Present value of the obligations at end of year 28,681,417 28,057,482 24,013,207
Other Similar Obligations
2020 2019 2018

Present value of the obligations at beginning of year 6,251,807 4,789,072 5,043,761
Current service cost (Note 40) 5,860 8,142 5,797
Interest cost 448,836 443,837 438,567
Benefits paid (337,742 ) (378,782 ) (346,185 )
Actuarial (gains)/losses (450,735 ) 1,366,837 455,193
Other (1) - 22,701 (808,061 )
Present value of the obligations at end of year 5,918,026 6,251,807 4,789,072
(1) In the year ended December 31, 2018 there was an increase in the cost contribution established for a postemployment benefit plan, which is calculated as a percentage of the total monthly compensation of associates. The increase in the contribution resulted in a decrease in the past service cost, due to changes in the plan. The envisaged changes implied a reduction in the present value of the obligations of the defined benefit plan, which is supported by actuarial valuations. In the Consolidated Statements of Income, this amount was recorded under Provision (Net).

Post-Employment Plans
2021 2020 2019

Present value of the obligations at beginning of year 28,681,417 28,057,482 24,013,207
Current service cost (Note 39) 1,799 4,186 2,774
Interest cost 1,971,031 1,940,515 2,087,484
Benefits paid (2,159,866) (2,060,960) (1,960,103)
Actuarial (gains)/losses (1,992,512) 722,261 3,908,350
Others 2,091 17,933 5,770
Present value of the obligations at end of year 26,503,960 28,681,417 28,057,482

~~The changes in the fair value of the plan assets were as follows:~~
Post-Employment Plans
2020 2019 2018

Fair value of plan assets at beginning of year 25,822,890 22,708,990 20,689,637
Interest (Expense) Income 1,832,247 1,938,252 1,904,345
Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net
   interest expense 2,994,598 3,087,544 1,347,689
Contributions/(surrenders) 49,716 51,807 481,959
Of which:
   By the Bank 44,970 44,752 472,723
   By plan participants 4,746 7,055 9,236
Benefits paid (2,060,960 ) (1,960,103 ) (1,876,014 )
Exchange differences and other items (3,600 ) (3,600 ) 161,374
Fair value of plan assets at end of year 28,634,891 25,822,890 22,708,990
Other Similar Obligations
2020 2019 2018

Fair value of plan assets at beginning of year 5,222,517 4,157,251 3,721,147
Interest (Expense) Income 377,462 381,992 362,444
Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net interest expense (34,409 ) 915,626 304,632
Contributions/(surrenders) 132,416 107,037 72,548
Of which:
   By the Bank 132,416 107,037 72,548
Benefits paid (299,319 ) (339,389 ) (310,458 )
Exchange differences and other items - - 6,938
Fair value of plan assets at end of year 5,398,667 5,222,517 4,157,251

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-76~~F-72
Table of Contents

* Values expressed in thousands, except when indicated.
Changes in the present value of the accrued defined benefit obligations - Other Similar Obligations

Other Similar Obligations
2021 2020 2019

Present value of the obligations at beginning of year 5,918,026 6,251,807 4,789,072
Current service cost (Note 39) 6,820 5,860 8,142
Interest cost 417,536 448,836 443,837
Benefits paid (373,341) (337,742) (378,782)
Actuarial (gains)/losses (845,173) (450,735) 1,366,837
Other -    -    22,701
Present value of the obligations at end of year 5,123,869 5,918,026 6,251,807
The changes in the fair value of the plan assets were as follows:
Post-Employment Plans
2021 2020 2019

Fair value of plan assets at beginning of year 28,634,891 25,822,890 22,708,990
Interest (Expense) Income 2,052,712 1,832,247 1,938,252
Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net
   interest expense (791,317) 2,994,598 3,087,544
Contributions/(surrenders) 589,006 49,716 51,807
Of which:
    By the Bank 585,437 44,970 44,752
    By plan participants 3,569 4,746 7,055
Benefits paid (2,159,866) (2,060,960) (1,960,103)
Exchange differences and other items (3,600) (3,600) (3,600)
Fair value of plan assets at end of year 28,321,826 28,634,891 25,822,890
Changes in the fair value of the plan assets - Other Similar Obligations

Other Similar Obligations
2021 2020 2019

Fair value of plan assets at beginning of year 5,398,667 5,222,517 4,157,251
Interest (Expense) Income 402,551 377,462 381,992
Remeasurement - Actual return (loss) on plan assets excluding the amounts included in net interest expense (521,100) (34,409) 915,626
Contributions/(surrenders) 151,926 132,416 107,037
Of which:
    By the Bank 151,926 132,416 107,037
Benefits paid (335,781) (299,319) (339,389)
Fair value of plan assets at end of year 5,096,263 5,398,667 5,222,517

Breakdown of gains (losses) actuarial by experience, financial assumptions and demographic hypotheses:
Opening of gains (losses) Actuarial from experience, financial assumptions and demographic hypotheses
Post-Employment Plans
2020 2019 2018
Experience Plan (807,895 ) (446,444 ) (803,717 )
Changes in Financial Assumptions 85,634 (2,615,119 ) (871,176 )
Changes in Financial Demographic - 1,228 -
Gain (Loss) Actuarial - Obligation (722,261 ) (3,060,335 ) (1,674,893 )
Return on Investment, Return Unlike Implied Discount Rate 2,994,598 2,624,960 1,344,089
Gain (Loss) Actuarial - Asset 2,994,598 2,624,960 1,344,089
Changes in Surplus / Deficit Uncollectible (1,318,382 ) (164,428 ) 117,320
Other Similar Obligations
2020 2019 2018
Experience Plan 289,237 (209,175 ) (79,810 )
Changes in Financial Assumptions 182,120 (1,157,662 ) (376,949 )
Changes in Financial Demographic (20,621 ) - -
Gain (Loss) Actuarial - Obligation 450,735 (1,366,837 ) (456,759 )
Return on Investment, Return Unlike Implied Discount Rate (34,409 ) 915,626 307,048
Gain (Loss) Actuarial - Asset (34,409 ) 915,626 307,048
Changes in Surplus Uncollectible (240,010 ) 71,698 (52,604 )
Consolidated Financial Statements | December 31, 2021 | F-73
Table of Contents

* Values expressed in thousands, except when indicated.

Post-Employment Plans
2021 2020 2019
Experience Plan (2,640,120) (807,895) (446,444)
Changes in Financial Assumptions 4,632,632 85,634 (2,615,119)
Changes in Financial Demographic -    -    1,228
Gain (Loss) Actuarial - Obligation 1,992,512 (722,261) (3,060,335)
Return on Investment, Return Unlike Implied Discount Rate (791,317) 2,994,598 2,624,960
Gain (Loss) Actuarial - Asset (791,317) 2,994,598 2,624,960
Changes in Surplus / Deficit Uncollectible (630,255) (1,318,382) (164,428)
Opening of gains (losses) Actuarial from experience, financial assumptions and demographic hypotheses - Other Similar Obligations

Other Similar Obligations
2021 2020 2019
Experience Plan (290,878) 289,237 (209,175)
Changes in Financial Assumptions 1,136,497 182,120 (1,157,662)
Changes in Financial Demographic (446) (20,621) -
Gain (Loss) Actuarial - Obligation 845,173 450,735 (1,366,837)
Return on Investment, Return Unlike Implied Discount Rate (521,100) (34,409) 915,626
Gain (Loss) Actuarial - Asset (521,100) (34,409) 915,626
Changes in Surplus Uncollectible (313,984) (240,010) 71,698
The experience adjustments arising from plan assets and liabilities are shown bellow:

Post - Employment Plans
2020 2019 2018

Experience in Net Assets Adjustments 2,994,598 2,624,960 1,344,089
Other Similar Obligations
2020 2019 2018

Experience in Net Assets Adjustments (34,409 ) 915,626 307,048
Post - Employment Plans
2021 2020 2019

Experience in Net Assets Adjustments (791,317) 2,994,598 2,624,960

Other Similar Obligations
2021 2020 2019

Experience in Net Assets Adjustments (521,100) (34,409) 915,626

The amounts of actuarial obligation of defined benefit plans not covered and defined benefit plans partially or totally covered are shown below:

2020 2019 2018

759,370 815,929 700,347
33,840,073 33,493,360 28,101,932
~~Consolidated Financial Statements | December 31, 2020 | F-77~~
2021 2020 2019

Defined benefit plans uninsured 613,101 759,370 815,929
Defined benefit plans partially or totally covered 31,014,727 33,840,073 33,493,360

~~Table of Contents~~
* Values expressed in thousands, except when indicated.

The main categories of plan assets as a percentage of total plan assets are as follows:

2021 2020 2019
2020 2019 2018

Equity instruments 0.00 % 0.00 % 4.81 %
Debt instruments 97.41 % 92.92 % 94.59 % 96.68% 97.41% 92.92%
Properties 0.17 % 0.26 % 0.28 % 0.17% 0.26%
Other 2.45 % 6.82 % 0.32 % 3.15% 2.45% 6.82%

Consolidated Financial Statements | December 31, 2021 | F-74
Table of Contents

* Values expressed in thousands, except when indicated.

The expected return on plan assets was determined based on the market expectations for returns over the duration of the related obligations.

The actual return on plan assets was R$~~4,826,845 (2019~~1,198,815 (2020 - R$~~6,301,111~~4,826,845 e ~~2018~~2019 - R$~~3,823,004)~~6,301,111).

The following table shows the estimated benefits payable for the next ten years from December 31, ~~2020~~:2021:

2021 2,281,173
2022 2,334,653 2,511,841
2023 2,385,827 2,561,598
2024 2,435,557 2,608,572
2024 2,482,183
2026 to 2030 12,981,893
2025 2,651,957
2026 2,691,303
2027 to 2031 13,884,478
Total 24,901,286 26,909,749
Assumptions about the rates related to medical care costs have a significant impact on the amounts recognized in income. The change of one percentage point in the medical care cost rates would have the effects as follows:

Sensitivity
2020 2019 2018
Current Service Cost and Interest Present Value of Obligations Current Service Cost and Interest Present Value of Obligations Current Service Cost and Interest Present Value of Obligations
Discount Rate
(+)0.5% (28,711 ) (402,547 ) (31,672 ) (440,072 ) (29,066 ) (307,980 )
(-)0.5% 32,099 450,049 35,572 494,257 32,403 343,340
Boards of Mortality
Applied (+) 2 years (47,637 ) (667,904 ) (51,720 ) (718,632 ) (45,937 ) (486,742 )
Applied (-) 2 years 54,226 760,289 56,687 787,636 49,355 522,958
Cost of Medical Care
(+)0.5% 34,718 486,769 38,388 533,380 35,949 380,906
(-)0.5% (31,637 ) (443,569 ) (35,060 ) (487,146 ) (32,100 ) (340,122 )
~~Consolidated Financial Statements | December 31, 2020 | F-78~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Sensitivity
2021 2020 2019
Current Service Cost and Interest Present Value of Obligations Current Service Cost and Interest Present Value of Obligations Current Service Cost and Interest Present Value of Obligations
Discount Rate
(+)0,5% (25,444) (305,114) (28,711) (402,547) (31,672) (440,072)
(-)0,5% 28,133 337,349 32,099 450,049 35,572 494,257
Boards of Mortality
Applied (+) 2 years (44,619) (535,039) (47,637) (667,904) (51,720) (718,632)
Applied (-) 2 years 47,934 574,793 54,226 760,289 56,687 787,636
Cost of Medical Care
(+)0,5% 31,280 375,089 34,718 486,769 38,388 533,380
(-)0,5% (28,762) (344,891) (31,637) (443,569) (35,060) (487,146)

The following table shows the ~~duration~~duration of the actuarial liabilities of the plans sponsored by Banco Santander:

~~Plans~~ Plans ~~Post-Employment~~ Post - Employment Plans
Duration (in years)
Banesprev Plans I ~~11,92~~ 12.57
Banesprev Plans  II ~~12,38~~ 12.92
Banesprev Plans  III ~~10,79~~ 11.54
Banesprev Plans  IV ~~14,80~~ 14.82
Banesprev Plans  V ~~9,24~~ 9.51
Banesprev Pre-75 ~~10,10~~ 10.45
Sanprev I ~~6,93~~ 6.79
Sanprev II ~~11,57~~ 12.76
Sanprev III ~~10,46~~ 11.06
Bandeprev Basic ~~10,08~~ 10.53
Bandeprev Special I ~~6,80~~ 7.23
Bandeprev Special II ~~6,53~~ 6.46
~~SantanderPrevi~~ SantanderPrevi ~~7,69~~ 8.11
CACIBAN / DAB / DCA ~~6,46/5,88/7,06~~ 7.27/ 5.93/ 6.47
~~Plans~~
Consolidated Financial Statements | December 31, 2021 | F-75
Table of Contents

* Values expressed in thousands, except when indicated.
Duration of the actuarial liabilities of the plans sponsored - Other Similar Obligations
Plans Other Similar Obligations
~~Cabesp~~ Cabesp ~~15,03~~ 16.03
~~Bandepe~~ Bandepe ~~14,98~~ 18.03
Free Clinic ~~11,47~~ 12.28
Lifetime officers ~~9,27~~ 9.36
Health officers ~~25,65~~ 30.28
Circulars ⁽¹⁾ ~~13,47~~ 11.62 E ~~11,92~~ 12.97
Life Insurance ~~7,99~~ 8.04
(1) The duration ~~12,15~~12.15 refers to the plan of Former Employees of Banco ABN Amro and ~~11,93~~11.93 to the plan of Former Employees of Banco Real.

Actuarial Assumptions Adopted in Calculations

2020 2019 2018 2021 2020 2019
Pension Health Pension Health Pension Health Pension Health Pension Health Pension Health
Nominal Discount Rate for Actuarial Obligation 6.8 % 7.1 % 7.1 % 7.2 % 9.1 % 9.3 % Nominal Discount Rate for Actuarial Obligation 8.4% 8.4% 6.8% 7.1% 7.1% 7.2%
Rate Calculation of Interest Under Assets to the Next Year 6.8 % 7.1 % 7.1 % 7.2 % 9.1 % 9.3 % Rate Calculation of Interest Under Assets to the Next Year 8.4% 8.4% 6.8% 7.1% 7.1% 7.2%
Estimated Long-term Inflation Rate 3.3 % 3.3 % 3.5 % 3.5 % 4.0 % 4.0 % Estimated Long-term Inflation Rate 3.0% 3.0% 3.3% 3.3% 3.5% 3.5%
Estimated Salary Increase Rate 3.8 % N/A 4.0 % 4.0 % 5.0 % 5.0 % Estimated Salary Increase Rate 3.5% N/A 3.8% N/A 4.0% 4.0%
Mortality tables AT2000 AT2000 AT2000 AT2000 AT2000 AT2000 Mortality tables AT2000 AT2000 AT2000 AT2000 AT2000 AT2000
~~(1) Net cost of interest on the defined benefit obligation, interest / (income) on the fair value of the plan's assets and interest on the maximum asset recognition limit~~

22. ~~Consolidated Financial Statements | December 31, 2020 | F-79~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
~~22.~~ Provisions for judicial and administrative proceedings, commitments and other provisions
a) Breakdown

The breakdown of the balance of “Provisions” is as follows:
The breakdown of the balance of Provisions
Thousand of reais 2020 2019 2018 2021 2020 2019

Pension fund provisions and similar requirements 3,929,265 4,960,620 3,357,654 Pension fund provisions and similar requirements 2,728,126 3,929,265 4,960,620
Provisions for lawsuits and administrative proceedings, commitments and other provisions 9,885,713 11,371,205 11,338,244 8,876,356 9,885,713 11,371,205
Judicial and administrative proceedings under the responsibility of former controlling stockholders (Note 15) 496 103,272 605,638 Judicial and administrative proceedings under the responsibility of former controlling stockholders (Note 15) 496 496 103,272
Judicial and administrative proceedings 8,648,892 9,226,735 9,507,240 7,668,914 8,648,892 9,226,735
Of which:
Civil 3,429,155 3,201,061 3,377,338 3,231,004 3,429,155 3,201,061
Labor 2,886,990 3,504,296 3,819,107 2,071,811 2,886,990 3,504,296
Tax and Social Security 2,332,747 2,521,378 2,310,795 2,366,099 2,332,747 2,521,378
Provisions for contingent commitments (Note 22.b) 724,779 683,918 626,267
Provisions for contingent commitments (Note 22.b.1) 908,027 724,779 683,918
Others provisions 511,546 1,357,280 599,099 298,919 511,546 1,357,280
Total 13,814,978 16,331,825 14,695,898 11,604,482 13,814,978 16,331,825
~~b) Changes~~
Consolidated Financial Statements | December 31, 2021 | F-76
Table of Contents

* Values expressed in thousands, except when indicated.
b) Changes
The changes in “Provisions” were as follows:
Changes in Provisions
Thousand of reais 2021

Pensions ⁽¹⁾ Other Provisions Total
Balance at beginning of year 3,929,265 9,885,713 13,814,978
Additions charged to income:
Interest expense and similar charges 217,413 -    217,413
Personnel Expenses (Note 39) 8,619 -    8,619
Constitutions / Reversals and Adjustment of provisions (1,618) 1,997,788 1,996,170
Other Comprehensive Income (833,511) -    (833,511)
Additions to provisions for contingent commitments -    183,248 183,248
Payments to external funds (619,086) -    (619,086)
Amount paid -    (3,222,395) (3,222,395)
Transfer to other assets - actuarial assets (Note 15) 27,045 -    27,045
Transfers, exchange differences and other changes -    32,002 32,002
Balance at end of year 2,728,126 8,876,356 11,604,482

Thousand of reais 2020 2020

Pensions (1) Other Provisions Total Pensions ⁽¹⁾ Other Provisions Total
Balance at beginning of year 4,960,620 11,365,589 16,331,825 Balance at beginning of year 4,960,620 11,365,589 16,326,209
Additions charged to income: Additions charged to income:
Interest expense and similar charges 276,933 - 276,933 Interest expense and similar charges 276,933 -    276,933
Personnel Expenses (Note 40) 10,046 - 10,046
Personnel Expenses (Note 39) Personnel Expenses (Note 39) 10,046 -    10,046
Constitutions / Reversals and Adjustment of provisions 13,044 1,565,402 1,578,446 Constitutions / Reversals and Adjustment of provisions 13,044 1,565,402 1,578,446
Other Comprehensive Income (1,133,245 ) - (1,133,245 ) (1,133,245) -    (1,133,245)
Additions to provisions for contingent commitments - 40,861 40,861 -    40,861 40,861
Payments to external funds (215,829 ) - (215,829) Payments to external funds (215,829) -    (215,829)
Amount paid - (3,136,423 ) (3,136,423 ) -    (3,136,423) (3,136,423)
Transfer to other assets - actuarial assets (Note 15) 17,695 - 17,695 Transfer to other assets - actuarial assets (Note 15) 17,695 -    17,695
Transfers, exchange differences and other changes - 50,284 50,284 Transfers, exchange differences and other changes -    50,284 50,284
Balance at end of year 3,929,265 9,885,713 13,814,978 3,929,265 9,885,713 13,814,978
Thousand of reais 2019

Pensions ⁽¹⁾ Other Provisions Total
Balance at beginning of year 3,357,654 11,338,244 14,695,898
Additions charged to income:
Interest expense and similar charges 314,596 -    314,596
Personnel Expenses (Note 39) 10,917 -    10,917
Constitutions / Reversals and Adjustment of provisions 21,523 2,936,187 2,957,710
Other Comprehensive Income 1,416,815 -    1,416,815
Additions to provisions for contingent commitments -    (57,651) (57,651)
Payments to external funds (183,899) -    (183,899)
Amount paid -    (2,865,087) (2,865,087)
Transfer to other assets - actuarial assets (Note 15) 23,014 -    23,014
Transfers, exchange differences and other changes -    19,512 -    19,512
Balance at end of year 4,960,620 11,371,205 16,331,825
(1) For further information, see note 22. Provisions for pension funds and similar obligations.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-80~~F-77
Table of Contents

* Values expressed in thousands, except when indicated.
* Values expressed in thousands, except when indicated.
Thousand of reais 2019

Pensions (1) Other Provisions Total
Balance at beginning of year 3,357,654 11,338,244 14,695,898
Additions charged to income:
Interest expense and similar charges 314,596 - 314,596
Personnel Expenses (Note 40) 10,917 - 10,917
Constitutions / Reversals and Adjustment of provisions 21,523 2,936,187 2,957,710
Other Comprehensive Income 1,416,815 - 1,416,815
Additions to provisions for contingent commitments - (57,651 ) (57,651 )
Payments to external funds (183,899 ) - (183,899 )
Amount paid - (2,870,703 ) (2,870,703 )
Transfer to other assets - actuarial assets (Note 15) 23,014 - 23,014
Transfers, exchange differences and other changes - 19,512 19,512
Balance at end of year 4,960,620 11,365,589 16,331,825
Thousand of reais 2018

Pensions (1) Other Provisions Total
Balance at beginning of year 3,923,456 10,063,459 13,986,915
Additions charged to income:
Interest expense and similar charges 320,559 - 320,559
Personnel Expenses (Note 40) 8,939 - 8,939
Constitutions / Reversals and Adjustment of provisions (801,332 ) 3,556,512 2,755,180
Other Comprehensive Income 483,058 - 483,058
Additions to provisions for contingent commitments - (48,246 ) (48,246 )
Payments to external funds (594,024 ) - (594,024 )
Amount paid - (2,247,172 ) (2,247,172 )
Transfer to other assets - actuarial assets (Note 15) 16,998 - 16,998
Transfers, exchange differences and other changes - 13,691 13,691
Balance at end of year 3,357,654 11,338,244 14,695,898
~~(1) For further information, see note 22. Provisions for pension funds and similar obligations.~~

b.1) Provisions for contingent payments

According to note ~~2.iii.ix,~~1.iii, IFRS 9 requires that the provision for expected credit losses be recorded for contracts of financial guarantees rendered, which have not yet been honored. Provision expense reflecting credit risk should be measured and accounted for when the honor of these guarantees occurs and the client accused does not comply with its contractual obligations. The movement of these provisions in ~~2020~~2021 and ~~2019~~2020 is as follows:
Movement of provisions
Thousand of reais 2020 2019 2018

Balance at beginning of year (in 1/01/2018 after the initial adoption of the IFRS 9) 683,918 626,267 674,513
Creation of provision for contingent commitments 40,861 57,651 (48,246 )
Balance at end of year 724,779 683,918 626,267
~~Consolidated Financial Statements | December 31, 2020 | F-81~~
Thousand of reais 2021 2020 2019

Balance at beginning of year 724,779 683,918 626,267
Creation of provision for contingent commitments 183,248 40,861 57,651
Balance at end of year 908,027 724,779 683,918

~~Table of Contents~~

* Values expressed in thousands, except when indicated.c) Tax and Social Security, Labor and Civil Provisions

Banco Santander and its subsidiaries are involved in lawsuits and administrative proceedings related to tax, labor, social security and civil arising in the normal course of its activities.

The provisions were constituted based on the nature, complexity, lawsuits historic and company´s assessment of lawsuit losses based on the opinions of internal and external legal advisors. The Santander has the policy to constitute provision of full amount of lawsuits who’s the result of loss assessment is probable. The legal obligation of tax and social security were fully recognized in the financial statements.

~~b.2)~~Management understands that the provisions made are sufficient to meet legal obligations and any losses arising from legal and administrative proceedings as follows:
c.1) Lawsuits and Administrative Proceedings – related to Tax and Social Security

The main legal obligations and administrative proceedings, recorded at the line of “Tax Liabilities – Current”, recorded integrality as an obligation are described as follows:

~~Main lawsuits and administrative proceedings related to legal obligations, tax and social security~~
• PIS and ~~COFINS~~Cofins - R$~~3,993,873 (2019~~4,075,496(2020 - R$~~3,755,556 and 2018 – 3,632,467)~~3,993,873): Banco Santander and its subsidiaries filed lawsuits seeking to eliminate the application of Law 9,718/1998, which modified the calculation basis for PIS and ~~COFINS~~Cofins to cover all revenues of legal entities and not only those arising from the provision of services and sale of goods. Regarding the Banco Santander Process, on April 23, 2015, a STF decision was issued admitting the Extraordinary Appeal filed by the Federal Government regarding PIS and denying the follow-up to the Extraordinary Appeal of the Federal Public Prosecutor regarding ~~COFINS.~~Cofins. Both appealed this decision, without any success, so that the suit relating to ~~COFINS~~Cofins is defined, ruling the judgment of the Federal Regional Court of the 4th Region of August 2007, favorable to Banco Santander. Pursuant to the STF, Banco Santander’s PIS and the PIS and ~~COFINS~~Cofins of other subsidiaries are pending final judgment.

Main lawsuits and administrative proceedings with probable loss risk

Banco Santander and its subsidiaries are parties in lawsuits and administrative proceedings related to tax and social security matters, which their risk of loss ~~are~~is classified as probable, based on the opinion of legal counsel. Those are ~~the~~de main themes at the proceedings:

• Provisional Contribution on Financial Transactions (CPMF) on Customer Operations - R$~~924,457 (2019~~945,715 (2020 - R$~~906,355 and 2018 – R$729,919):~~924,457 ): in May 2003, the Federal Revenue Service issued a tax assessment against Santander Distribuidora de Títulos e Valores Mobiliários Ltda. (Santander DTVM) and another tax assessment against Banco Santander Brasil S.A. The tax assessments refer to the collection of CPMF tax on transactions conducted by Santander DTVM in the cash management of its customers’ funds and clearing services provided by Banco to Santander DTVM in 2000, 2001 and 2002. Based on the risk assessment of legal counsel, the tax treatment was accurate. Santander DTVM had a favorable decision at the Board of Tax Appeals (CARF). Banco Santander had aan unfavorable decision and was considered responsible for the collection of the CPMF tax. Both decisions were appealed by the respective losing party to the highest jurisdiction of CARF. In June 2015, Bank and DTVM had obtained a ~~non favorable~~non-favorable decision at CARF. On July 3, 2015, Banco and Santander Brasil Tecnologia S.A. (current name of Produban Serviços de Informática S.A. and Santander DTVM) filed a lawsuit seeking to cancel both tax debts. This lawsuit was ruled groundless and is currently awaiting judgment by the Regional Federal Court (TRF 3). Based on the legal advisors' assessment, a provision was set up to cover the loss considered probable in the lawsuit.
Consolidated Financial Statements | December 31, 2021 | F-78
Table of Contents

* Values expressed in thousands, except when indicated.

• Social Security Contribution (INSS) - R$~~51,409 (2019~~53,936 (2020 - R$~~282,053 and 2018 - R$273,233):~~51,409 ): Banco Santander and its subsidiaries are involved in administrative and judicial proceedings regarding the collection of income tax on social security and education allowance contributions over several funds that, according to the evaluation of legal advisors, do not have nature of salary.

• Tax on Services (ISS) - Financial Institutions - R$~~263,183 (2019~~283,528 (2020 - R$~~224,631~~263,183 and ~~2018~~2019 - R$~~228,403)~~224,631): Banco Santander and its subsidiaries discuss administrative and legal requirements, by several municipalities, of the payment of ISS on various revenues arising from operations that are usually not classified as services ~~(Note 23.c.4~~(Part of this process is at risk of possible loss as per note note 22.c.4 – Possible Risk Loss).

~~b.3) Civil,~~c.2) Legal and Administrative Lawsuits of a Labor ~~Tax, and Security Social Liabilities Contingent Classified with Loss Risk as Possible:~~Nature

~~Refer~~These are lawsuits filed by Unions, Associations, the Public Ministry of Labor and former employees claiming labor rights they deem to be due, in particular the payment of “overtime” and other labor rights, including lawsuits ~~and administrative proceedings involving tax, labor and civil matters classified by legal counsels with loss risk as possible, which they were not recorded.~~related to retirement benefits.

~~The tax~~For lawsuits ~~classification~~considered common and similar in nature, provisions are recorded based on the historical average of closed proceedings. Claims that do not meet the above criteria are provisioned based on an individual assessment carried out, and the provisions are set up based on the probable risk of loss, in the law and in case law, in accordance with the assessment of loss ~~risk as possible totaled R$27,447 million, being~~carried out by the ~~main lawsuits as follow:~~legal advisors.

~~• INSS on Profits or Results (PLR) -~~Former employees of Banespa. Action distributed in 1998 by the Association of Retired Persons of Banespa (AFABESP) requesting the payment of a semiannual bonus provided for in the regulations of Banco Banespa for approximately 8,400 former employees (retirees), according to which the payment will be made in the event that the Bank makes a profit and the ~~subsidiaries have several~~distribution of this profit is approved by the board of directors. The bonus was not paid in 1994 and 1995 because Banespa bank did not make a profit during these years. Partial payments were made between 1996 and 2000 as approved by the board of directors. Said clause was excluded from the regulation in 2001. The Regional Labor Court and the Superior Labor Court ordered Santander Brasil, as successor to Banespa, to pay the semiannual bonus for the periods relating to the second semester of 1996 and the semesters of 1997. On March 20, 2019, a decision of the Federal Supreme Court (Supreme Federal Court, or “STF”) rejected the extraordinary appeal filed by Banco Santander, which did not resolve the merits of the case. We filed a rescission action to annul the sentence due to the lack of legitimacy of AFABESP (second precedent No. 573.232 of the STF) or to recognize the nullity of the TRT judgment that did not notify Banco Santander about the modifying effects of the decision, as well as to suspend the execution in the main process. The rescission action was dismissed, and this decision was filed a motion for clarification, due to the absence of an explicit statement about the arguments brought by the Bank. Regarding the Motions for Clarification, the points of omission were not answered as required by law, which is why an Extraordinary Appeal was filed, which was denied by the TST. From this decision, the Bank filed an interlocutory appeal, which is pending admissibility, considering that the decisions rendered by the Superior Labor Court contradict the already peaceful position in the STF (precedent No. 573,232), according to which the Association needs a specific power of attorney to sue in judgment, and also the decision affronts constitutional precepts about access to justice (item XXXV of art. 5 of the CF) by determining excessive collection of costs. In relation to the main action, in August 2021, a decision was rendered that determined that the execution be carried out individually in the court corresponding to each defendant and AFABESP filed an appeal, however, so far there has been no decision in this regard.
Our legal advisors classified the risk of loss as probable. The current decisions of the court, and neither of the court in the main proceedings, do not define a specific amount to be paid by the substituted, and the amounts must be calculated in regular settlement of the sentence.
On December 31, 2021, the case is classified as probable loss and the provision was constituted based on the estimated loss
c.3) Civil Judicial and Administrative Proceedings
These provisions generally arise from: (1) lawsuits requesting revision of contractual terms and ~~administrative proceedings~~conditions or requests for monetary adjustments, including alleged effects of the implementation of various government economic plans, (2) lawsuits arising from ~~questioning tax authorities~~financing contracts, (3) execution actions; and (4) damages claims. For civil actions considered common and similar in ~~connection~~nature, provisions are recorded based on the historical average of closed proceedings. Claims that do not meet the above criteria are provisioned based on an individual assessment carried out, and the provisions are set up based on the probable risk of loss, in the law and in case law, in accordance with the ~~taxation for social security purposes~~assessment of ~~certain items which are not considered to be employee remuneration. As of December 31, 2020,~~loss carried out by the ~~amounts related to these proceedings totaled approximately R$4,931 million.~~
legal advisors.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-82~~F-79
Table of Contents

* Values expressed in thousands, except when indicated.
The main lawsuits classified as risk of probable loss are described below:

• Indemnity Actions - These refer to compensation for material and/or moral damage, relating to the consumer relationship, dealing mainly with issues relating to credit cards, direct consumer credit, checking accounts, collection and loans and other matters. In the actions related to causes considered similar and usual for the business, in the normal course of the Bank's activities, the provision is constituted based on the historical average of closed processes. Claims that do not meet the above criteria are provisioned based on an individual assessment carried out, and the provisions are set up based on the probable risk of loss, in the law and in case law, in accordance with the assessment of loss carried out by the legal advisors.
Economic Plans - Refer to legal disputes, claiming alleged inflationary purges arising from Economic Plans (Bresser, Verão, Collor I and II), as they understand that such plans violated acquired rights related to the application of inflation indices supposedly due to Savings Accounts, Judicial Deposits and Time Deposits (CDBs). The lawsuits are provisioned based on the individualized assessment of loss carried out by the legal advisors.
Banco Santander is also party to public civil actions, on the same matter, filed by consumer protection entities, the Public Ministry or Public Defenders. The constitution of a provision is made only for cases with probable risk, based on requests for individual executions. The issue is still under review at the STF. There is jurisprudence in the STF favorable to Banks regarding economic phenomenon similar to that of savings, as in the case of correction of time deposits (CDBs) and corrections applied to contracts (table).
However, the jurisprudence of the STF has not yet been consolidated on the constitutionality of the norms that modified the monetary standard in Brazil. On April 14, 2010, the Supreme Court of Justice (STJ) ruled that the deadline for bringing public civil actions discussing the purges is 5 years from the date of the plans, but this decision has not yet become final. Thus, with this decision, a large part of the actions, as they were proposed after a period of 5 years, will probably be dismissed, reducing the amounts involved. The STJ also decided that the period for individual savers to qualify for Public Civil Actions is also 5 years, counted from the final and unappealable decision of the respective sentence. Banco Santander believes in the success of the theses defended before these courts for their content and foundation.
At the end of 2017, the Federal General Counsel (AGU), Bacen, the Consumer Defense Institute (Idec), the Brazilian Savings Front (Febrapo) and the Brazilian Federation of Banks (Febraban) signed an agreement that seeks to end the legal disputes over the Economic Plans.
Discussions focused on defining the amount that would be paid to each author, according to the balance in the passbook on the date of the plan. The total value of the payments will depend on the number of subscriptions, and also on the number of savers who have proven in court the existence of the account and the balance on the anniversary date of the change in the indices. The term of agreement negotiated between the parties was approved by the STF.
In a decision handed down by the STF, there was a national suspension of all processes that deal with the issue for the period of validity of the agreement, with the exception of cases in which the sentence was definitively complied with.
On March 11, 2020, the agreement was extended by means of an amendment, with the inclusion of actions that involve only the discussion of the Collor I Plan. June 2020
Management considers that the provisions made are sufficient to cover the risks involved with the economic plans, considering the approved agreement.
c.4) Tax and Social Security, Labor and Civil Contingent Liabilities Classified as Risk of Possible Loss
These are legal and administrative proceedings of a tax, social security, labor and civil nature classified, based on the opinion of legal advisors, as a possible risk of loss, and therefore not provisioned.
Tax lawsuits classified as possible losses totaled R$29,498,172 in the Consolidated, with the main lawsuits being as follows:
INSS on Profit Sharing (PLR) - the Bank and its subsidiaries have legal and administrative proceedings arising from questionings by the tax authorities regarding the collection of social security contributions on payments made as profit sharing. As of December 31, 2021, the amount was approximately R$ 7,340,746.
Tax on Services (ISS) - Financial Institutions - Banco Santander and its subsidiaries ~~discuss administrative~~are discussing administratively and ~~legal requirements,~~in court the demand, by several municipalities, of ~~the~~ payment of ISS on various revenues arising from operations that are not usually ~~not~~ classified as ~~services. On~~services rendered. As of December 31, ~~2020,~~2021, the ~~amounts related to these proceedings totaled~~amount was approximately R$~~3,582 million.~~4,145,661.
Consolidated Financial Statements | December 31, 2021 | F-80
Table of Contents

* Values expressed in thousands, except when indicated.

~~• Unapproved~~Non-Approved Compensation - ~~The~~ the Bank and its affiliates ~~discuss administrative~~are discussing administratively and ~~legal proceedings~~judicially with the Federal Revenue ~~Office to grant~~Service the non-approval of tax ~~relief~~offsets with credits arising from ~~overpayments. On~~overpayments or undue payments. As of December 31, ~~2020,~~2021, the ~~amounts related to these proceedings totaled~~amount was approximately R$~~4,641 million.~~5,351,349.

~~• Goodwill~~ Amortization of Banco ~~Real~~Real's Goodwill - the Federal ~~Tax Office~~Revenue Service of Brazil issued ~~infraction notices~~a tax assessment notice against the Bank to ~~require~~demand the ~~income tax~~payment of IRPJ and ~~social payments,~~CSLL, including late payment charges, for the ~~period of 2009.~~2009 base period. The Tax Authorities considered that the goodwill related to the acquisition of Banco Real, amortized ~~for accounting purposes prior to the~~before its merger, could not be ~~deduced~~deducted by Banco Santander for tax purposes. The ~~infraction~~tax assessment notice was ~~contested. On July 14, 2015,~~duly challenged and we are currently awaiting judgment before the Police Judging RFB decided favorably to Banco Santander, fully canceling the tax debt. On November 10, 2016, the appeal was filed, prompting the Bank to lodge an appeal with CARF, which is awaiting judgment. OnCARF. As of December 31, ~~2019,~~2021, the ~~balance~~amount was approximately R$~~1,440 million.~~1,466,444.

•Losses on Credit ~~Losses~~Operations - the Bank and its subsidiaries challenged the tax assessments issued by the Federal Revenue ~~Services claiming~~of Brazil alleging the improper deduction of losses on credit operations from the IRPJ and CSLL calculation bases for ~~credit losses because they fail to meet~~allegedly not complying with the ~~relevant~~ requirements ~~under~~of applicable ~~law.~~laws. As of December 31, ~~2020,~~2021, the amount ~~related to this claim is~~was approximately R$~~581 million.~~1,175,511.

• Use of CSLL Tax Loss and Negative Basis – Tax ~~Loss -~~ ~~Tax assessments~~assessment notices issued by the Brazilian Federal Revenue Service in 2009 for alleged undue compensation of CSLL tax loss ~~carryforwards~~ and negative basis, ~~of CSLL,~~ as a ~~consequence~~result of tax ~~assessments drawn up~~assessment notices issued in previous periods. ~~Judgment is pending~~Awaiting judgment at the administrative level. As of December 31, ~~2020,~~2021, the amount was approximately R$~~1,072 million.~~1,092,625.

~~• Goodwill~~ Amortization of Banco Sudameris –Goodwill - the ~~Tax Authorities have~~tax authorities issued ~~infraction~~tax assessment notices to ~~require~~demand the ~~income tax~~payments of IRPJ and ~~social contribution payments,~~CSLL, including late payment charges, ~~relating~~referring to the tax deduction of the amortization of the goodwill ~~from~~paid on the acquisition of Banco Sudameris, ~~related~~referring to the base period of 2007 to 2012. Banco Santander ~~timely~~ presented ~~its appeals,~~the respective administrative defenses, which were judged unfavorably. Currently, the processes are ~~pending. On~~awaiting judgment at CARF. As of December 31, ~~2020,~~2021, the ~~amounts related to these proceedings totaled~~amount was approximately R$~~646 million.~~569,114.

• IRPJ and CSLL - Capital Gain - the ~~Federal Tax Office~~Internal Revenue Service of Brazil issued ~~infraction notices~~a tax assessment notice against Santander Seguros (legal successor ~~company~~ of ABN AMRO Brasil Dois Participações ~~S.A.~~SA (AAB Dois Par), charging income ~~Tax~~tax and ~~Social Contribution~~social contribution related to ~~related base~~the fiscal year de 2005. The Federal ~~Tax Office~~Revenue Service of Brazil claims that the capital gain ~~in sales~~on the sale of the shares ~~from~~of Real Seguros ~~S.A~~SA and Real Vida e Previdência ~~S.A.~~SA by AAB Dois Par should be taxed ~~by the~~at a rate of ~~34%~~34.0% instead ~~15%.~~of 15.0 %. The assessment was ~~contested~~challenged administratively based on the understanding that the tax treatment adopted atin the transaction was in ~~compliance~~accordance with current tax ~~laws~~legislation and the capital gain was ~~taxed properly.~~duly taxed. The administrative proceeding ended unfavorably to the Company. In July 2020, the Company filed a lawsuit seeking to cancel the debt. The lawsuit is awaiting ~~trial. The~~judgment. Banco Santander is responsible for any adverse outcome in this ~~lawsuit~~proceeding as the former controlling shareholder of the Zurich Santander Brasil Seguros e Previdência S.A. ~~stockholder.~~ As of December 31, ~~2019,~~2021, the amount ~~related to this lawsuit is~~was approximately R$~~488 million.~~496,231.

~~The labor~~Labor claims ~~with classification of loss risk~~classified as possible loss totaled R$~~227 million,~~ 267,267 in the Consolidated, excluding the ~~lawsuits~~process below:

Readjustment of the Pension Supplements of Banesprev ~~retirement complements~~ by the IGPDI~~- lawsuit~~ – action filed in 2002 in the Federal Court by the Association of Retired Employees of the ~~Banco do Estado de~~Bank of the State of São Paulo ~~S.A. - Banespa,~~ requesting the readjustment of the ~~retirement~~pension supplementation by the IGPDI for Banespa retirees who have been admitted until May 22 of 1975. The judgment granted the correction, but only in ~~the~~ periods in which no other form of adjustment ~~could be~~was applied. The Bank and Banesprev ~~have~~ appealed this decision and ~~although~~ the appeals ~~have not yet been judged, the Bank's success rate in this matter in the High Courts is around 90%.~~are still pending judgment. In Provisional Execution, calculations were presented by the Bank and Banesprev ~~with "zero" result~~ due to the exclusion of participants who, among other reasons, ~~are listed~~appear as ~~authors~~plaintiffs in other ~~lawsuits~~actions or have already had some type of ~~adjustment.~~readjustment. The amount ~~related to this claim~~involved is not disclosed due to the current procedural stage of the ~~lawsuit~~case and ~~such disclosure may impact~~potentially affecting the progress of the ~~claim.~~action.

~~The liabilities~~Liabilities related to civil lawsuits with ~~classification~~possible risk of loss ~~risk as possible~~ totaled R$~~1,753 million, being~~2,380,226 in the Consolidated, with the main ~~lawsuits as follow:~~lawsuits:

• Action for Indemnity ~~Lawsuit Arising of the Banco Bandepe -~~ ~~related to mutual agreement on appeal to the Justice Superior Court (STJ - Superior Tribunal de Justiça).~~
~~Indemnity Lawsuit Related~~Referring to Custody Services - provided by Banco Santander at an ~~early~~initial stage ~~which was not~~and still without a sentence handed ~~down yet.~~down.

• ~~Lawsuit~~Action Arising from a Contractual Dispute - in the acquisition of Banco Geral do Comércio ~~S.A. on~~SA under appeal toby the Court of Justice of the State of São Paulo ~~(TJSP - Tribunal de Justiça do Estado de São Paulo)~~(TJSP).

~~Consolidated Financial Statements | December 31, 2020 | F-83~~
~~Table~~c.5) Other Lawsuits for the Liability of ~~Contents~~
Former Controllers

* Values expressed in thousands, except when indicated.
~~b.4) Other Lawsuits Under the Responsibility of Former Controlling Stockholders~~
~~Refer~~They refer to ~~tax, labor and~~ civil lawsuits, in the amounts of R$~~0, R$0 and R$~~496 ~~(2019~~ (12/31/2020 - R$~~102,482, R$213 and R$578)~~496), ~~respectively, which the responsible people were~~of responsibility of the former ~~controlling stockholders~~controllers of ~~the Bank~~banks and acquired companies. Based on the ~~agreement~~ signed contracts, these ~~lawsuits have~~actions are guaranteed full reimbursement ~~from part of~~by the former controllers, whose respective ~~duties~~rights were recorded in other ~~receivables – others.~~assets.

Consolidated Financial Statements | December 31, 2021 | F-81
Table of Contents

* Values expressed in thousands, except when indicated.
23. Tax assets and liabilities
a) Income and Social Contribution Taxes

The total charge for the year can be reconciled to accounting profit as follows:

Thousand of reais 2020 2019 2018 2021 2020 2019

Operating Profit Before Tax 9,663,975 22,273,149 15,909,771 Operating Profit Before Tax 24,750,329 9,663,975 22,273,149
Interest on capital ⁽¹⁾ - - (4,080,000 )
Operating Profit Before Tax 9,663,975 22,273,149 11,829,771 Operating Profit Before Tax 24,750,329 9,663,975 22,273,149
Rates (25% income tax and 20% social contribution tax) (4,348,789 ) (8,909,260 ) (5,323,397 )
PIS and COFINS (net of income and social contribution taxes) (2) (6) (1,589,260 ) (1,983,839 ) (1,490,190 )
Rates (25% income tax and 25% social contribution tax) Rates (25% income tax and 25% social contribution tax) (12,375,164) (4,348,789) (8,909,260)
PIS and COFINS (net of income and social contribution taxes) (1) PIS and COFINS (net of income and social contribution taxes) (1) (1,679,789) (1,589,260) (1,983,839)
Non-taxable/Non-deductible: Non-taxable/Non-deductible:
Equity in affiliates 85,723 59,795 29,681 72,114 85,723 59,795
Goodwill(3) (183,854 ) (137,175 ) (101,305 )
Exchange variation - foreign branches (4) 6,831,484 715,424 2,792,995
Net Indeductible Expenses of Non-Taxable Income (6) (57,663 ) 214,242 384,554
Goodwill (559,247) (183,854) (137,175)
Exchange variation - foreign branches (2) Exchange variation - foreign branches (2) 768,902 6,831,484 715,424
Net Indeductible Expenses of Non-Taxable Income (3) Net Indeductible Expenses of Non-Taxable Income (3) (230,958) (57,663) 214,242
Adjustments:
Constitution of income and social contribution taxes on temporary differences 551,983 70,223 136,353 Constitution of income and social contribution taxes on temporary differences 264,191 551,983 70,223
Effects of change in rate of social contribution taxes (5) 1,604,000
CSLL Aliquot Differential Effect (5) 353,777 2,796,493 (90,013 )
Effects of change in rate of social contribution taxes Effects of change in rate of social contribution taxes 1,820,072 1,478,138 1,604,000
CSLL Aliquot Differential Effect (4) CSLL Aliquot Differential Effect (4) 1,192,687 353,777 2,796,493
Other adjustments 665,239 (71,602 ) 551,469 1,536,187 665,239 (71,602)
Income taxes 3,786,778 (5,641,699 ) (3,109,853 ) (9,191,005) 3,786,778 (5,641,699)
Of which:
Current tax (6) (5,111,380 ) (6,692,328 ) (4,704,293 ) (8,087,119) (5,111,380) (6,692,328)
Deferred taxes 8,898,158 1,050,629 1,594,440 (1,103,886) 8,898,158 1,050,629
Taxes paid in the year (1,269,150 ) (5,301,184 ) (3,668,571 ) Taxes paid in the year (4,534,538) (1,269,150) (5,301,184)
(1) PIS and COFINS are considered as components of the profit base (net base of certain income and expenses); therefore, and in accordance with IAS 12, they are accounted for as income taxes.
(2) Permanent differences related to investment in overseas subsidiaries are considered to be non-taxable/deductible (see details below).
(3) Mainly includes the tax effect on income from judicial deposit updates and other income and expenses that do not qualify as temporary differences
(4) Effect of the rate differential for other non-financial and financial companies, whose social contribution rates are 9% and 20%
(1) Amount distributed to shareholders as interest attributable to shareholders’ equity. For accounting purposes, although the interest should be reflected in the income statement for tax deduction, the charge is reversed before the calculation
Currency Hedge of the ~~net income in the financial statements and deducted from the shareholders’ equity since it is considered as dividend.~~
~~(2) PIS and COFINS are considered a profit-base component (net basis of certain revenues and expenses), therefore and accordingly to IAS 12 they are recorded as income taxes.~~
(3) The difference between the tax basis and accounting basis of goodwill on acquisition of Banco ABN Amro Real S.A. is a permanent and definitive difference. Administration in this case the possibility of loss on impairment or disposal is remote and only applies to the entity as a whole and according to the characteristics of the business combination performed, it is not possible to segregate and identify the business originally acquired. Therefore deferred tax liability is not record.
~~(4) Permanent difference related of foreign currency exchange variation on investments abroad nontaxable/ deductible (see details below).~~
(5) Effect of the rate differential for other non-financial corporations, with a social contribution rate of 9%, as well as the effect of the additional 5% applicable to financial institutions, valid until the end of 2018.
~~(6) Includes mainly the tax effect on expenses with donations, revenues from judicial deposit updates and other income and expenses that do not qualify as temporary differences.~~
~~Exchange Hedge of~~ Grand Cayman ~~branch in~~Agency, Luxembourg ~~and of Santander Brasil EFC~~

Banco Santander operates ~~an agency~~a branch in the Cayman Islands, ~~a branch in~~ Luxembourg ~~and a subsidiary called Santander Brasil Establecimiento Financiero de Credito, EFC, or "Santander Brasil EFC" (an independent subsidiary in Spain), which are~~that is used primarily to raise funds in the international capital and financial markets, to provide the Bank with lines of credit ~~lines~~ that are extended to its ~~clients~~customers for financing foreign trade and ~~working capital financing.~~
~~Consolidated Financial Statements | December 31, 2020 | F-84~~
~~Table~~capital. of ~~Contents~~
* Values expressed in thousands, except when indicated.spinning.

To ~~hedge the~~cover exposure to exchange ~~rate~~ variations, the Bank uses derivatives and ~~funding (economic hedge). In accordance with~~funding. Under Brazilian tax rules, gains or losses arising from the impact of the appreciation or ~~depreciation~~devaluation of the Real on foreign investments ~~are~~were not taxable, but from January 2021 onwards, they became taxable or deductible for ~~PIS / COFINS /~~ PIS/Cofins/IR ~~/ CSLL purposes,~~purposes. /CSLL, while ~~the~~ gains or losses ~~of the~~on derivatives used as ~~hedges~~hedging are taxable or deductible. The purpose of these derivatives is to protect net income after taxes.
Law 14,031, of July 28, 2020, determined that as of January 2021, 50% of the exchange rate variation on investments abroad must be computed in the determination of taxable income and the basis for calculating the Social Contribution on Net Income ( CSLL) of the investing company domiciled in the country. As of 2022, the exchange variation will be fully computed in the taxable bases of IRPJ and CSLL.

Tax distinct treatment from such exchange rate differences results in volatility in "Operating Income Before Tax" and "Income taxes". The foreign exchange variations recorded as a result of foreign investments in the year ended on December 31, 2021, 2020, ~~2019~~ and ~~2018~~.2019.

2020 2019 2018
Exchange differences (net)
Result generated by the exchange rate variations on the Bank's investment in the Cayman, Luxemburg and EFC Branch 16,791,857 1,512,322 6,673,535
Gains (losses) on financial assets and liabilities (net)
Result generated by derivative contracts used as hedge (30,374,869 ) (2,776,601 ) (12,540,855 )
Income Taxes
Tax effect of derivative contracts used as hedge - PIS / COFINS 311,819 (106,497 ) 255,481
Tax effect of derivative contracts used as hedge - IR / CS 13,271,193 1,370,776 5,611,839

Foreign exchange variations recorded as a result of foreign investments
2021 2020 2019
Exchange differences (net)
Result generated by the exchange rate variations on the Bank's investment in the Cayman, Luxemburg and EFC Branch 3,862,128 16,791,857 1,512,322
Gains (losses) on financial assets and liabilities (net)
Result generated by derivative contracts used as hedge (6,374,108) (30,374,869) (2,776,601)
Income Taxes
Tax effect of derivative contracts used as hedge - PIS / COFINS 275,052 311,819 (106,497)
Tax effect of derivative contracts used as hedge - IR / CS 2,236,928 13,271,193 1,370,776

Consolidated Financial Statements | December 31, 2021 | F-82
Table of Contents

* Values expressed in thousands, except when indicated.
b) Effective tax rate calculation

The effective tax rate is as follows:
The effective tax rate
Thousand of reais 2020 2019 2018 2021 2020 2019

Operating Profit Before Tax 9,663,975 22,273,149 15,909,771 Operating Profit Before Tax 24,750,328 9,663,975 22,273,149
Income tax (3,786,778 ) 5,641,699 3,109,853 9,191,005 (3,786,778) 5,641,699
Effective tax rate (39.18 )% 25.33 % 19.55 % 37.13% (39.18%) 25.33%
c) Tax recognized in equity

In addition to the income tax recognized in the consolidated income statement, the Bank recognized the following amounts in consolidated equity:
Thousand of reais 2020 2019 2018

Tax credited to equity 3,008,035 3,517,590 2,785,330
Measurement at fair value through other comprehensive income 472,472 416,748 369,805
Measurement of cash flow hedges 1,533 186 2,081
Measurement of investment hedges 562,353 562,353 562,353
Defined benefit plan 1,971,677 2,538,303 1,851,091
Tax charged to equity (3,087,311 ) (3,952,457 ) (2,168,758 )
Measurement at fair value through other comprehensive income (2,700,991 ) (3,618,126 ) (1,997,600 )
Measurement of cash flow hedges (386,284 ) (322,080 ) (163,038 )
Defined benefit plan (36 ) (12,251 ) (8,120 )
Total (79,276 ) (434,867 ) 616,572
The Bank recognized the following amounts in consolidated equity
Thousand of reais 2021 2020 2019

Tax credited to equity 4,583,297 3,008,035 3,517,590
Measurement at fair value through other comprehensive income 1,978,165 472,472 416,748
Measurement of cash flow hedges 388,307 1,533 186
Measurement of investment hedges 562,353 562,353 562,353
Defined benefit plan 1,654,472 1,971,677 2,538,303
Tax charged to equity (2,349,500) (3,087,311) (3,952,457)
Measurement at fair value through other comprehensive income (2,340,394) (2,700,991) (3,618,126)
Measurement of cash flow hedges -    (386,284) (322,080)
Defined benefit plan (9,106) (36) (12,251)
Total 2,233,797 (79,276) (434,867)
Relates to deferred taxes recognized in equity due to temporary differences accounted for in equity.
~~Consolidated Financial Statements | December 31, 2020 | F-85~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

d) Deferred taxes

The detail of the balances of “Tax assets – Deferred” and “Tax liabilities – Deferred” is as follows:
Thousand of reais 2020 2019 2018

Tax assets: 37,981,698 30,295,062 27,680,578
Of which:
   Temporary differences (1) 32,113,436 29,565,702 26,416,527
   Tax loss carry forwards 5,693,104 367,120 846,587
Social contribution taxes 18% 175,158 362,240 417,464
Total deferred tax assets 37,981,698 30,295,062 27,680,578

Tax liabilities: 4,546,595 5,540,873 3,031,389
Of which:
   Excess depreciation of leased assets 166,903 148,839 123,257
   Adjustment to fair value of trading securities and derivatives 4,379,692 5,392,034 2,908,132
Total deferred tax liabilities 4,546,595 5,540,873 3,031,389
~~(1) Temporary differences relate mainly to impairment losses on loans~~Balances of Tax assets - Deferred and ~~receivables and provisions for lawsuits and administrative proceedings, and the effect of the fair value of financial instruments.~~Tax liabilities - Deferred
Thousand of reais 2021 2020 2019

Tax assets: 37,640,297 37,981,698 30,295,062
  Of which:
    Temporary differences ⁽¹⁾ 32,884,314 32,113,436 29,565,702
    Tax loss carry forwards 4,755,983 5,693,104 367,120
Social contribution taxes 18% -    175,158 362,240
Total deferred tax assets 37,640,297 37,981,698 30,295,062

Tax liabilities: 2,225,190 4,546,595 5,540,873
  Of which:
    Excess depreciation of leased assets -    166,903 148,839
    Adjustment to fair value of trading securities and derivatives 2,225,190 4,379,692 5,392,034
Total deferred tax liabilities 2,225,190 4,546,595 5,540,873
(1) Temporary differences that refer mainly to impairment losses on loans and receivables, provisions for legal and administrative proceedings and the effect of the fair value of financial instruments.
Consolidated Financial Statements | December 31, 2021 | F-83
Table of Contents

* Values expressed in thousands, except when indicated.

The changes in the balances of “Tax Assets – Deferred” and “Tax Liabilities – Deferred” in the last three years were as follows:
Thousand of reais Balances at December 31, 2019 Adjustment to
Income Valuation adjustments ⁽¹⁾ Other ⁽²⁾ Acquisition / Merger Balance at December 31, 2020

Tax assets: 30,295,060 8,362,100 (400,583 ) (418,784 ) 161,603 37,999,396
   Temporary differences 29,565,700 3,223,197 (400,583 ) (418,784 ) 161,603 32,131,133
   Tax loss carry forwards 367,120 5,325,984 - - - 5,693,104
Social contribution taxes 18% 362,240 (187,081 ) - - - 175,159
Tax liabilities: 5,540,873 129,231 (1,063,160 ) (60,349 ) - 4,546,595
Temporary differences 5,540,873 129,231 (1,063,160 ) (60,349 ) - 4,546,595
Total 24,754,187 8,232,869 662,577 (358,435 ) 161,603 33,452,801

Thousand of reais Balances at December 31, 2018 Adjustment to
Income Valuation adjustments ⁽¹⁾ Other ⁽²⁾
Acquisition /

Merger

Balance at December 31, 2019

Tax assets: 27,680,578 3,693,727 471,499 (1,550,744 ) - 30,295,060
   Temporary differences 26,416,527 4,240,405 471,499 (1,562,731 ) - 29,565,700
   Tax loss carry forwards 846,587 (491,454 ) - 11,987 - 367,120
Social contribution taxes 18% 417,464 (55,224 ) - - - 362,240
Tax liabilities: 3,031,389 781,448 1,773,065 (45,029 ) - 5,540,873
Temporary differences 3,031,389 781,448 1,773,065 (45,029 ) - 5,540,873
Total 24,649,189 2,912,279 (1,301,566 ) (1,505,715 ) - 24,754,187

Thousand of reais Balances at December 31, 2017 Adjustment to
Income Valuation adjustments ⁽¹⁾ Other ⁽²⁾ Acquisition / Merger Balance at December 31, 2018

Tax assets: 24,778,078 1,674,317 (186,260 ) 1,369,934 44,509 27,680,578
   Temporary differences 23,375,600 1,812,744 (186,260 ) 1,369,934 44,509 26,416,527
   Tax loss carry forwards 866,579 (19,992 ) - - - 846,587
Social contribution taxes 18% 535,899 (118,435 ) - - - 417,464
2,496,531 79,877 607,773 (153,623 ) 831 3,031,389
Temporary differences 2,496,531 79,877 607,773 (153,623 ) 831 3,031,389
Total 22,281,547 1,594,440 (794,033 ) 1,523,557 43,678 24,649,189
~~(1) It relates to deferred taxes recognized~~Changes in ~~equity due to temporary differences accounted in equity.~~the balances of Tax Assets - Deferred and Tax Liabilities - Deferred
~~(2) In 2020, it mainly refers to net of deferred taxes amounted to R$1,595,773 (2019 - R$1,216,311 and 2018 - R$241,708), which have the same counterparty and realization period.~~
Thousand of reais Balances at December 31, 2018 Adjustment to
Income Valuation adjustments ⁽¹⁾ Other ⁽²⁾ Acquisition / Merger Balance on December 31, 2021

Tax assets: 37,981,699 (3,609,495) 1,696,091 1,572,002 -    37,640,297
    Temporary differences 32,113,436 (2,497,215) 1,696,091 1,572,002 -    32,884,315
    Tax loss carry forwards 5,693,104 (937,121) -    -    -    4,755,983
Social contribution taxes 18% 175,159 (175,159) -    -    -    -
Tax liabilities: 4,546,595 (1,344,268) (977,137) -    -    2,225,190
Temporary differences 4,546,595 (1,344,268) (977,137) -    -    2,225,190
Total 33,435,104 (2,265,227) 2,673,228 1,572,002 -    35,415,107

Thousand of reais Balances at December 31, 2017 Adjustment to
Income Valuation adjustments ⁽¹⁾ Other ⁽²⁾ Acquisition / Merger Balance on December 31, 2020

Tax assets: 30,295,060 8,362,100 (400,583) (418,784) 161,603 37,999,396
    Temporary differences 29,565,700 3,223,197 (400,583) (418,784) 161,603 32,131,133
    Tax loss carry forwards 367,120 5,325,984 -    -    -    5,693,104
Social contribution taxes 18% 362,240 (187,081) -    -    -    175,159
Tax liabilities: 5,540,873 129,231 (1,063,160) (60,349) -    4,546,595
Temporary differences 5,540,873 129,231 (1,063,160) (60,349) -    4,546,595
Total 24,754,187 8,232,869 662,577 (358,435) 161,603 33,452,801

Thousand of reais Balances at December 31, 2016 Adjustment to
Income Valuation adjustments ⁽¹⁾ Other ⁽²⁾ Acquisition / Merger Balance on December 31, 2019

Tax assets: 27,680,578 3,693,727 471,499 (1,550,744) -    30,295,060
    Temporary differences 26,416,527 4,240,405 471,499 (1,562,731) -    29,565,700
    Tax loss carry forwards 846,587 (491,454) -    11,987 -    367,120
Social contribution taxes 18% 417,464 (55,224) -    -    -    362,240
   3,031,389 781,448 1,773,065 (45,029) -    5,540,873
Temporary differences 3,031,389 781,448 1,773,065 (45,029) -    5,540,873
Total 24,649,189 2,912,279 (1,301,566) (1,505,715) -    24,754,187
(1) ~~Consolidated Financial Statements | December 31, 2020 | F-86~~ It relates to deferred taxes recognized in equity due to temporary differences accounted in equity.
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
(2) In 2021, it mainly refers to net of deferred taxes amounted to R$1,572,003 (2020 - R$1,358,435 and 2019 - R$1,505,715), which have the same counterparty and realization period.

e) Expected realization of deferred tax assets
Tax assets Tax liabilities
Year Temporary differences Tax loss carry forwards Social contribution taxes 18% Total Temporary differences Total

2021 4,334,901 3,214,512 175,158 7,724,571 2,282,399 2,282,399
2022 12,412,237 60,066 - 12,472,303 2,123,509 2,123,509
2023 10,671,466 266,517 - 10,937,983 31,007 31,007
2024 819,052 2,034,568 - 2,853,620 16,662 16,662
2025 2,758,198 9,520 - 2,767,718 16,028 16,028
2026 a 2028 525,852 107,921 - 633,773 46,338 46,338
2029 a 2030 609,428 - - 609,428 30,652 30,652
Total 32,131,134 5,693,104 175,158 37,999,396 4,546,595 4,546,595
Expected realization of deferred tax assets
Tax assets Tax liabilities
Year Temporary differences Tax loss carry forwards Total Temporary differences Total

2022 10,032,946 1,917,879 11,950,826 573,982 573,982
2023 10,544,315 1,781,778 12,326,093 573,982 573,982
2024 8,684,796 987,568 9,672,364 458,404 458,404
2025 1,870,257 40,732 1,910,989 546,114 546,114
2026 976,574 7,063 983,637 12,717 12,717
2027 a 2031 775,250 21,139 796,388 59,991 59,991
Total 32,884,138 4,756,159 37,640,297 2,225,190 2,225,190
Consolidated Financial Statements | December 31, 2021 | F-84
Table of Contents

* Values expressed in thousands, except when indicated.
24. Other liabilities
The breakdown of the balance of “Other Liabilities” is as follows:

Thousand of reais 2020 2019 2018

Accrued expenses and deferred income (1) 5,115,936 5,038,011 3,193,291
Transactions in transit (3) 674,162 785,418 925,336
Provision for share-based payment 325,930 317,539 260,739
Liabilities for insurance contracts 1,987,577 1,901,801 1,797,167
Other (2) 5,947,640 2,878,175 2,918,615
Total 14,051,245 10,920,944 9,095,148
~~(1)~~
Thousand of reais 2021 2020 2019

Accrued expenses and deferred income ⁽¹⁾ 2,649,744 5,115,936 5,038,011
Transactions in transit ⁽³⁾ 796,671 674,162 785,418
Provision for share-based payment 319,660 325,930 317,539
Liabilities for insurance contracts 2,011,596 1,987,577 1,901,801
Other ⁽²⁾ 4,723,707 5,947,640 2,878,175
Total 10,501,378 14,051,245 10,920,944
(1) Corresponds, mainly, to payments to be made - personnel expenses.
(2) Includes credits for funds to be released, such as Administratives expenses, amounts due to associates and suppliers.
(3) Includes mainly the amounts to transfer to the credit card companies (resources in transit) and amount to release referred to the real estate credits.

~~(2) Includes credits for funds to be released, such as Administratives expenses, amounts due to associates and suppliers.~~
~~(3) Includes mainly the amounts to transfer to the credit card companies (resources in transit) and amount to release referred to the real estate credits.~~
25. ~~25.~~ Other Comprehensive Income
The balances of Other Comprehensive Income include the amounts, net of the related tax effect, of the adjustments to assets and liabilities recognized temporarily in equity stated in the Consolidated Statement of Changes in Equity and Consolidated Statements of Comprehensive Income until they are extinguished or realized, when they are recognized in the consolidated income statement. The amounts attributable to subsidiaries, investments in associates and joint ventures are presented, on a line by line basis, in the appropriate items based on their nature.
It should be noted that the consolidated Statements of Comprehensive Income includes the changes to Other Comprehensive Income as follows:
- Revaluation gains (losses): This includes the amount of the gains, net of losses incurred in the year, recognized directly in equity. The amounts recognized in equity in the year remain under this heading, even if in the same year they are transferred to the income statement or to the initial carrying amount of the assets or liabilities or are reclassified to another heading.
- Amounts transferred to income statement: This includes the amount of the revaluation gains (losses) previously recognized in equity, even in the same year, which are subsequently recognized in the income statement.
~~Consolidated Financial Statements | December 31, 2020 | F-87~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
- Amounts transferred to the initial carrying number of hedged objects: This includes the amount of the revaluation gains (losses) previously recognized in Equity, even in the same year, which are recognized in the initial carrying amount of assets or liabilities as a result of cash flow hedges.
- Other transfers: This includes the amount of the transfers made in the year between the various Other Comprehensive Income items.
In the Consolidated Statements of Comprehensive Income, the amounts in "Other Comprehensive Income" are recognized gross, including the amount relating to non-controlling interests, and the corresponding tax effect is presented under a separate heading, except in the case of entities accounted for using the equity method, the amounts for which are presented net of the tax effect.
a) Financial assets measured at fair value through other comprehensive income
a.1) Financial assets measured at fair value through other comprehensive income
Other Comprehensive Income – Financial assets measured at fair value through other comprehensive income includes the net amount of unrealized changes in the fair value of assets classified as available-for-sale financial assets (see Notes 6 and 7), net of taxes.
The breakdown, by type of instrument and geographical origin of the issuer, of Other Comprehensive Income Financial assets measured at fair value through other comprehensive income (IFRS 9) on December 31, ~~2020~~2021 is as follows:

Thousand of reais 2020
Revaluation gains Revaluation losses Net revaluation gains (losses) Fair value
Debt Instruments
Government debt securities 11,061,691 (8,832,504 ) 2,229,187 109,317,614
Private-sector debt securities 953,043 (840,101 ) 112,942 38,131
Total 12,014,734 (9,672,605 ) 2,342,129 109,355,745

Thousand of reais 2019
Revaluation gains Revaluation losses Net revaluation gains (losses) Fair value
Debt Instruments
Government debt securities 7,251,721 (3,952,558 ) 3,299,163 95,961,823
Private-sector debt securities 824,294 (778,175 ) 46,119 1,104
Total 8,076,015 (4,730,733 ) 3,345,282 95,962,927

Thousand of reais 2018
Revaluation gains Revaluation losses Net revaluation gains (losses) Fair value
Debt Instruments
Government debt securities 3,917,451 (1,608,673 ) 2,308,778 85,395,136
Private-sector debt securities 1,546,895 (1,863,092 ) (316,197 ) 555
Total 5,464,346 (3,471,765 ) 1,992,581 85,395,691
~~Banco Santander evaluates at~~
Consolidated Financial Statements | December 31, 2021 | F-85
Table of Contents

* Values expressed in thousands, except when indicated.
Thousand of reais 2021
Revaluation gains Revaluation losses Net revaluation gains (losses) Fair value
Debt Instruments
Government debt securities 6,756,252 (9,937,757) (3,181,505) 101,158,055
Private-sector debt securities 795,765   (3,965) 791,800 54,545
Total 7,552,017 (9,941,722) (2,389,705) 101,212,600

Thousand of reais 2020
Revaluation gains Revaluation losses Net revaluation gains (losses) Fair value
Debt Instruments
Government debt securities 11,061,691 (8,832,504) 2,229,187 109,317,614
Private-sector debt securities 953,043 (840,101) 112,942 38,131
Total 12,014,734 (9,672,605) 2,342,129 109,355,745

Thousand of reais 2019
Revaluation gains Revaluation losses Net revaluation gains (losses) Fair value
Debt Instruments
Government debt securities 7,251,721 (3,952,558) 3,299,163 95,961,823
Private-sector debt securities 824,294 (778,175) 46,119 1,104
Total 8,076,015 (4,730,733) 3,345,282 95,962,927
At each ~~disclosure to~~reporting date, the ~~market~~Bank assesses whether there is any objective evidence indicating that the ~~instruments classified as Financial Assets Measured at Fair Value in Other Comprehensive Income~~available-for-sale financial assets (debt ~~securities) have indications of loss due to impairment.~~
securities and equity instruments) are impaired.
b) Cash flow hedges
Other Comprehensive Income — Cash flow hedges includes the gains or losses attributable to hedge instruments that qualify as effective hedges. These amounts will remain under this heading until they are recognized in the consolidated income statement in the periods in which the hedged items affect them (see Note 8).
c) Hedges of net investments in foreign operations and Translation adjustments foreign investment
Other Comprehensive Incomes — Hedges of net investments in foreign operations includes the net amount of changes in the value of hedging instruments in hedges of net investments in foreign ~~operations,~~operations. In 2019 this hedge was discontinued (Note 8.a5).
Other Comprehensive Income — Exchange differences includes the net amount of the differences arising on the translation to Reais of the balances of the consolidated entities whose functional currency is not the Reais (Note 2.a).

26. Non-controlling interests
"Non-controlling interests" refer to the net equity value attributable to equity instruments that do not belong, directly or indirectly, to the Bank, including the portion of the annual profit attributed to the subsidiaries.

~~Consolidated Financial Statements | December 31, 2020 | F-88~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
a) Breakdown

The detail, by company, of the balance of “Equity - Non-controlling interests” is as follows:

Thousand of reais 2020 2019 2018

Financial Position of non-controlling interest 312,885 558,581 529,990
Santander Leasing S,A, Arrendamento Mercantil —   447 447
Getnet S,A. —   —   249,007
Olé Consignado S,A. —   271,078 116,967
Banco PSA Finance Brasil S,A. 138,644 131,222 155,399
Rojo Entretenimento S,A. 7,087 7,245 7,015
Banco Hyundai Capital 167,155 148,589
Return Capital Serviços de Recuperação de Créditos S.A. (Atual denominação Social da Ipanema Empreendimentos e Participações) —   —   1,155

Thousand of reais 2020 2019 2018

Profit attributable to non-controlling interests 32,224 224,518 217,441
Of which:
Santander Leasing S.A. Arrendamento Mercantil (444 ) 3 25
Getnet S.A. —   3,962 55,518
Olé Consignado S.A. —   199,332 138,527
Banco PSA Finance Brasil S.A. 14,146 15,887 17,914
Rojo Entretenimento S.A. (159 ) 230 166
Banco Hyundai Capital 18,681 2,520 —
Return Capital Serviços de Recuperação de Créditos S,A, (Atual denominação Social da Ipanema Empreendimentos e Participações) —   2,584 1,150
Others —   —   4,141
Thousand of reais 2021 2020 2019

Financial Position of non-controlling interest 334,349 312,885 558,581
Santander Leasing S.A. Arrendamento Mercantil -    -    447
Olé Consignado S.A. -    -    271,078
Banco PSA Finance Brasil S.A. 129,289 138,644 131,222
Rojo Entretenimento S.A. 6,939 7,087 7,245
Banco Hyundai Capital 183,538 167,155 148,589
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A. 3,109 -    -
Toro Corretora de Títulos e Valores Mobiliários Ltda. 11,474 -    -
Consolidated Financial Statements | December 31, 2021 | F-86
Table of Contents

* Values expressed in thousands, except when indicated.
Balance of Profit attributable to non-controlling interests

Thousand of reais 2021 2020 2019

Profit attributable to non-controlling interests 31,272 32,224 224,518
Of which:
Santander Leasing S.A. Arrendamento Mercantil -    (444) 3
Getnet S.A. -    -    3,962
      Olé Consignado S.A. -    -    199,332
      Banco PSA Finance Brasil S.A. 12,688 14,146 15,887
Rojo Entretenimento S.A. (148) (159) 230
Banco Hyundai Capital 21,563 18,681 2,520
GIRA, Gestão Integrada de Recebíveis do Agronegócio S.A. 1,569 -    -
Toro Corretora de Títulos e Valores Mobiliários Ltda. (4,400) -    -
Return Capital Serviços de Recuperação de Créditos S.A. (Current name of Ipanema Empreendimentos e Participações Ltda.) -    -    2,584

b) Changes

The changes in the balance of “Non-controlling interests” are summarized as follows:

Thousand of reais 2020 2019 2018 2021 2020 2019

Balance at beginning of year 558,581 529,990 436,894 Balance at beginning of year 312,885 558,581 529,990
Additions / disposals (net) due to change in the scope of consolidation (1) (271,078 ) 51,073 6,849 Additions / disposals (net) due to change in the scope of consolidation ⁽¹⁾ 17,415 (271,078) 51,073
Dividends paid / Interest on Capital - (92,734 ) (60,936 ) Dividends paid / Interest on Capital (19,138) -    (92,734)
Capital increase (2) - 100,000 48,000 -    -    100,000
Profit attributable to non-controlling interests 32,224 224,518 213,300 Profit attributable to non-controlling interests 31,272 32,224 224,518
Update PUT Olé Consignado S.A. - (240,000 ) (106,440 ) -    -    (240,000)
Others (6,842 ) (14,266 ) (7,677 ) (8,085) (6,842) (14,266)
Balance at end of year 312,885 558,581 529,990 334,349 312,885 558,581
(1) ~~(1)~~ In 2019, itmainly refers ~~mainly~~ to Banco Hyundai Capital, which was consolidated using the equity method. In 2020, it refers to the ~~incorporation~~merger of Banco Olé Consignado S.A by the Company. In 2021, it refers to the merger of Toro Corretora de Títulos e Valores Mobiliários S.A and Gira – Gestão Integrada de Receivíveis do Agronegócio S.A.
(2) ~~(2)~~ In 2019, ~~and 2018, it~~ refers to the capital increase of Olé Consignado.
~~Consolidated Financial Statements | December 31, 2020 | F-89~~27. Shareholders’ equity

~~Table of Contents~~
* Values expressed in thousands, except when indicated.
~~27.~~ ~~Shareholders’ equity~~
a) Capital

According to the by-laws, Banco Santander's capital stock may be increased up to the limit of its authorized capital, regardless of statutory reform, by resolution of the Board of Directors and through the issuance of up to 9,090,909,090 (nine billion, ninety million, nine hundred and nine thousand and ninety) shares, subject to the established legal limits on the number of preferred shares. Any capital increase that exceeds this limit will require stockholders' approval.

At the Extraordinary Shareholders' Meeting held on March 31, 2021, it was approved in the context of the partial spin-off of Santander Brasil, which resulted in the segregation of the shares of its ownership issued by Getnet Adquirência e Serviços para Meios de Contas SA. (“Getnet”), with version of the spun-off portion for Getnet, the reduction in the share capital of Santander Brasil in the total amount of two billion reais, without the cancellation of shares, increasing the share capital of Santander Brasil from fifty-seven billion reais to fifty-five billion of reais.
The capital stock, fully subscribed and paid, is divided into registered book-entry shares with no par value.

Thousand of shares
2020 2019
Common Preferred Total Common Preferred Total
Brazilian residents 109,885 135,438 245,323 90,069 115,785 205,854
Foreign residents 3,708,810 3,544,398 7,253,208 3,728,626 3,564,051 7,292,677
Total shares 3,818,695 3,679,836 7,498,531 3,818,695 3,679,836 7,498,531
(-) Treasury shares (18,829 ) (18,829 ) (37,658 ) (16,702 ) (16,702 ) (33,404 )
Total outstanding 3,799,866 3,661,007 7,460,873 3,801,993 3,663,134 7,465,127
Thousand of shares
2018
Common Preferred Total
Brazilian residents 82,043 107,699 189,742
Foreign residents 3,736,652 3,572,137 7,308,789
Total shares 3,818,695 3,679,836 7,498,531
(-) Treasury shares (13,317 ) (13,317 ) (26,634 )
Total outstanding 3,805,378 3,666,519 7,471,897
Consolidated Financial Statements | December 31, 2021 | F-87
Table of Contents

* Values expressed in thousands, except when indicated.
Thousand of shares
2021 2020
Common Preferred Total Common Preferred Total
Brazilian residents 109,718 135,345 245,063 109,885 135,438 245,323
Foreign residents 3,708,977 3,544,491 7,253,468 3,708,810 3,544,398 7,253,208
Total shares 3,818,695 3,679,836 7,498,531 3,818,695 3,679,836 7,498,531
(-) Treasury shares (15,755) (15,755) (31,510) (18,829) (18,829) (37,658)
Total outstanding 3,802,940 3,664,081 7,467,021 3,799,866 3,661,007 7,460,873

Thousand of shares
2019
Common Preferred Total
Brazilian residents 90,069 115,785 205,854
Foreign residents 3,728,626 3,564,051 7,292,677
Total shares 3,818,695 3,679,836 7,498,531
(-) Treasury shares (16,702) (16,702) (33,404)
Total outstanding 3,801,993 3,663,134 7,465,127
b) Dividends and Interest on Capital

~~According to the Bank’s bylaws, stockholders~~By-laws, shareholders are ~~entitled to~~guaranteed a minimum dividend ~~equivalent to~~of 25% of net income for ~~the~~each year, adjusted ~~according to~~in accordance with legislation. Preferred shares ~~are nonvoting~~do not have voting rights and ~~nonconvertible,~~cannot be converted into common shares, but they have the same rights and advantages granted to common shares, in addition to priority in the ~~payment~~distribution of dividends ~~at a rate that is~~and an additional 10% ~~higher than those~~on dividends paid onto common shares, and in the reimbursement of capital, ~~reimbursement,~~ without premium, in the event of ~~liquidation of~~ the ~~Bank.~~Bank's dissolution.

~~Prior to~~Dividends were calculated and paid in accordance with Brazilian Corporate Law.
Before the Annual ~~Stockholders~~Shareholders' Meeting, the Board of Directors may ~~resolve~~decide on the declaration and payment of dividends on ~~earnings~~the profits earned, based on: (i) balance sheets or ~~earning~~profit reserves ~~showed~~existing in the last balance ~~sheet;~~sheet or (ii) balance sheets issued in ~~the period shorter~~periods of less than 6six months, ~~since~~provided that the total of dividends paid in each ~~half~~semester of the fiscal year ~~shall~~does not exceed the amount of capital reserves. These dividends are fully ~~attributed~~imputed to the mandatory dividend.

CMN Resolution No. 4,885, of December 23, 2020, prohibits ~~the~~ institutions authorized to operate by the Central Bank of Brazil ~~to remunerate their capital~~from remunerating equity above the highest ~~of:~~between: i) 30% of ~~the~~net income adjusted ~~net profit under the terms of~~pursuant to item I of article 20 of Law No. ~~6,404/~~6.404/76; or ii) mandatory minimum ~~mandatory~~ dividends established by article 202 of Law ~~No. 6,404 /~~ 6,404/76, including in the form of Interest on Equity, until December 31, 2020. The ~~standard~~rule also prohibits the reduction of the share capital, except in specific situations, and the increase in the remuneration of its officers, administrators and members of the Board of Directors and the Fiscal Council.

~~The amount~~We present below the distribution of ~~R$665,000 in~~ dividends and ~~interest~~Interest on ~~own capital paid in February~~Equity made on December 31, 2021 and December 31, 2020 ~~is recorded under the caption of other obligations - social~~ and ~~statutory (2019 – R$7,800,000 and R$2018 – 4,800,00);~~2019.

2020
Thousand Real per Thousand Shares / Units
of reais Common Preferred Units

Interest on Capital (1) (5) 890,000 113,7129 125,0842 238,7971
Interest on Capital (2) (5) 770,000 98,3793 108,2172 206,5965
Interest on Capital (3) (5) 1,000,000 127,7636 140,5400 268,3036
Interest on Capital (4) (5) 665,000 84,9626 93,4589 178,4214
Total 3,325,000
~~(1) Deliberated by the Board of Directors on April 27, 2020, paid on June 24, 2020, without any remuneration as restatement.~~
~~(2) Deliberated by the Board of Directors on July 28, 2020, paid on September 25, 2020, without any remuneration monetary restatement.~~
~~(3) Deliberated by the Board of Directors on October 26, 2020, paid on December 23, 2020, without any remuneration monetary restatement security.~~
~~(4) Deliberated by the Board of Directors on December 28, 2020, paid as of February 1, 2021, without any remuneration as monetary restatement.~~
~~(5) They were fully imputed to the minimum mandatory dividends to be distributed by the Bank for the fiscal year 2020.~~
2021
Real per Thousand Shares / Units
Thousand of reais Gross Net
Common Preferred Units Common Preferred Units

Dividends (1)(5) 3,000,000 382.98 421.28 804.26 382.98 421.28 804.26
Interest on Capital (2)(5) 3,400,000 434.04 477.45 911.49 368.94 405.83 774.77
Dividends (3)(5) 3,000,000 382.98 421.28 804.26 382.98 421.28 804.26
Interest on Capital (4) (5) 249,000 31.79 34.97 66.75 27.02 29.72 56.74
Total 9,649,000
~~Consolidated Financial Statements | December 31, 2020 | F-90~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
2019
Thousand Real per Thousand Shares / Units
of reais Common Preferred Units

Interest on Capital (1) (6) 1,000,000 127,5853 140,3438 267,9291
Interim Dividends (2) (6) 1,000,000 127,6399 140,4039 268,0438
Interest on Capital (3) (6) 1,000,000 127,6610 140,4271 268,0881
Interest on Capital (4) (6) 1,010,000 128,9673 141,8641 270,8314
Interim Dividends (5) (6) 6,790,000 867,0180 953,7197 1,820,7377
Total 10,800,000
~~(1) Deliberated by the Board of Directors on March 29, 2019, paid on May 28, 2019, without any remuneration as restatement.~~
~~(2) Deliberated by the Board of Directors on June 28, 2019, paid on July 31, 2019, without any remuneration as restatement.~~
~~(3) Deliberated by the Board of Directors on September 30, 2019, paid on October 30, 2019, without any remuneration monetary restatement.~~
~~(4) Deliberated by the Board of Directors on December 27, 2019, paid on February 21, 2020, without any remuneration monetary restatement~~
~~(5) Deliberated by the Board of Directors on December 27, 2019, paid on February 21, 2020, without any remuneration monetary restatement.~~
~~(6) The amount of interest on own capital and interim dividends were fully imputed to the minimum mandatory dividends distributed by the Bank for the 2019 financial year.~~
2018
Thousand Reais per Thousand Shares / Units
of reais Common Preferred Units

Interest on Capital (1) (6) 600,000 76,3304 83,9634 160,2938
Interest on Capital (2) (6) 600,000 76,4956 84,1451 160,6407
Interest on Capital (3) (6) 600,000 76,4985 84,1484 160,6469
Interim Dividends (4) (6) 2,880,000 367,4149 404,1564 771,5713
Interest on Capital (5) (6) 1,920,000 244,9433 269,4376 514,3809
Total 6,600,000
(1) ~~Established~~ Resolved by the Board of Directors ~~in March~~on April 27, ~~2018, Common Shares - R$ 64.8808, preferred - R$71.3689 and Units - R$ 136.2497 net of taxes, and was~~2021, paid on ~~April 26, 2018~~June 2, 2021, without any ~~compensation~~remuneration as monetary ~~indexation.~~restatement.
(2) ~~Established~~ Resolved by the Board of Directors ~~in June 26, 2018, was paid~~ on July 27, ~~2018~~2021, paid on September 3, 2021, without any ~~compensation~~remuneration as monetary ~~indexation.~~restatement.
(3) ~~Established~~ Resolved by the Board of Directors ~~in September 28, 2018, common - R$ 65.0237, preferred - R$ 71.5261 and Units - R$ 136.5498 net of taxes and paid~~ on October 26, ~~2018,~~2021, paid on December 3, 2021, without any ~~compensation~~remuneration as monetary ~~indexation.~~restatement.
(4) Established by the Board of Directors in December 28, 2018, common - R$ 312.3027, preferred - R$ 343.5329 and Units - R$ 655.8356 net of taxes and paid on February 26, 2019, without any compensation as monetary indexation.
~~(5)~~ ~~Deliberated~~Resolved by the Board of Directors on December 28, ~~2018 and~~2021, paid ~~as of~~on February ~~26, 2019,~~3, 2022, without any remuneration as monetary ~~indexation.~~restatement.
(5) ~~(6)~~ ~~The amount of dividends and interest on shareholders' equity will be~~They were fully ~~charged~~imputed to the mandatory minimum dividends distributed by the Bank for the year 2021.
Consolidated Financial Statements | December 31, 2021 | F-88
Table of Contents

* Values expressed in thousands, except when indicated.
2020
Real per Thousand Shares / Units
Thousand of reais Gross Net
Common Preferred Units Common Preferred Units
Interest on Capital (1) (5) 890,000 113.71 125.08 238.80 96.65 106.32 202.97
Interest on Capital  (2) (5) 770,000 98.37 108.21 206.58 83.62 91.98 175.61
Interest on Capital (3) (5) 1,000,000 127.76 140.54 268.30 108.59 119.45 228.04
Interest on Capital (4) (5) 665,000 84.96 93.45 178.41 72.21 79.44 151.65
Dividends (5)(6) 512,085 65.43 71.97 137.39 65.43 71.97 137.39
Total 3,837,085
(1) Resolved by the Board of Directors on April 27, 2020, paid on June 24, 2020, without any remuneration as restatement.
(2) Resolved by the Board of Directors on July 28, 2020, paid on September 25, 2020, without any remuneration on account of monetary restatement.
(3) Resolved by the Board of Directors on October 26, 2020, paid on December 23, 2020, without any remuneration to monetary restatement title.
(4) Resolved by the Board of Directors on December 28, 2020, paid from February 1, 2021, without any remuneration by way of monetary restatement.
(5) They were fully allocated to the mandatory minimum dividends to be distributed by the Bank for the ~~financial~~ year ~~2018.~~2020.
(6) Deliberated by the Board of Directors on February 2, 2021, paid on March 3, 2021, without any monetary restatement.
2019
Reais per Thousand Shares / Units
Thousand of reais Gross Net
Common Preferred Units Common Preferred Units

Interest on Capital (1) (6) 1,000,000 127.59 140.34 267.93 108.45 119.29 227.74
Interest on Capital (2) (6) 1,000,000 127.64 140.40 268.04 127.64 140.40 268.04
Interest on Capital (3) (6) 1,000,000 127.66 140.43 268.09 108.51 119.36 227.87
Interim Dividends (4) (6) 1,010,000 128.97 141.86 270.83 109.62 120.58 230.21
Interest on Capital (5) (6) 6,790,000 867.02 953.72 1,820.74 867.02 953.72 1,820.74
Total 10,800,000
(1) Resolved by the Board of Directors on March 29, 2019, paid on May 28, 2019, without any remuneration as monetary restatement.
(2) Resolved by the Board of Directors on June 28, 2019, paid on July 31, 2019, without any remuneration as monetary restatement.
(3) Resolved by the Board of Directors on September 30, 2019, paid on October 30, 2019, without any remuneration as monetary restatement.
(4) Resolved by the Board of Directors on December 27, 2019, paid on February 21, 2020, without any remuneration as monetary restatement.
(5) Resolved by the Board of Directors on December 27, 2019, paid on February 21, 2020, without any remuneration as monetary restatement.
(6) The amount of interest on equity and interim dividends were fully allocated to the mandatory minimum dividends distributed by the Bank for the year 2019.
c) Reserves

The reserves are allocated as follows after the deductions and statutory provisions, from the net income:

Legal reserve

In accordance with Brazilian Corporate Law, 5% is transferred to the legal reserve, until it reaches 20% of the share capital. This reserve is designed to ensure the integrity of the capital and can only be used to offset losses or increase capital.

~~Consolidated Financial Statements | December 31, 2020 | F-91~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Capital reserve

The Bank´s capital reserve consists of: goodwill reserve for subscription of shares and other capital reserves, and can only be used to absorb losses that exceed retained earnings and profit reserves, redemption, reimbursement or acquisition of shares for the Bank´s own issue; capital increase, or payment of dividends to preferred shares under certain circumstances.

Consolidated Financial Statements | December 31, 2021 | F-89
Table of Contents

* Values expressed in thousands, except when indicated.
Reserve for equalization dividend

After the allocation of dividends, the remaining balance if any, may, upon proposal of the Executive Board and approved by the Board of Directors, be allocated to reserve for equalization of dividends, which will be limited to 50% of the capital. This reserve aims to ensure funds for the payment of dividends, including as interest on own capital, or any interim payment to maintain the flow of shareholders remuneration.

At the Extraordinary General Meeting held on March 31, 2021, it was approved in the context of the partial spin-off of Santander Brasil, which resulted in the segregation of the shares owned by it issued by Getnet Adquirência e Serviços para Meios de Pagamentos S.A. (“Getnet”), with version of the spun-off portion to Getnet, the reduction of reserves for equalization of dividends of Santander Brasil in the total amount of R$1,167,674.
The reduction includes the remaining balance of the equity of the spun-off portion, as well as the write-off of the option to acquire an equity instrument.
d) Treasury shares

At a meeting held on February 2, 2021, the Board of Directors approved, in continuity with the ~~repurchase~~buyback program that expired on November 4, 2020, a new ~~repurchase~~buyback program for Units and ADRs issued by Banco Santander, ~~either~~ directly or onthrough its ~~own.~~branch in Cayman, ~~branch,~~ for maintenance in treasury or ~~for~~ subsequent ~~sale.~~disposal.

~~The~~The Buyback Program covers the acquisition of up to 36,956,402 Units, representing 36,956,402 common shares and 36,956,402 preferred shares, which corresponded, on December 31, ~~2020, corresponded~~2021, to approximately 1% of the Bank's ~~share capital.~~capital stock. As of December 31, ~~2020,~~2021, Banco Santander had 355,661,814 common shares and 383,466,228 preferred shares outstanding.

The repurchase aims to (1) maximize the generation of value for shareholders through an efficient management of the capital structure; and (2) enable the payment of administrators, ~~management-level~~management level employees and other employees of the Bank and of companies under its control, under the terms of the Long-Term Incentive Plans. The term of the Buyback Program is up to 18 months from February 3, 2021, ending on August 2, 2022.

2020 2019 2018 2021 2020 2019
Quantity Quantity Quantity Quantity
Units Units Units Units
Treasury shares at beginning of the period 16,702 13,317 1,773 18,829 16,702 13,317
Shares Acquisitions 5,052 6,465 15,816 91 5,052 6,465
Cancellation of Shares (2) - - -
Payment - Share-based compensation (2,925 ) (3,080 ) (4,272 ) Payment - Share-based compensation (3,165) (2,925) (3,080)
Treasury shares at end of the period 18,829 16,702 13,317 Treasury shares at end of the period 15,755 18,829 16,702
Balance of Treasury Shares in thousand of reais R$ 789,587 R$ 679,364 R$ 460,550 Balance of Treasury Shares in thousand of reais R$ 711,268 R$ 789,587 R$ 679,364
Emission Costs in thousands of Reais R$ 1,771 R$ 1,771 R$ 882
Emission Costs in thousands of Reais R$ 1,771
Balance of Treasury Shares in thousands of reais R$ 791,358 R$ 681,135 R$ 461,432 Balance of Treasury Shares in thousands of reais R$ 713,039 R$ 791,358 R$ 681,135

Cost/Share Price Units Units Units Units
Minimum cost (1) R$7,55 R$7,55 R$7,55 R$7.55 R$7.55 R$7.55
Weighted average cost (1) R$33,24 R$28,59 R$28,59 Weighted average cost (1) R$33.86 R$33.24 R$28.59
Maximum cost (1) R$49,55 R$43,84 R$43,84 R$49.55 R$49.55 R$43.84
Share Price R$44,83 R$42,70 R$42,70 R$29.98 R$44.83 R$42.70
(1) Considering since the beginning of operations on the stock exchange.
Additionally, in the year ended December 31, ~~2020,~~2021, treasury shares were sold, that resulted in a ~~loss~~gain of ~~9,274 (2019~~R$40,820 (2020 - loss of R$~~5,796~~9,274 and ~~2018~~2019 - loss of R$~~15,868)~~5,796) recorded directly in equity in capital reserves.

28. Earnings per share
a) Basic earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to the Parent by the weighted average outstanding shares during the year average number, excluding the average number of own shares held during the year and held in ~~treasury.~~treasury.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-92~~F-90
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~
2021 2020 2019

Profit attributable to the Parent 15,528,052 13,418,529 16,406,932

Earnings per share (R$)
Basic earnings per 1,000 shares (R$)
Common shares 1,981.65 1,713.45 2,094.83
Preferred shares 2,179.82 1,884.80 2,304.32
Net Profit attributable - Basic (R$)
Common shares 7,535,924 6,511,367 7,965,194
Preferred shares 7,992,128 6,907,162 8,441,738

Weighted average shares outstanding (in thousands) - Basic
Common shares 3,802,851 3,800,140 3,802,303
Preferred shares 3,666,423 3,664,666 3,663,444

* Values expressed in thousands, except when indicated.
2020 2019 2018

Profit attributable to the Parent 13,418,529 16,406,932 12,582,477

Earnings per share (Brazilian Reais)
Basic earnings per 1,000 shares (Brazilian Reais)
Common shares 1,713.45 2,094,83 1,604,34
Preferred shares 1,884.80 2,304,32 1,764,78
Net Profit attributable - Basic (Brazilian Reais)
Common shares 6,511,367 7,965,194 6,108,349
Preferred shares 6,907,162 8,441,738 6,474,128

Weighted average shares outstanding - Basic
Common shares 3,800,140 3,802,303 3,807,386
Preferred shares 3,664,666 3,663,444 3,668,527
b) Diluted earning per share

The diluted earnings per share is calculated by dividing the net profit attributable to the Parent by the weighted average outstanding shares during the year average number, excluding the average number of own shares held during the year and held in treasury, including the effect of dilutive potential programs long-term compensation.
Diluted earnings per share
2020 2019 2018

Profit attributable to the Parent 13,418,529 16,406,932 12,582,477

Earnings per share (Brazilian Reais)
Diluted earnings per 1,000 shares (Brazilian Reais)
Common shares 1,713.45 2,094.83 1,604.34
Preferred shares 1,884.80 2,304.32 1,764.78
Net Profit attributable - Diluted (Brazilian Reais)
Common shares 6,511,367 7,965,194 6,108,349
Preferred shares 6,907,162 8,441,738 6,474,128

Weighted average shares outstanding - Diluted ��
Common shares 3,800,140 3,802,303 3,807,386
Preferred shares 3,664,666 3,663,444 3,668,527
(1) The exercise period of the SOP 2013 Long Term Incentive Plan purchase option ended in June 2018. The Bank does not have stock-based compensation plans in force (Note 39) and consequently has no anti-dilution items.
2021 2020 2019

Profit attributable to the Parent

15,528,052
13,418,529 16,406,932

Earnings per share (R$)
Diluted earnings per 1,000 shares (R$)
Common shares 1,981,65 1,713,45 2,094,83
Preferred shares 2,179,82 1,884,80 2,304,32
Net Profit attributable - Basic (R$)
Common shares 7,535,924 6,511,367 7,965,194
Preferred shares 7,992,128 6,907,162 8,441,738

Weighted average shares outstanding (in thousand) - Diluted
Common shares 3,802,851 3,800,140 3,802,303
Preferred shares 3,666,423 3,664,666 3,663,444

29. ~~29.~~ Fair value of financial assets and liabilities
Under IFRS 13, the fair value measurement uses a fair value hierarchy that reflects the model used in the measurement process which should be in accordance with the following hierarchical levels:
~~Consolidated Financial Statements | December 31, 2020 | F-93~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Level 1: Determined on the basis of public (unadjusted) quoted prices in highly active markets for identical assets and liabilities, these include public debt securities, stocks, derivatives listed.
Level 2: They are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).
Level 3: They are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Trading Financial Assets, Other financial assets at fair value on through income statement, Available-for-sale financial assets and Financial liabilities held for trading.
Level 1: The securities with high liquidity and quoted prices in active market are classified as level 1. At this level there were classified most of the Brazilian Government Securities (mainly LTN, LFT, NTN-B, NTN-C and NTN-F), shares in stock exchange and other securities traded in the active market.

Consolidated Financial Statements | December 31, 2021 | F-91
Table of Contents

* Values expressed in thousands, except when indicated.
Level 2: When quoted price cannot be observed, the ~~management,~~Management, using its own internal models, make its best estimate of the price that would be set by the market. These models use data based on observable market parameters as an important reference. Various techniques are used to make these estimates, including the extrapolation of observable market data and extrapolation techniques. The best evidence of fair value of a financial instrument on initial recognition is the transaction price, unless the fair value of the instrument can be obtained from other market transactions carried out with the same instrument or similar instruments or can be measured using a valuation technique in which the variables used include only data from observable market, especially interest rates. These securities are classified at level 2 of the fair value hierarchy and are composed mainly of Government Securities ~~(NTN-A), repo,~~(repo, LCI Cancelable and NTN) in a less liquid market than those classified at level 1.
Level 3: When there is information that is not based on observable market data, Banco Santander uses internally developed models, from curves generated according to the internal model. Level 3 comprises mainly unlisted shares.
Derivatives
Level 1: Derivatives traded on stock exchanges are classified in Level 1 of the hierarchy.
Level 2: For derivatives traded over the counter, the valuation (primarily swaps and options) usually uses observable market data, such as: exchange rates, interest rates, volatility, correlation between indexes and market liquidity.
When pricing the financial instruments aforementioned, it is used the Black-Scholes Model (exchange rate options, interest rate options; caps and floors) and the present value method (discount of future values by market curves).
Level 3: Derivatives not traded ~~in the stock~~on an exchange and that do not have an observable ~~data~~information in an active market were classified as ~~Level 3. These~~level 3, and are composed, byincluding exotic derivatives. ~~Below are the valuation carachteristics considered for the main financial instruments classified as Level 3:~~
Category Type Asset/Liability Valuation technique Main unobservable inputs
Linear derivatives Coupon Fra BMF Closing Prices Currency Coupon rate - long term
Inflation Swap Discounted cash flow IGPM Coupon rate
Interest Rate Swap Discounted cash flow Pre-fixed rates – long term
Non linear derivatives Equities Options Black&Scholes Implicit volatility- long term
Inflation Options Black&Scholes IPCA Implicit volatility- long term
Interest Rate Options Black&Scholes IDI Implicit volatility- long term
Currency Options Black&Scholes USD/BRL Implicit volatility- long term
Cash Pension Plan Liability Actuarial Model IGPM Coupon rate
Private Bonds Discounted cash flow Discount rate ("Yields")
Public Bonds Discounted cash flow NTN-C and TDA Discount rate ("Yields")
Put options Put Options Discounted cash flow Growth and Discount rates
The Banco Santander´s policy related to instrument classification in the fair value hierarchy existing since September/2018, introduced detailed procedures about the instrument classification process. Definitions were included related to instruments, risk factors and deadlines as well as observability degree of market prices and its importance in the fair value measurement model. The application of such definitions since September 2018 resulted in reclassifications of certain financial instruments, as shown in the section “Changes of Fair Value Level 3”.
~~Consolidated Financial Statements | December 31, 2020 | F-94~~

~~Table of Contents~~
* Values expressed in thousands, except when indicated.
The ~~following~~ table below shows a summary of the fair values of financial assets and liabilities for the ~~period~~years ended December 31, 2021, 2020 ~~2019~~ and ~~2018~~,2019, classified based on ~~several~~the various measurement methods adopted by the Bank to determine their fair ~~value:~~value
Summary of the fair values of financial assets and liabilities
12/31/2020
Level 1 Level 2 Level 3 Total
Financial Assets Measured At Fair Value Through Profit Or Loss 588,778 57,354,806 2,956,882 60,900,466
Debt instruments 588,778 - 2,956,882 3,545,660
Balances With The Brasilian Central Bank - 57,354,806 - 57,354,806
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 70,139,962 27,508,722 817,548 98,466,232
Debt instruments 68,461,854 11,848 47,097 68,520,799
Equity instruments 1,678,108 128,251 11,917 1,818,276
Derivatives - 27,368,623 758,534 28,127,157
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss - 217,569 282,151 499,720
Equity instruments - 185,790 253,122 438,912
Loans and advances to customers - 31,779 29,029 60,808
Financial Assets Measured At Fair Value Through Other Comprehensive Income 106,456,132 1,987,234 1,297,021 109,740,387
Debt instruments 106,454,645 1,953,504 1,260,065 109,668,214
Equity instruments 1,487 33,730 36,956 72,173
Hedging derivatives (assets) - 743,463 - 743,463
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading - 76,890,170 753,121 77,643,291
Trading derivatives - 31,082,223 753,121 31,835,344
Short positions - 45,807,947 - 45,807,947
Financial Liabilities Measured At Fair Value Through Profit Or Loss - 7,038,467 - 7,038,467
Other financial liabilities - 7,038,467 - 7,038,467
Hedging derivatives (liabilities) - 144,594 - 144,594
12/31/2019
Level 1 Level 2 Level 3 Total
Financial Assets Measured At Fair Value Through Profit Or Loss 975,393 28,739,507 2,627,405 32,342,305
Debt instruments 975,393 132,277 2,627,405 3,735,075
Balances With The Brasilian Central Bank - 28,607,230 - 28,607,230
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 35,057,803 21,247,552 715,548 57,020,903
Debt instruments 33,028,333 1,726,441 130,857 34,885,631
Equity instruments 2,029,470 - - 2,029,470
Derivatives - 19,521,111 584,691 20,105,802
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 143,077 627 27,749 171,453
Equity instruments 143,077 627 27,749 171,453
Financial Assets Measured At Fair Value Through Other Comprehensive Income 93,555,527 1,612,741 951,966 96,120,234
Debt instruments 93,531,617 1,612,741 818,569 95,962,927
Equity instruments 23,910 - 133,397 157,307
Hedging derivatives (assets) - 339,932 - 339,932
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading - 45,499,913 564,757 46,064,670
Trading derivatives - 21,664,260 564,757 22,229,017
Short positions - 23,835,653 - 23,835,653
Financial Liabilities Measured At Fair Value Through Profit Or Loss - 3,719,416 1,600,000 5,319,416
Hedging derivatives (liabilities) - 200,961 - 200,961
12/31/2021

Level 1(1) Level 2 Level 3 Total
Financial Assets Measured at Fair Value Through Profit or Loss 601,204 15,736,825 2,520,813 18,858,842
Debt instruments 601,204 - 2,520,813 3,122,017
Balances with The Brazilian Central Bank -    15,736,825 -    15,736,825
Financial Assets Measured at Fair Value Through Profit or Loss  Held for Trading 49,462,429 20,608,008 500,228 70,570,665
Debt instruments 47,582,871 19,329 150,395 47,752,595
Equity instruments 1,879,558 85,029 56,023 2,020,610
Derivatives -    20,503,650 93,810 20,797,460
Non-Trading Financial Assets Mandatorily Measured at Fair Value Through Profit or Loss -    420,898 449,264 870,162
Equity instruments -    98,921 378,786 477,707
Loans and advances to customers -    321,977 70,478 392,455
Financial Assets Measured at Fair Value Through Other Comprehensive Income 98,977,403 1,662,779 601,605 101,241,787
Debt instruments 98,975,973 1,649,925 586,702 101,212,600
Equity instruments 1,430 12,854 14,903 29,187
Hedging derivatives (assets) -    342,463 -    342,463
Financial Liabilities Measured at Fair Value Through Profit or Loss  Held For Trading -    36,484,135 468,432 36,952,567
Trading derivatives -    23,703,576 468,432 24,172,008
Short positions -    12,780,559 -    12,780,559
Financial Liabilities Measured at Fair Value Through Profit or Loss -    7,459,784 -    7,459,784
Other financial liabilities -    7,459,784 -    7,459,784
Hedging derivatives (liabilities) -    446,973 -    446,973

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-95~~F-92
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~

12/31/2020

Level 1(1) Level 2 Level 3 Total
Financial Assets Measured At Fair Value Through Profit Or Loss 588,778     57,354,806    2,956,882   60,900,466
Debt instruments 588,778 -    2,956,882 3,545,660
Balances with The Brazilian Central Bank -    57,354,806 -    57,354,806
Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading 70,139,962 27,508,722 817,548 98,466,232
Debt instruments 68,461,854 11,848 47,097 68,520,799
Equity instruments 1,678,108 128,251 11,917 1,818,276
Derivatives -    27,368,623 758,534 28,127,157
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss -    217,569 282,151 499,720
Equity instruments -    185,790 253,122 438,912
Loans and advances to customers -    31,779 29,029 60,808
Financial Assets Measured At Fair Value Through Other Comprehensive Income 106,456,132 1,987,234 1,297,021 109,740,387
Debt instruments 106,454,645 1,953,504 1,260,065 109,668,214
Equity instruments 1,487 33,730 36,956 72,173
Hedging derivatives (assets) -    743,463 -    743,463
Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading -    76,890,170 753,121 77,643,291
Trading derivatives -    31,082,223 753,121 31,835,344
Short positions -    45,807,947 -    45,807,947
Financial Liabilities Measured At Fair Value Through Profit Or Loss -    7,038,467 -    7,038,467
Other Financial Liabilities -    7,038,467 -    7,038,467
Hedging derivatives (liabilities) -    144,594 -    144,594

12/31/2019

Level 1(1) Level 2 Level 3 Total
Financial Assets Measured At Fair Value Through Profit Or Loss 975,393     28,739,507   2,627,405     32,342,305
Debt instruments 975,393 132,277 2,627,405 3,735,075
Balances with The Brazilian Central Bank -    28,607,230 -    28,607,230
Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading 35,057,803 21,247,552 715,548 57,020,903
Debt instruments 33,028,333 1,726,441 130,857 34,885,631
Equity instruments 2,029,470 -    -    2,029,470
Derivatives -    19,521,111 584,691 20,105,802
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 143,077 627 27,749 171,453
Equity instruments 143,077 627 27,749 171,453
Financial Assets Measured At Fair Value Through Other Comprehensive Income 93,555,527 1,612,741 951,966 96,120,234
Debt instruments 93,531,617 1,612,741 818,569 95,962,927
Equity instruments 23,910 -    133,397 157,307
Hedging derivatives (assets) -    339,932 -    339,932
Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading -    45,499,913 564,757 46,064,670
Trading derivatives -    21,664,260 564,757 22,229,017
Short positions -    23,835,653 -    23,835,653
Financial Liabilities Measured At Fair Value Through Profit Or Loss -    3,719,416 1,600,000 5,319,416
Hedging derivatives (liabilities) -    200,961 -    200,961

* Values expressed in thousands, except when indicated.

2018
Level 1 Level 2 Level 3 Total
Financial Assets Measured At Fair Value Through Profit Or Loss 2,660,859 40,540,054 510,887 43,711,800
Debt instruments 2,660,859 510,887 3,171,746
Balances With The Brasilian Central Bank - 40,540,054 - 40,540,054
Financial Assets Measured at Fair Value in the Income through Trading 49,855,112 17,626,932 1,370,270 68,852,314
Debt instruments 49,094,924 432,910 538,635 50,066,469
Equity instruments 757,843 8,490 - 766,333
Derivatives 2,345 17,185,532 831,635 18,019,512
Financial assets not intended for trading Mandatory measured at fair value in the income statement 142,732 619,798 154,947 917,477
Loans and advances to customers - 619,180 - 619,180
Equity instruments 142,732 618 154,947 298,297
Financial assets measured at fair value in other comprehensive income 83,283,924 1,442,797 709,956 85,436,677
Debt instruments 83,253,117 1,442,797 699,777 85,395,691
Equity instruments 30,807 - 10,179 40,986
Hedging derivatives (assets) - 343,934 - 343,934
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading 32,697,510 17,600,024 641,458 50,938,992
Trading derivatives 1,833 17,600,024 641,458 18,243,315
Short positions 32,695,677 - - 32,695,677
Hedging derivatives (liabilities) - 223,520 - 223,520
Consolidated Financial Statements | December 31, 2021 | F-93
Table of Contents

* Values expressed in thousands, except when indicated.
Movements in fair value of Level 3
The following tables demonstrate the movements during 2021, 2020 ~~2019~~ and ~~2018~~2019 for the financial assets and liabilities classified as Level 3 in the fair value hierarchy:
Fair value hierarchy
Fair Value
12/31/2019 Gains/ losses (Realized/Not Realized) Transfers to Level 3 Additions / Low Fair value 12/31/2020
Financial Assets Measured At Fair Value Through Profit Or Loss 2,627,405 83,832 (239,512 ) 485,157 2,956,882
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 715,548 502,596 (231,468 ) (169,128 ) 817,548
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 27,749 100,091 125,282 29,029 282,151
Financial Assets Measured At Fair Value Through Other Comprehensive Income 951,966 (21,677 ) (197,098 ) 563,830 1,297,021
Financial Liabilities Measured At Fair Value Through Profit Or Loss 564,757 500,159 (406,971 ) 95,176 753,121
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading 1,600,000 - - (1,600,000 ) -
Fair Value
12/31/2018 Gains/ losses (Realized/Not Realized) Transfers to Level 3 Additions / Low Fair value 12/31/2019
Financial Assets Measured At Fair Value Through Profit Or Loss 510,887 290,773 1,700,499 125,246 2,627,405
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading 1,370,270 238,632 (1,031,076 ) 137,722 715,548
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 154,947 (101,541 ) - (25,657 ) 27,749
Financial Assets Measured At Fair Value Through Other Comprehensive Income 709,956 253,803 291 (12,084 ) 951,966
Financial Liabilities Measured At Fair Value Through Profit Or Loss Held For Trading 641,458 190,813 (586,346 ) 318,832 564,757
Fair Value
12/31/2020 Gains/ losses (Realized/Not Realized) Transfers to Level 3 Additions / Low Fair value 12/31/2021
Financial Assets Measured At Fair Value Through Profit Or Loss 2,956,882 99,401 -    (535,470) 2,520,813
Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading 817,548 (802,760) (36,051) 483,419 462,156
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 282,151 78,853 -    88,260 449,264
Financial Assets Measured At Fair Value Through Other Comprehensive Income 1,297,021 (268,095) -    (427,322) 601,604
Financial Liabilities Measured At Fair Value Through Profit Or Loss 753,121 (337,847) (137,963) 156,272 433,583
Fair Value
12/31/2019 Gains/ losses (Realized/Not Realized) Transfers to Level 3 Additions / Low Fair value 12/31/2020
Financial Assets Measured At Fair Value Through Profit Or Loss 2,627,405 83,832     (239,512)     485,157 2,956,882
Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading 715,548 502,596 (231,468)     (169,128) 817,548
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 27,749 100,091 125,282 29,029 282,151
Financial Assets Measured At Fair Value Through Other Comprehensive Income 951,966 (21,677) (197,098) 563,830 1,297,021
Financial Liabilities Measured At Fair Value Through Profit Or Loss 564,757 500,159 (406,971) 95,176 753,121
Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading 1,600,000 -    -    (1,600,000) -

Fair Value
12/31/2018 Gains/ losses (Realized/Not Realized) Transfers to Level 3 Additions / Low Fair value 12/31/2019
Financial Assets Measured At Fair Value Through Profit Or Loss 510,887 290,773 1,700,499 125,246 2,627,405
Financial Assets Measured At Fair Value Through Profit Or Loss  Held For Trading 1,370,270 238,632 (1,031,076) 137,722 715,548
Non-Trading Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 154,947 (101,541) -    (25,657) 27,749
Financial Assets Measured At Fair Value Through Other Comprehensive Income 709,956 253,803 291 (12,084) 951,966
Financial Liabilities Measured At Fair Value Through Profit Or Loss  Held For Trading 641,458 190,813 (586,346) 318,832 564,757

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-96~~F-94
Table of Contents

* Values expressed in thousands, except when indicated.
* Values expressed in thousands, except when indicated.
Fair Value
12/31/2017 Gains/ losses (Realized/Not Realized) Transfers to Level 3 Additions / Low IFRS 9 Impact Fair value 12/31/2018
Financial assets measured at fair value in the result 33,368 60,887 - 445,991 (29,359 ) 510,887
Financial Assets Measured at Fair Value in the Income through Trading - (181,355 ) 1,264,576 246,051 40,998 1,370,270
Financial assets not intended for trading Mandatory measured at fair value in the income statement - (7,280 ) - - 162,227 154,947
Financial assets measured at fair value through other comprehensive income 140,143 47,773 645,708 - (123,668 ) 709,956
Financial liabilities measured at fair value in the result - 115,212 710,219 (183,973 ) - 641,458
Fair value movements linked to credit risk
Changes in fair value attributable to changes in credit risk are determined based on ~~the basis of~~ changes in the prices of credit default swaps compared to similar obligations of the same obligor when such prices are observable, ~~since~~as these credit default swaps better reflect the ~~market~~market's valuation of the debtors. credit risk ~~assessment~~ for a specific financial asset. When such prices are ~~not observable,~~unobservable, changes in fair value attributable to changes in credit risk are determined as the total ~~value~~amount of changes in fair value not attributable to changes in the ~~underlying~~benchmark interest rate or other observed market rates. In the absence of specific observable data, this approach provides a reasonable approximation of changes attributable to credit risk, as it estimates the change in margin ~~change~~ above the ~~reference value~~benchmark that the market may ~~require~~demand for the financial asset. ~~In 2018, there were no significant changes between the fair value categories due to changes in credit risk.~~
~~Consolidated Financial Statements | December 31, 2020 | F-97~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

Financial assets and liabilities not measured at fair value

The financial assets owned by the Bank are measured at fair value in the accompanying consolidated balance sheets, except for loans and receivables.

Similarly, the Bank’s financial liabilities except for financial liabilities held for trading and those measured at fair value - are measured at amortized cost in the consolidated balance sheets.

i) Financial assets measured at other than fair value

Below is a comparison of the carrying amounts of financial assets of the Bank measured by a value other than the fair value and their respective fair values on December 31, 2021, 2020 ~~2019~~ and ~~2018:~~2019:
Comparison of the carrying amounts of the Bank's financial assets measured at other than fair value and their respective fair values
12/31/2021
Assets Accounting Value Fair Value Level 1 Level 2 Level 3
Open market investments - Central Bank of Brazil 16,657,201     16,657,201     16,657,201     -        -
Financial Assets Measured At Amortized Cost -   -   -   -    -
Loans and amounts due from credit institutions 95,664,754 95,664,754 -    73,308,279 22,356,475
Loans and advances to customers 464,451,587 460,525,749 -    6,044,808 454,480,941
Debt instruments 73,125,011 74,074,095 28,472,612 12,124,154 33,477,329
Total 649,898,553 646,921,799 45,129,813 91,477,241 510,314,745

12/31/2020
Assets Accounting Value Fair Value Level 1 Level 2 Level 3
Open market investments - Central Bank of Brazil 20,148,725 20,148,725 20,148,725 -    -
Financial Assets Measured At Amortized Cost -   -   -   -   -
Loans and amounts due from credit institutions 112,849,776 112,849,776 -    59,492,738 53,357,038
Loans and advances to customers 393,707,229 396,878,319 -    4,530,041 392,348,278
Debt instruments 48,367,791 49,963,947 4,425,723 17,486,057 28,052,167
Total 575,073,521 579,840,767 24,574,448 81,508,836 473,757,483

12/31/2019
Assets Accounting Value Fair Value Level 1 Level 2 Level 3
Open market investments - Central Bank of Brazil 15,249,515 15,249,515 -    15,249,515 -
Financial Assets Measured At Amortized Cost -   -   -   -   -
Loans and amounts due from credit institutions 109,233,128 109,233,128 -    109,233,128 -
Loans and advances to customers 326,699,480 327,278,243 -    -    327,278,243
Debt instruments 38,748,296 39,678,192�� 5,378,791 7,858,612 26,440,789
Total 489,930,419 491,439,078 5,378,791 132,341,255 353,719,032

~~During 2020, The Bank reclassified R$ 53,357,038 of “loans and amounts due from credit institutions” from level 2 to level 3, as there was no active trading market for these instruments.”~~

Consolidated Financial Statements | December 31, 2021 | F-95
Table of Contents

* Values expressed in thousands, except when indicated.

12/31/2020
Assets Accounting Value Fair Value Level 1 Level 2 Level 3
Cash and Balances With The Brazilian Central Bank 20,148,725 20,148,725 20,148,725 - -
Financial Assets Measured At Amortized Cost
Loans and amounts due from credit institutions 112,849,776 112,849,776 - 59,492,738 53,357,038
Loans and advances to customers 393,707,229 396,878,319 - 4,530,041 392,348,278
Debt instruments 48,367,791 49,963,947 4,425,723 17,486,057 28,052,167
Total 575,073,521 579,840,767 24,574,448 81,508,836 473,757,483
12/31/2019
Assets Accounting Value Fair Value Level 1 Level 2 Level 3
Cash and Balances With The Brazilian Central Bank 15,249,515 15,249,515 - 15,249,515 -
Financial Assets Measured At Amortized Cost
Loans and amounts due from credit institutions 109,233,128 109,233,128 - 109,233,128 -
Loans and advances to customers 326,699,480 327,278,243 - - 327,278,243
Debt instruments 38,748,296 39,678,192 5,378,791 7,858,612 26,440,789
Total 489,930,419 491,439,078 5,378,791 132,341,255 353,719,032

2018
Assets Accounting Value Fair Value Level 1 Level 2 Level 3

Cash and Balances With The Brazilian Central Bank 15,228,491 15,269,809 - 15,269,809 -
Financial Assets Measured At Amortized Cost:
Loans and other amounts with credit institutions 91,859,759 91,859,759 - 91,859,759 -
Loans and advances to customers 301,702,207 303,495,240 - - 303,495,240
Financial assets measured at amortized cost - Debt instruments 36,799,509 38,927,356 9,766,162 29,161,194 -
Total 433,337,208 437,299,602 9,766,162 124,038,200 303,495,240
ii) Financial liabilities measured at other than fair value

Following is a comparison of the carrying amounts of Bank´s financial liabilities measured by a value other than fair value and their respective fair values on December 31, 2021, 2020 ~~2019~~ and ~~2018:~~2019:

During 2020, The Bank reclassified R$ 73,075,341 of “Deposits of Brazil's Central Bank and deposits of credit institutions” and R$
390,760,088 of “Customer deposits” from level 2 to level 3, as there was no active trading market for these instruments.”

Comparison of the carrying amounts of the Bank's financial liabilities measured at other than fair value and their respective fair values
~~Consolidated Financial Statements | December 31, 2020 | F-98~~
12/31/2021
Liabilities Accounting Value Fair Value Level 1 Level 2 Level 3
Financial Liabilities at Measured Amortized Cost:
Deposits of Brazil's Central Bank and deposits of credit institutions 121,005,909     121,005,909     -        26,200,162     94,805,747
Customer deposits 468,961,069 468,960,950 -    60,911,279 408,049,671
Marketable debt securities 79,036,792 79,035,644 -    -    79,035,644
Subordinated Debt -    -    -    -    -
Debt instruments Eligible Capital 19,641,408 19,641,408 -    -    19,641,408
Other financial liabilities 61,448,516 61,448,516 -    -    61,448,516
Other financial liabilities 750,093,694 750,092,427 -    87,111,441 662,980,986

12/31/2020
Liabilities Accounting Value Fair Value Level 1 Level 2 Level 3
Financial Liabilities at Measured Amortized Cost:
Deposits of Brazil's Central Bank and deposits of credit institutions 131,656,962 131,654,431 -    58,579,090 73,075,341
Customer deposits 445,813,972 445,856,090 -    55,096,002 390,760,088
Marketable debt securities 56,875,514 57,265,307 -    -    57,265,307
Subordinated Debt -    -    -    -    -
Debt instruments Eligible Capital 13,119,660 13,119,660 -    -    13,119,660
Other financial liabilities 59,822,683 59,822,683 -    -    59,822,683
Other financial liabilities 707,288,791 707,718,171 -    113,675,092 594,043,080

12/31/2019
Liabilities Accounting Value Fair Value Level 1 Level 2 Level 3
Financial Liabilities at Measured Amortized Cost:
Deposits of Brazil's Central Bank and deposits of credit institutions 99,271,415 99,271,415 -    99,271,415 -
Customer deposits 336,514,597 336,593,455 -    336,593,455 -
Marketable debt securities 73,702,474 73,889,348 -    10,205,065 63,684,284
Subordinated Debt 10,175,961 10,175,961 -    10,175,961 -
Other financial liabilities 55,565,954 55,565,954 -    -    55,565,954
Other financial liabilities 575,230,401 575,496,132 -    456,245,896 119,250,238

~~Table of Contents~~
* Values expressed in thousands, except when indicated.
12/31/2020
Liabilities Accounting Value Fair Value Level 1 Level 2 Level 3
Financial Liabilities at Measured Amortized Cost:
Deposits of Brazil's Central Bank and deposits of credit institutions 131,656,962 131,654,431 - 58,579,090 73,075,341
Customer deposits 445,813,972 445,856,090 - 55,096,002 390,760,088
Marketable debt securities 56,875,514 57,265,307 - - 57,265,307
Debt instruments Eligible Capital 13,119,660 13,119,660 - - 13,119,660
Other financial liabilities 59,822,683 59,822,683 - - 59,822,683
Total 707,288,791 707,718,171 - 113,675,092 594,043,080
12/31/2019
Liabilities Accounting Value Fair Value Level 1 Level 2 Level 3
Financial Liabilities at Measured Amortized Cost:
Deposits of Brazil's Central Bank and deposits of credit institutions 99,271,415 99,271,415 —   99,271,415 —
Customer deposits 336,514,597 336,593,455 —   336,593,455 —
Marketable debt securities 73,702,474 73,889,348 —   10,205,065 63,684,284
Subordinated Debt 10,175,961 10,175,961 —   10,175,961 —
Other financial liabilities 55,565,954 55,565,954 —   —   55,565,954
Total 575,230,401 575,496,133 —   456,245,896 119,250,238
12/31/2018
Liabilities Accounting Value Fair Value Level 1 Level 2 Level 3
Financial Liabilities at Measured Amortized Cost:
Deposits of Brazil's Central Bank and deposits of credit institutions 99,022,806 99,022,806 —   99,022,806 —
Customer deposits 304,197,800 304,197,800 —   304,197,800 —
Marketable debt securities 74,626,232 74,626,232 —   4,599,204 70,027,028
Subordinated Debt 9,885,607 9,885,607 —   9,885,607 —
Debt Instruments Eligible to Compose Capital 9,779,944 9,779,944 9,779,944 —
Other financial liabilities 49,782,780 49,782,780 —   —   49,782,780
Total 547,295,169 547,295,169 —   427,485,361 119,809,808
The methods and assumptions used to estimate the fair values summarized in the tables above are set forth below:

- Loans and amounts due from credit institutions and from clients – Fair value are estimated for groups of loans with similar characteristics. The fair value was measured by discounting estimated cash flow using the average interest rate of new contracts. That is, the future cash flow of the current loan portfolio is estimated using the contractual rates, and then the new loans spread over the risk free interest rate are incorporated to the risk free yield curve in order to calculate the loan portfolio fair value. In terms of behavior assumptions, it is important to highlight that a prepayment rate is applied to the loan portfolio, thus a more realistic future cash flow is achieved.

- Deposits from Bacen and credit institutions and Client deposits – The fair value of deposits was calculated by discounting the difference between the cash flows on a contractual basis and current market rates for instruments with similar maturities. For variable-rate deposits, the carrying amount was considered to approximates fair value.

~~- Debt~~
Consolidated Financial Statements | December 31, 2021 | F-96
Table of Contents

* Values expressed in thousands, except when indicated.
Bonds and ~~Subordinated Securities and Debt Instruments Eligible to Compose Capital~~ securities – The fair ~~value~~ values of ~~long-term loans~~these items were estimated by calculating the discounted cash flow ~~discounted at~~using the interest ~~rate~~rates offered onin the market for bonds with similar terms and maturities.
Debt Instruments Eligible for Capital – refer to the transaction fully agreed with a related party, in the context of the Capital Optimization Plan, whose book value is similar to the fair value.

The valuation techniques used to estimate each level are defined in note 2.e.

Management revised the criteria assigned to classify the fair value level of assets and liabilities measured at amortized cost, presented exclusively for disclosure purposes, and concluded that they are better classified as level 3 in light of observable market data.
~~Consolidated Financial Statements | December 31, 2020 | F-99~~30. Operational Ratios

~~Table~~Bacen determines that financial institutions maintain a Reference Equity (PR), Tier I Equity and Core Capital compatible with the risks of ~~Contents~~
* Values expressed in thousands, except when indicated.
~~30.~~ ~~Operational Ratios~~
~~In July 2008 came into force~~their activities, higher than the ~~rules on regulatory capital measurement~~minimum requirement of the Required Reference Equity, represented by the ~~Standardized Approach of Basel II. On 2013 was issued a set of Resolutions and Circulars, aligned with the recommendations~~sum of the ~~Basel Committee on Banking Supervision. These rules were repealed by CMN Resolution nº 4,192~~credit risk, market and 4,193 which took effect from October 2013, establishing the model for calculating the minimum Regulatory Capital requirements, Tier I and Common Equity Tier I. These Resolutions states that the composition of the Regulatory Capital is done through equity, subordinated debt and hybrid capital instruments.operational risk.

As ~~required by~~established in CMN ~~Resolution nº~~Resolutions No. 4,193/2013 and No. 4,783/2020, until September 2021 the PR requirement ~~for PR in 2019~~ was ~~10.5%~~10.625%, ~~composed~~including 8.00% of ~~8.0% of~~Minimum Reference Equity ~~Minimum~~ plus ~~2.5%~~1.625% of Additional for Capital Conservation and 1 .00% Systemic Additional. ~~Considering this additional,~~Tier I PR ~~Level I increased to 8.5%~~was 8.625% and Minimum Principal Capital ~~to 7.0%~~was 7.125%.

~~For~~In October 2021, the ~~base year 2020,~~Additional for Capital Conservation increased to 2.00%. Thus, in December the PR requirement ~~remains at 10.25%, including 8.0%~~is 11.00%. It is considered 8.00% of Minimum Reference Equity plus 2.00% of Additional for Capital Conservation and 1.00% of Additional Systemic, with the requirement of Tier I PR of 9.00% and of Core Capital Minimum of 7.50%. As of April 2022, the PR requirement will reach 11.50%, considering 8.00% of Minimum Reference Equity plus ~~1.25%~~2.50% of Capital Conservation Additional and ~~1.0%~~1.00% of Systemic Additional, ~~PR Level~~with requirement Tier I ~~reaches 8.25%~~PR and Minimum Principal Capital ~~6.75%.~~of 9.50% and 8.00%, respectively.

~~In face o~~Continuing the ~~pandemic scenario, the Brazilian Central Bank have ben monitoring the Brazilian market and has established a number of regulations in order to diminish the impacts~~adoption of the ~~pandemic. For banking capitalization purposes, it has~~rules established ~~a reduction in~~by CMN Resolution No. 4,192/2013, as of January 2015, the ~~additional for conservancy of principal capital from 2.5% to 1.25%, in order to expand the capacity of credit concessions.~~Prudential Consolidated, defined by CMN Resolution No. 4,280/2013, came into force.

The Basel ~~ratio~~index is calculated in accordance with the Financial ~~Stateents~~Statements of the Prudential Conglomerate ~~which are~~ prepared in accordance ~~to the~~with accounting practices adopted in ~~Brasil, which a~~Brazil, applicable to ~~Financial Institutions~~institutions authorized to operate by Bacen, as ~~presented~~shown below:
Financial Conglomerate
BASEL INDEX % dec-21 dec-20 dec-19

Tier I Regulatory Capital 76,969.9 77,571.5 66,481.7
Principal Capital 69,919.9 71,006.3 61,389.5
Supplementary Capital 7,050.1 6,565.2 5,092.2
Tier II Regulatory Capital 12,591.3 6,554.5 5,083.8
Regulatory Capital (Tier I and II) 89,561.3 84,126.0 71,565.5
Credit Risk 527,119.3 478,303.5 407,786.2
Market Risk 15,122.2 15,846.3 20,235.2
Operational Risk 58,499.8 57,419.4 47,965.5
Total RWA 600,741.3 551,569.2 475,986.9
Basel I Ratio 12.81 14.06 13.97
Basel Principal Capital 11.64 12.87 12.90
Basel Regulatory Capital 14.91 15.25 15.04

Thousand of reais 2020 2019 2018
Tier I Regulatory Capital 77,571,525 66,481,661 61,476,715
Principal Capital 71,006,316 61,389,509 56,581,518
Supplementary capital 6,565,209 5,092,153 4,895,197
Tier II Regulatory Capital 6,554,451 5,083,808 4,887,175
Regulatory Capital (Tier I and II) 84,125,976 71,565,469 66,363,890
Credit Risk (1) 478,303,523 407,786,238 358,955,592
Market Risk (2) 15,846,255 20,235,208 39,231,773
Operational Risk 57,419,401 47,965,481 42,375,554
Total RWA (3) 551,569,179 475,986,927 440,562,919
Basel I Ratio 14,06 13,97 13,95
Basel Principal Capital 12,87 12,90 12,84
Basel Regulatory Capital 15,25 15,04 15,06
(1) Exposures to credit risk subject to the calculation of the capital requirement using a standardized approach (RWACPAD) are based on the procedures established by Circular Bacen 3,644, dated March 4, 2013 and its subsequent complements through the wording of Circular Bacen 3,174 of August 20, 2014 and Bacen Circular 3,770 of October 29, 2015.
(2) Includes portions for market risk exposures subject to variations in rates of foreign currency coupons (RWAjur2), price indexes (RWAjur3) and interest rate (RWAjur1/RWAjur4), the price of commodities (RWAcom), the price of shares classified as trading portfolios (RWAacs), and portions for gold exposure and foreign currency transactions subject to foreign exchange (RWAcam).
(3) Risk Weighted Assets.
Banco Santander, ~~publishes the Risk Management Report on a~~ quarterly ~~basis with~~discloses Pillar III information onrelating to risk management, ~~a brief description~~Regulatory Capital and Risk Weighted Assets. A report with further details of the ~~Recovery Plan, capital management, PR~~structure and ~~RWA.~~
methodology will be disclosed on the website www.ri.santander.com.br/ri.

Financial institutions are required to maintain investments in permanent assets compatible with adjusted regulatory capital. Funds invested in permanent assets, calculated on a consolidated basis, are limited to 50% of adjusted regulatory capital, as per prevailing regulation. Banco Santander classifies for said index. The Bank is ~~in compliance with~~following the requirements aforementioned.

Consolidated Financial Statements | December 31, 2021 | F-97
Table of Contents

* Values expressed in thousands, except when indicated.

31.
Interest and similar income
Interest and similar income in the consolidated income statement consists of interest accrued in the year on all financial assets with implicit or explicit return, calculated using the effective interest method, regardless of the fair value measurement, and the result as a result of hedge accounting. Interest is recognized on a gross basis, without deducting taxes withheld at source.

The breakdown of the main items of interest and similar charges accrued in 2021, 2020 ~~2019~~ and ~~2018~~2019 is as follows:

~~Consolidated Financial Statements | December 31, 2020 | F-100~~
Thousand of reais 2021 2020 2019

Cash and balances with the Brazilian Central Bank 2,581,083 1,552,121 3,827,648
Loans and advances - Credit institutions 5,190,799 1,518,557 3,843,798
Loans and advances - Customers 49,537,564 44,103,997 50,406,078
Debt instruments 19,041,947 13,556,403 13,528,096
Pension Plans 19,613 16,720 27,353
Other interest 1,616,302 2,027,142 1,208,087
Total 77,987,308 62,774,940 72,841,060

~~Table of Contents~~

* Values expressed in thousands, except when indicated.

Thousand of reais 2020 2019 2018

Cash and balances with the Brazilian Central Bank 1,552,121 3,827,648 5,095,828
Loans and advances - Credit institutions 1,518,557 3,843,798 2,977,670
Loans and advances - Customers 44,103,997 50,406,078 46,471,507
Debt instruments 13,556,403 13,528,096 13,629,167
Pension Plans (Note 22,b) 16,720 27,353 -
Other interest 2,027,142 1,208,087 2,304,221
Total 62,774,940 72,841,060 70,478,393
32. Interest expense and similar charges
"Interest and similar expenses" in the consolidated income statement consist of interest accrued in the year on all financial liabilities with implicit or explicit return, including remuneration in kind, calculated using the effective interest method, regardless of the measurement of the fair value, cost adjustments as a result of hedge accounting and interest costs attributed to pension funds.

The breakdown of the main items of interest and similar charges accrued in 2021, 2020 ~~2019~~ and ~~2018~~2019 is as ~~follows:~~follows:

Thousand of reais 2020 2019 2018 2021 2020 2019

Credit institutions deposits 4,327,276 4,866,357 5,367,471 Credit institutions deposits 4,712,388 4,327,276 4,866,357
Customer deposits 7,504,276 14,965,958 13,576,866 13,187,967 7,504,276 14,965,958
Marketable debt securities and subordinated liabilities: Marketable debt securities and subordinated liabilities:
Marketable debt securities (note 18) 2,785,942 5,138,306 4,606,949 Marketable debt securities (note 18) 4,536,849 2,785,942 5,138,306
Subordinated liabilities - - 25,336
Debt Instruments Eligible to Compose Capital (note 19) 909,393 503,541 604,216 Debt Instruments Eligible to Compose Capital (note 19) 955,199 909,393 503,541
Pension Plans (note 21.b) 301,389 342,068 343,137
Pension Plans 248,312 301,389 342,068
Other interest ⁽¹⁾ 2,503,953 2,703,723 4,033,076 3,028,127 2,503,953 2,703,723
Total 18,332,228 28,519,953 28,557,051 26,668,842 18,332,228 28,519,953
~~(1)~~
(1) It is mainly composed of Expenses with Interest on Repo Agreements

33. Income from equity instruments
“Income from equity instruments” includes the dividends and payments on equity instruments out of profits generated by investees after the acquisition of the equity interest.

The breakdown of the balance of this item is as follows:
Thousand of reais 2020 2019 2018

Equity instruments classified as:
Financial Assets Measured At Fair Value Through Profit Or Loss 30,232 13,398 27,047
Financial Assets Measured At Fair Value Through Other Comprehensive Income 3,522 5,535 5,576
Total 33,754 18,933 32,623
Breakdown of the balance of this item
Thousand of reais 2021 2020 2019

Equity instruments classified as:
Financial Assets Measured At Fair Value Through Profit Or Loss 89,563 30,232 13,398
Financial Assets Measured At Fair Value Through Other Comprehensive Income 477 3,522 5,535
Total 90,040 33,754 18,933
Consolidated Financial Statements | December 31, 2021 | F-98
Table of Contents~~34.~~

* Values expressed in thousands, except when indicated.
34. Fee and commission income
The heading “Fee and commission income” comprises the amount of all fees and commissions accruing in favor of the Bank in the year, except those that form an integral part of the effective interest rate on financial instruments.

~~Consolidated Financial Statements | December 31, 2020 | F-101~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
The breakdown of the balance of this item is as ~~follows:~~follows:

Thousand of reais 2020 2019 2018 2021 2020 2019

Collection and payment services:
Bills 1,083,262 1,143,229 1,070,258 1,163,616 1,083,262 1,143,229
Demand accounts 2,425,416 2,554,559 2,311,925 2,664,586 2,425,416 2,554,559
Cards (Credit and Debit) and Acquiring Services 6,009,780 6,620,708 5,854,503 5,338,649 6,009,780 6,620,708
Checks and other 138,483 188,249 169,872 127,509 138,483 188,249
Orders 856,723 720,521 622,405 695,293 856,723 720,521
Total 10,513,664 11,227,266 10,028,962 9,989,653 10,513,664 11,227,266

Marketing of non-Banking financial products: Marketing of non-Banking financial products:
Investment funds 450,940 725,494 717,924 731,817 450,940 725,494
Insurance 3,134,723 3,120,471 2,975,661 3,566,596 3,134,723 3,120,471
Capitalization plans 634,775 829,852 402,859 711,351 634,775 829,852
Total 4,220,438 4,675,817 4,096,444 5,009,764 4,220,438 4,675,817

Securities services:
Securities underwriting and placement 695,978 721,793 448,914 Securities underwriting and placement 935,464 695,978 721,793
Securities trading 281,686 186,847 137,617 318,590 281,686 186,847
Administration and custody 495,457 401,310 41,794 647,054 495,457 401,310
Asset management 1,144 2,291 2,173 987 1,144 2,291
Total 1,474,265 1,312,241 630,497 1,902,095 1,474,265 1,312,241

Other:
Foreign exchange 1,450,636 968,270 934,801 1,512,326 1,450,636 968,270
Financial guarantees 728,232 650,241 708,819 838,790 728,232 650,241
Other fees and commissions 2,219,472 1,558,623 1,328,928 Other fees and commissions 1,135,461 2,219,472 1,558,623
Total 4,398,340 3,177,134 2,972,549 3,486,577 4,398,340 3,177,134

Total 20,606,707 20,392,458 17,728,452 20,388,089 20,606,707 20,392,458

35. Fee and commission expense
Fee and commission expense” shows the amount of all fees and commissions paid or payable in the year, except those that form an integral part of the effective interest rate on financial instruments.

The breakdown of the balance of this item is as follows:
Amount of all fees and commissions paid or payable in the year
Thousand of reais 2020 2019 2018

Commissions assigned to third parties (1) 2,685,005 3,639,239 2,364,119
Other fees and commissions 1,693,488 1,040,066 1,232,174
Total 4,378,493 4,679,306 3,596,293
~~(1)~~
Thousand of reais 2021 2020 2019

Commissions assigned to third parties (1) 2,743,339 2,685,005 3,639,239
Other fees and commissions 2,371,449 1,693,488 1,040,066
Total 5,114,788 4,378,493 4,679,306
(1) Composed, mainly, by credit cards.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-102~~F-99
Table of Contents
* Values expressed in thousands, except when indicated.

* Values expressed in thousands, except when indicated.
36. Gains or losses on financial assets and liabilities
Gains (losses) on financial assets and liabilities (net) includes the amount of the valuation adjustments of financial instruments, except those attributable to interest accrued as a result of application of the effective interest method and to allowances, and the gains or losses derived from the sale and purchase thereof.

The breakdown of the balance of this item, by type of instrument, is as follows:
Thousand of reais 2020 2019 2018

Financial Assets Measured At Fair Value Through Profit Or Loss 711,949 252,253 (138,673 )
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading (1) 12,122,794 2,391,080 (2,764,859 )
Non-Tranding Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 172,828 11,501 61,239
Financial Assets Not Measured At Fair Value Through Profit Or Loss (239,054 ) (57,522 ) (138,104 )
Financial Assets available-for-sale
  Debt instruments (207,011 ) (46,136 ) (111,750 )
  Equity instruments (32,043 ) (11,386 ) (26,354 )
Financial Assets Measured At Fair Value Through Other Comprehensive Income
  Gains or losses from hedge accounting, net 229,543 (134,767 ) 197,595
Total 12,998,060 2,462,545 (2,782,802 )
~~(1)~~ The breakdown of the balance of this item, by type of instrument, is as follows:
Thousand of reais 2021 2020 2019

Financial Assets Measured At Fair Value Through Profit Or Loss 1,555,837 711,949 252,253
Financial Assets Measured At Fair Value Through Profit Or Loss Held For Trading ⁽¹⁾ 3,519,626 12,122,794 2,391,080
Non-Tranding Financial Assets Mandatorily Measured At Fair Value Through Profit Or Loss 205,016 172,828 11,501
Financial Assets Not Measured At Fair Value Through Profit Or Loss (665,853) (239,054) (57,522)
Financial Assets available-for-sale
   Debt instruments (432,510) (207,011) (46,136)
   Equity instruments (233,344) (32,043) (11,386)
Financial Assets Measured At Fair Value Through Other Comprehensive Income
Gains or losses from hedge accounting, net (4,392,844) 229,543 (134,767)
Total 221,782 12,998,060 2,462,545
(1) Includes the exchange hedge of the Bank’s interest in Cayman (note 23).

37. Exchange differences (net)
Exchange ~~differences~~differences" demonstrate the gains or losses on foreign currency transactions, the differences that arise on translations of monetary items in foreign currencies to the functional currency, and those disclosed on non-monetary assets in foreign currency at the time of their disposal.

Thousand of Reais 2020 2019 2018 2021 2020 2019

Revenue with Exchange Variations 78,578,786 23,622,963 12,752,765
Revenue with Exchange variations 196,480,319 78,578,786 23,622,963
Expenses with Exchange Variations (103,279,748 ) (26,411,500 ) (15,559,237 ) (198,482,605) (103,279,748) (26,411,500)
Total (24,700,962 ) (2,788,537 ) (2,806,471 ) (2,002,286) (24,700,962) (2,788,537)
38. Other operating income and expenses
~~The~~
The breakdown of "Other operating income (expense)" is as follows:

Thousand of reais 2020 2019 2018

Other operating income 792,639 591,125 556,715
Other operating expense (1,237,133 ) (1,351,568 ) (1,281,764 )
Contributions to fund guarantee of credit - FGC (428,016 ) (347,276 ) (330,801 )
Total (872,510 ) (1,107,719 ) (1,055,850 )
~~Consolidated Financial Statements | December 31, 2020 | F-103~~
~~Table of Contents~~
Thousand of reais 2021 2020 2019

Other operating income 914,084 792,639 591,125
Other operating expense (1,559,663) (1,237,133) (1,351,568)
Contributions to fund guarantee of credit - FGC (473,801) (428,016) (347,276)
Total (1,119,380) (872,510) (1,107,719)

* Values expressed in thousands, except when indicated.

39. Personnel expenses
a) Breakdown

The breakdown of “Personnel expenses” is as follows:

Thousand of reais 2020 2019 2018 2021 2020 2019
Wages and salaries 5,730,779 5,876,328 5,812,688 5,905,394 5,730,779 5,876,328
Social security costs 1,222,352 1,276,620 1,404,537 1,153,164 1,222,352 1,276,620
Benefits 1,390,044 1,491,485 1,387,078 1,434,815 1,390,044 1,491,485
Defined benefit pension plans (note 22) 6,892 10,917 8,939 6,415 6,892 10,917
Contributions to defined contribution pension plans 117,216 131,885 131,388 152,156 117,216 131,885
Share-based compensation 19,348 88,248 58,050 24,045 19,348 88,248
Training 49,037 66,215 62,756 54,858 49,037 66,215
Other personnel expenses 335,813 386,016 340,571 294,855 335,814 386,016
Total 8,871,481 9,327,714 9,206,007 9,025,702 8,871,482 9,327,714
Consolidated Financial Statements | December 31, 2021 | F-100
Table of Contents

* Values expressed in thousands, except when indicated.
b) Share-Based Compensation

Banco Santander has long-terms compensation plans linked to the market price of the shares. The members of the Executive Board of Banco Santander are eligible for these plans, as well as other members selected by the Board of Directors, whose selection will take into account seniority of the group. For the Board of Directors members in order to be eligible, it is necessary to exercise Executive Board functions. These amounts are recorded under Other liabilities (Note 24) and personnel expenses (Note 39.a).
b.1) Local and Global Program

~~Program~~ ~~Plan~~ ~~Vesting Period~~ ~~Period of Exercise/Settlement~~
~~Local~~ ~~Santander Brasil Bank Shares~~ ~~01/2019 to 12/2021~~
~~01/2020 to 12/2022~~
~~2019 to 2023~~ ~~03/2022 and 03/2023~~
~~03/2023 and 03/2024~~
~~2022 and 2023~~
~~Global~~ ~~Santander Spain Shares and Options~~ ~~01/2020 to 12/2022~~ ~~03/2023 and 03/2025~~
~~Program~~ ~~Liquidity Type~~ ~~Vesting Period~~ ~~Period of Exercise/Settlement~~ ~~01/01 to 12/31/2020~~ ~~01/01 to 12/31/2019~~
~~Local~~ ~~Santander Brasil Bank Shares~~ ~~01/2019 to 12/2021~~
~~01/2020 to 12/2022~~
~~2019 to 2023~~ ~~03/2022 and 03/2023~~
~~03/2023 and 03/2024~~
~~2022 and 2023~~ ~~R$ 4,916,667 (*)~~
~~R$ 9,440,000 (*)~~
~~841,446 SANB11~~ ~~R$ 4,916,667 (*)~~
~~R$ 9,440,000 (*)~~
~~841,446 SANB11~~
~~Global~~
~~Santander Spain Shares and Options~~

01/01 to
12/31/2021 01/01 to
12/31/2020
Program Settlement Type Vesting Period Period of Exercise
01/2019 to 12/2021 2022 and 2023 R$ 4,216,667 (*) R$ 4,916,667
01/2020 to 12/2022 2023 R$ 3,668,000 (*) R$  -
01/2020 to 12/2022 2023 and 2024 R$ 2,986,667 (*) R$ 9,440,000
01/2021 to 09/2024 2024 R$ 13,520,000 (*) R$ -
01/2021 to 12/2023 2023 R$ 1,834,000 (*) R$ -
Local Santander Brasil Bank Shares 07/2019 to 06/2022 2022 111,962 SANB11 109,677 SANB11
09/2020 to 09/2022 2022 301,583 SANB11 450,738 SANB11
01/2020 to 09/2023 2023 249,666 SANB11 281,031 SANB11
01/2021 to 12/2022 2023 177,252 SANB11 -    SANB11
01/2021 to 12/2023 2024 327,065 SANB11 -    SANB11
01/2021 to 01/2024 2024 30,545 SANB11 -    SANB11
01/2020 to 12/2022 2023 309,576 SAN (**) 318,478 SAN (**)
Global Santander Spain Shares and Options 01/2020 to 12/2022 2023, with limit for options' exercise until 2030 1,618,445 Options s/ SAN (**) 1,664,983 Options s/ SAN (**)
01/2021 to 12/2023 02/2024 135,632 SAN (**) -
01/2021 to 12/2023 02/2024, with limit for options' exercise until 02/2029 404,630 Options s/ SAN (**) -
R$ 26,225,334 (*) R$ 14,356,667 (*)
Balance of Plans on December 31, 2021 1,198,073 SANB11 841,446 SANB11
445,208 SAN 318,478 SAN
2,023,075 Options s/ SAN 1,664,983 Options s/ SAN
(*) Plan target in Reais, to be converted into SANB11 shares according to the achievement of the plan's performance indicators at the end of the vesting period, based on the quotation of the last 15 trading sessions of the month immediately preceding the grant.
(**) Target of the plan in SAN shares and options, to be paid in cash at the end of the vesting period, according to the achievement of the plan's performance indicators.

~~01/2020 to 12/2022~~ ~~03/2023 and 03/2025~~ ~~318,478 SAN~~
~~1,664,983 opções s/ SAN~~ ~~318,478 SAN~~
~~1,664,983 opções s/ SAN~~
~~Balance of Plans on December 31, 2020~~ ~~R$ 14,356,667 841,446 SANB11 318,478 SAN 1,664,983 opções s/ SAN~~ ~~R$ 14,356,667~~
~~841,446 SANB11~~
~~318,478 SAN~~
~~1,664,983 opções s/ SAN~~
Our long-term programs are divided into Local and Global plans, with specific performance indicators and ~~conditions for~~condition of maintaining the participant's employment relationship until the payment date in order to be entitled to ~~the receipt~~receive.

The calculation of payment offor the plans is ~~calculated~~ based on the percentage of achievement of the indicators applied onto the reference value (target), with the Local plans being paid in SANB11 units and the Global plans in shares and options of Grupo Santander (SAN).

Each participant has a reference value defined in cash, converted into SANB11 units or into ~~Santander Group (SAN)~~ shares and options ~~usually at~~of Grupo Santander (SAN), normally based on the ~~price~~quotation of the last 15 trading sessions of the month immediately ~~prior to~~preceding the ~~grant~~granting of each ~~plan,~~plan. At the end of the vesting period, the payment of either the resulting shares ~~are delivered~~in the case of local plans, or the cash value corresponding to the shares/options of the global plans, is made with a 1-year restriction, and this payment is still subject to the application of the Malus ~~/ Clawback~~ clauses /Clawback, which may reduce or cancel the shares to be delivered in cases of non-compliance with internal rules and exposure to excessive ~~risks.~~

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-104~~F-101
Table of Contents
* Values expressed in thousands, except when indicated.

* Values expressed in thousands, except when indicated.
Impact on ~~Results~~Income

The impacts on the result are recorded in the Personnel Expenses item, as follows:

~~Program~~ ~~Liquidity Type~~ ~~01/01 to 12/31/2020~~
~~Local~~ ~~Santander Brasil Bank Shares~~ ~~10,776~~
~~Global~~ ~~Santander Spain Shares and Options~~ ~~846~~

Consolidated
01/01 to
12/31/2021 01/01 to
12/31/2020
Program Settlement Type
Local Santander Actions (Brazil) 20,720 10,776
Global Santander Spain shares and stock options 3,534 846
b.2) Variable Remuneration ~~Referenced to Shares~~based in shares
~~In the~~The long-term incentive plan (deferral), sets forth the requirements for payment of future deferred installments of variable remuneration, ~~are determined,~~ considering the long-term sustainable financial bases, including the possibility of applying reductions or cancellations ~~depending on~~due to the risks assumed and fluctuations of the cost of capital.
The variable remuneration plan with payment referenced in Banco Santander shares is divided into 2 programs: (i) Identified Collective and (ii) Other Employees. The impacts on the result are ~~recorded in the~~accounted for under Personnel Expenses, ~~item,~~ as follows:
Variable Remuneration Referenced to Shares

Program Participant Liquidity Type 01/01 to 12/31/2020 01/01 to 12/31/2019 Participant Liquidity Type 01/01 to 12/31/2021 01/01 to 12/31/2020
Collective Identified Members of the Executive Committee, Statutory Officers and other executives who assume significant and responsible risks of control areas 50% in cash indexed to 100% of CDI and 50% in shares (Units SANB11) 103,696 98,441 Members of the Executive Committee, Statutory Officers and other executives who assume significant and responsible risks of control areas 50% in cash indexed to 100% of CDI and 50% in shares (Units SANB11) 63,658 103,696
Unidentified Collective Management-level employees and employees who are benefited by the Deferral Plan 50% in cash indexed to 100% of CDI and 50% in shares (Units SANB11) 98,069 104,068
Other Employees Superintendence level employees and other employees with variable remuneration above a minimum amount established 50% in cash indexed to 100% of CDI and 50% in shares (Units SANB11) 111,995 98,069
40. Other general administrative expenses
a) Breakdown
The detail of other general administrative expenses is as follows:
Breakdown - Other administrative expenses
Thousand of reais 2020 2019 2018 2021 2020 2019

Genreal maintenance expenses 743,580 748,196 1,330,549 Genreal maintenance expenses 889,077 743,580 748,196
Technology maintenance expenses 2,355,310 2,058,619 1,786,416 Technology maintenance expenses 2,474,348 2,355,310 2,058,619
Advertising 654,175 712,855 621,645 621,425 654,175 712,855
Communications 648,856 472,873 457,323 353,271 648,856 472,873
Per diems and travel expenses 69,922 140,016 127,277 Per diems and travel expenses 71,840 68,922 140,016
Taxes other than income tax 280,098 112,012 88,977 Taxes other than income tax 202,440 280,098 112,012
Surveillance and cash courier services 594,953 630,585 617,129 Surveillance and cash courier services 597,946 594,953 630,585
Insurance premiums 16,620 34,778 29,434 22,374 16,620 34,778
Specialized and technical services 2,171,460 2,172,567 2,089,614 Specialized and technical services 2,184,139 2,171,460 2,172,567
Technical reports 319,814 360,990 359,468 355,343 319,814 360,990
Others specialized and technical services 1,851,646 1,811,577 1,730,146 Others specialized and technical services 1,828,795 1,851,646 1,811,577
Other administrative expenses (1) 709,504 531,311 437,767 Other administrative expenses (1) 873,857 709,504 531,311
Total 8,243,478 7,613,812 7,586,131 8,290,717 8,243,479 7,613,812
(1) ~~For the year ended~~ In December 31, ~~2020,~~2021, includes mainly Data Processing Expenses in the balance of R$~~176.105 (2019~~160,716 (2020 – R$~~67.724~~176,105 and ~~2017~~2019 - R$~~73.664)~~67,724), Service Expenses in the balance of R$~~27,751 (2019~~51,689 (2020 - revenue of R$~~26.852~~27,751 and ~~2018~~2019 - R$~~87.199)~~87,199), Expenses with Benefit Guarantor Fund - FGB R$~~8,478 (2019~~3,864 (2020 – R$~~34,996~~8,478 and ~~2017~~2019 - R$~~5,334), Interest on Own Capital R$0 (2018 – R$38.006 and 2017 - R$20.826)~~34,996) and Recovery of Charges and Expenses R$~~212,850 (2019~~378,604 (2020 – R$~~92.408~~ 212,850 and ~~2017~~2019 – R$~~89.409)~~92,408).
~~Consolidated Financial Statements | December 31, 2020 | F-105~~

~~Table of Contents~~
* Values expressed in thousands, except when indicated.

b) Other information

The balance of “Technical reports” includes the fees paid by the consolidated companies to their respective auditors, the detail are as follows:
Balance of Technical reports
Millions of Reais 2020 2019 2018
Audit of the annual financial statements of the companies audited by external audit (constant scope of consolidation) 24,0 25,2 19,9
Audit Related 0,4 0,1 0,5
Others 0,0 0,3 0,1
Total 24,4 25,6 20,5
Consolidated Financial Statements | December 31, 2021 | F-102
Table of Contents

* Values expressed in thousands, except when indicated.
Millions of Reais 2021 2020 2019

Audit of the annual financial statements of the companies audited by external audit (constant scope of consolidation) 26.3 24.0 25.2

Audit Related 0.2 0.4 0.1
Others 0.4 0.0 0.3
Total 26.9 24.4 25.6
The approximate value of taxes according to law 12,741/2012 totaled R$~~1,5~~1.9 million ~~(2019~~ (2020 - R$~~3,6~~1.5 million e ~~2018~~2019 - R$~~2,9million),~~3.6 million).

41. Gains or losses on ~~non financial~~non-financial assets and investments, net
The breakdown of the balance of this item is as follows:
Gains (losses) on disposal of assets not classified as non-current assets held for sale the breakdown of the balance
Thousand of reais 2020 2019 2018

Gains 285,335 55,709 11,627
Tangible and intangible assets 36,778 55,709 11,627
Investments 248,557 —   —
Losses (54,622 ) (45,063 ) (37,103 )
Tangible and intangible assets (14,517 ) (45,063 ) (37,103 )
Investments (1) (40,105 ) —   —
Total 230,713 10,646 (25,476 )
Thousand of reais 2021 2020 2019

Gains 45,780 285,335 55,709
Tangible and intangible assets 45,780 36,778 55,709
Investments -    248,557 -
Losses (60,893) (54,622) (45,063)
Tangible and intangible assets (32,863) (14,517) (45,063)
Investments (28,030) (40,105) -
Total (15,113) 230,713 10,646

42. Gains (losses) on disposal and expenses of non-current assets held for sale not classified as discontinued operations
~~For~~
As of December 31, 2021, revenue of R$48 million is mainly composed of revenue of R$101 million from the ~~year ended~~sale of assets received in the recovery of credits with customers, and as of December 31, 2020, revenue offrom R$77 million is mainly ~~comprised~~composed of ~~an expense~~revenue of R$24 million ~~with~~from the reversal of the provision for losses on other assets and assets, net of the constitution of the provision for the loss of the recoverable value of properties, the constitution of a provision for losses on other ~~values and assets, net of the reversal of the provision for loss of recoverable value of properties, constitution of a provision for losses on other values and~~ assets and ~~revenue~~R$49 million of ~~R$49 million resulting~~income from the sale of assets received in the ~~credit~~processes of recovery ~~processes~~of credits with customers and ~~for the year ended~~on December 31, 2019 ~~the income of R$ 10 millions,~~mainly includes, R$16 million ~~in revenue from~~ of expense with the ~~reversal~~constitution of the provision for ~~loss of recoverable value~~impairment of properties, constitution of provision for losses onin other values and assets and aof R$34 million ~~result on~~ in income from the sale of assets received in the ~~credit~~processes of recovery ~~processes~~of credits with customers and for the year ended December 31, 2018 mainly includes R$104 million of provisions for devaluations on properties, based on appraisal reports prepared by external consultants the specialized.customers.

43. Other disclosures
a) Guarantees and commitments

The Bank provides a variety of guarantees to its clients to improve their credit standing and allow them to compete the following table summarizes at December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019 all of the guarantees.
~~Consolidated Financial Statements | December 31, 2020 | F-106~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

As required, the “maximum potential amount of future payments” represents the notional amounts that could be considered as a loss if there were a total default by the guaranteed parties, without consideration of possible recoveries from collateral held or pledged, or recoveries under recourse provisions. There is no relationship between these amounts and probable losses on these ~~guarantees,~~guarantees. In fact, "maximum potential amount of future payments" significantly exceeds inherent losses.

Thousand of reais 2020 2019 2018
Maximum potential amount of future payments
Contingent liabilities
Guarantees and other sureties 45,930,486 41,870,332 39,081,803
Financial guarantees 32,477,336 29,397,344 27,216,418
Performance guarantees 989,979 1,009,367 907,856
Financial letters of credit 12,407,888 11,387,788 10,860,425
Other 55,283 75,833 97,104
Other contingent exposures 2,351,530 2,442,235 3,178,671
Documentary Credits 2,351,530 2,442,235 3,178,671
Total Contingent Liabilities 48,282,016 44,312,567 42,260,474
Commitments
Loan commitments drawable by third parties ⁽¹⁾ 131,706,433 125,876,671 122,652,229
Total Commitments 131,706,433 125,876,671 122,652,229
Total 179,988,449 170,189,238 164,912,704
~~(1) Includes the approved limits and unused overdraft, credit card and others.~~
Consolidated Financial Statements | December 31, 2021 | F-103
Table of Contents

* Values expressed in thousands, except when indicated.
Maximum potential amount of future payments
Thousand of reais 2021 2020 2019

Maximum potential amount of future payments

Contingent liabilities
Guarantees and other sureties 49,391,839 45,930,486 41,870,332
Financial guarantees 33,192,559 32,477,336 29,397,344
Performance guarantees 1,167,603 989,979 1,009,367
Financial letters of credit 14,990,887 12,407,888 11,387,788
Other 40,790 55,283 75,833
Other contingent exposures 4,028,516 2,351,530 2,442,235
Documentary Credits 4,028,516 2,351,530 2,442,235
Total Contingent Liabilities 53,420,355 48,282,016 44,312,567

Commitments
Loan commitments drawable by third parties ⁽¹⁾ 145,958,258 131,706,433 125,876,671
Total Commitments 145,958,258 131,706,433 125,876,671

Total 199,378,613 179,988,449 170,189,238
(1) Includes the approved limits and unused overdraft, credit card and others.

Financial guarantees are provided to Bank´s clients in respect of their obligations to third parties. The Bank has the right to seek reimbursement from the clients for any amount it shall have to pay under such guarantee. Additionally, the Bank may hold cash or other highly liquid collateral for these guarantees.

These guarantees are subject to the same credit evaluation performed on the origination of loans.

The Bank´s expectation is that many of these guarantees to expire without the need of cash disbursement in advance. Therefore, in the ordinary course of business, the Bank expects that these guarantees will have virtually no impact on its liquidity.

Performance guarantees are issued to guaranteed clients obligations such as to make contractually specified investments, to supply specified products, commodities, or maintenance or warranty services to a third party, completion of projects in accordance with contract terms, etc. Financial standby letters of credit include guarantees of payment of loans, credit facilities, promissory notes and trade acceptances. The Bank always requires collateral to grant this kind of financial guarantees. In Documentary Credits, the Bank acts as a payment intermediary between trading companies located in different countries (import-export transactions). Under a documentary credit transaction, the parties involved deal with the documents rather than the commodities to which the documents may relate. Usually the traded commodities are used as collateral to the transaction and the Bank may provide some credit facilities. Loan commitments draw able by third parties include mostly credit card lines and commercial commitments. Credit card lines are unconditionally cancelable by the issuer. Commercial commitments are mostly ~~1 year~~1-year facilities subject to information requirements to be provided by Banks´s clients.

The risk criteria followed to issue all kinds of guarantees, financial standby letters of credit, documentary credits and any risks of signature are in general the same as those used for other products of credit risk, and therefore subject to the same admission and monitoring standards. The guarantees granted on behalf of Bank´s clients are subject to the same credit quality review process as any other risk product. On a regular basis, at least once a year, the solvency of the mentioned clients is checked as well as the probability of those guarantees to be executed. In case that any doubt on the client’s solvency may arise, we create allowances with charge to net income, by the amount of the inherent losses even if there is no claim to us.

The provision for losses on the non-recovery guarantees and other securities (Note 9.c) is recorded as "Impairment losses on financial assets (net)” on consolidated income statement and its calculation is described in note 2.i.

Additionally, the liability recognized as deferred revenue for the premium received for providing the above guarantees, which is being amortized into income over the life of the related guarantees is R$~~356,226 (2019~~382,255 (2020 - R$~~285,218~~356,226 and ~~2018~~2019 - R$~~330,018).~~
~~Consolidated Financial Statements | December 31, 2020 | F-107~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.285,218 ).

b) Off-balance funds under management

Banco Santander has under its management investment funds for which it does not hold any substantial participation interests and does not act as principal over the funds, and it does not own any shares of such funds. Based on the contractual relationship governing the management of such funds, third parties who hold the participation interests in such funds are those who are exposed to, or have rights, to variable returns and have the ability to affect those returns through power over the fund. Moreover, though Santander Brasil acts as fund manager, in analyzing the fund manager’s remuneration regime, the remuneration regime is proportionate to the service rendered, and therefore does not create exposure of such importance to indicate that the fund manager is acting as the principal (Note ~~2.w)~~2.v).
Consolidated Financial Statements | December 31, 2021 | F-104
Table of Contents

* Values expressed in thousands, except when indicated.
The funds managed by Banco Santander not recorded in the balance sheet are as follows:

Thousand of reais 2020 2019 2018 2021 2020 2019

Funds under management 2,716,477 2,034,999 1,896,689 2,770,684 2,716,477 2,034,999
Managed Funds 191,873,169 230,199,261 200,366,261 192,927,475 191,873,169 230,199,261
Total 194,589,646 232,234,260 202,262,950 195,698,159 194,589,646 232,234,260
c) Third-party securities held in custody

On December 31, ~~2020~~,2021, the Bank held in custody debt securities and equity instruments totaling R$~~35,519,498 (2019~~37,998,502 (2020 - R$~~27,283,548~~35,519,498 e ~~2018~~2019 - R$~~34,040,742)~~27,283,548) entrusted to it by third ~~parties which are off-balance instruments.~~parties.

d) Residual maturity

The breakdown, by maturity, of the balances of certain items in the consolidated balance sheets is as follows:

2020
Thousand of reais
On
Demand Up to
3 Months 3 to
12 Months 1 to
3 Years 3 to
5 Years After 5
Years Total
Assets:
Cash and balances with the Brazilian Central Bank 7,373,662 12,775,063 - - - - 20,148,725
Debt instruments 432,579 13,195,527 33,903,698 64,225,680 70,182,705 48,162,275 230,102,464
Equity instruments - - - - - 2,329,361 2,329,361
Loans and amounts due from credit institutions 57,722,384 2,777,562 36,783,150 15,155,444 363,135 48,101 112,849,776
Loans and advances to customer 29,385,631 80,281,579 93,750,065 98,550,271 47,160,700 44,639,790 393,768,036
Derivatives - 14,558,434 1,994,418 6,726,841 1,869,509 3,721,418 28,870,620
Total 94,914,256 123,588,165 166,431,331 184,658,236 119,576,049 98,900,945 788,068,982

Liabilities:
Financial liabilities at amortized cost:
Deposits from credit institutions⁽¹⁾ - 83,922,876 43,315,412 3,764,159 - 654,516 131,656,962
Customer deposits⁽¹⁾ 85,433,287 139,191,140 121,804,752 62,768,886 36,578,335 37,572 445,813,972
Marketable debt securities ⁽¹⁾ - 8,815,410 18,736,230 28,158,133 747,340 418,401 56,875,514
Debt Instruments Eligible to Compose Capital - 220,425 - 12,899,235 - - 13,119,660
Other financial liabilities 23,352 21,858,532 20,730,398 17,203,162 4,787 2,452 59,822,683
Short positions - 45,807,946 - - - - 45,807,946
Derivatives - 2,046,924 1,973,701 8,010,713 7,744,145 12,204,455 31,979,938
Total 85,456,639 301,863,252 206,560,493 132,804,288 45,074,607 13,317,396 785,076,675

Difference (assets less liabilities) 9,457,617 (178,275,087 ) (40,129,162 ) 51,853,948 74,501,442 85,583,549 2,992,307
2021
Thousand of reais
On
Demand Up to
3 Months 3 to
12 Months 1 to
3 Years 3 to
5 Years After 5
Years Total
Assets:
Cash and balances with the Brazilian Central Bank 15,430,680 1,226,521 -    -    -    -    16,657,201
Debt instruments 1,612,213 119,780,229 20,352,554 5,834,524 38,904,369 38,728,334 225,212,223
Equity instruments -    -    -    -    -    2,527,504 2,527,504
Loans and amounts due from credit institutions 80,355,763 2,717,359 1,748,733 10,827,639 15,057 203 95,664,754
Loans and advances to customer 70,399,332 82,203,458 84,986,074 152,608,938 31,902,231 42,744,009 464,844,042
Derivatives -    8,667,809 2,836,098 1,645,538 5,989,792    2,000,686    21,139,923
Total 167,797,988 214,595,376 109,923,459 170,916,639 76,811,449 86,000,736 826,045,647

2021
Thousand of reais
On
Demand Up to
3 Months 3 to
12 Months 1 to
3 Years 3 to
5 Years After 5
Years Total
Liabilities:
Financial liabilities at amortized cost:
Deposits from credit institutions⁽¹⁾ 10,052,363        60,636,478     39,748,331     6,681,493     1,656,909     2,230,335     121,005,909
Customer deposits⁽¹⁾ 86,051,583 79,687,549 56,178,087 163,641,875 83,326,774 75,201 468,961,069
Marketable debt securities ⁽¹⁾ -    28,052,200 5,038,906 35,844,265 9,341,229 760,192 79,036,792
Debt Instruments Eligible to Compose Capital -    5,552,801 -    14,088,607 -    -    19,641,408
Other financial liabilities 3,935,498 10,732,613 19,132,399 35,107,790 -    -    68,908,300
Short positions -    12,780,559 -    -    -    -    12,780,559
Derivatives 641,571    7,239,697 2,503,888 9,117,265 3,773,251 1,343,309 24,618,981
Total 100,681,015 204,681,897 122,601,611 264,481,295 98,098,163 4,409,037 794,953,018
Difference (assets less liabilities) 67,116,973 9,913,479 (12,678,152) (93,564,656) (21,286,714) 81,591,699 31,092,629

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-108~~F-105
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
2019
Thousand of reais
On
Demand Up to
3 Months 3 to
12 Months 1 to
3 Years 3 to
5 Years After 5
Years Total
Assets:
Cash and balances with the Brazilian Central Bank 6,549,535 13,577,829 - - - - 20,127,364
Debt instruments 7,747,516 1,174,094 22,926,088 45,058,398 35,118,355 61,307,478 173,331,930
Equity instruments - - - - - 2,358,229 2,358,229
Loans and amounts due from credit institutions 69,135,371 1,943,291 21,064,571 14,525,161 2,411,265 153,469 109,233,128
Loans and advances to customer 9,451,762 84,839,695 43,180,508 89,624,089 34,092,967 65,510,459 326,699,480
Derivatives 6,806,370 1,893,308 2,649,730 3,546,082 1,950,678 3,599,566 20,445,734
Total 99,690,554 103,428,217 89,820,897 152,753,730 73,573,264 132,929,201 652,195,865

Liabilities:
Financial liabilities at amortized cost:
Deposits from credit institutions⁽¹⁾ 390,626 16,584,181 49,097,816 25,655,631 4,877,076 2,666,086 99,271,415
Customer deposits⁽¹⁾ 69,048,756 130,872,214 76,244,908 43,395,748 16,923,318 29,654 336,514,597
Marketable debt securities⁽¹⁾ - 10,675,356 695,071 37,268,809 3,900,484 21,162,755 73,702,474
Debt Instruments Eligible to Compose Capital - 170,939 - 10,005,022 - - 10,175,961
Other financial liabilities 10,334 24,360,724 14,509,911 16,678,725 4,717 1,543 55,565,954
Short positions - 4,748,545 1,554,274 1,256,416 3,747,700 12,528,718 23,835,653
Derivatives 6,776,746 4,345,286 406,383 4,696,823 2,502,040 3,702,699 22,429,977
Total 76,226,462 191,757,244 142,508,362 138,957,174 31,955,334 40,091,454 621,496,030
Difference (assets less liabilities) 23,464,093 (88,329,028 ) (52,687,465 ) 13,796,556 41,617,931 92,837,747 30,699,835
~~Consolidated Financial Statements | December 31, 2020 | F-109~~
Table of Contents
* Values expressed in thousands, except when indicated.
2018
Thousand of reais
On
Demand Up to
3 Months 3 to
12 Months 1 to
3 Years 3 to
5 Years After 5
Years Total
Assets:
Cash and balances with the Brazilian Central Bank 19,070,796 392,791 - - - - 19,463,587
Debt instruments 27,402 51,255,820 25,903,428 13,186,253 26,367,903 58,692,609 175,433,415
Equity instruments 839,620 34,420 231,576 - - - 1,105,616
Loans and amounts due from credit institutions 69,780,780 8,449,138 844,658 12,739,730 11,371 34,082 91,859,759
Loans and advances to customer - 111,595,396 75,720,016 63,043,973 21,397,689 29,934,313 301,691,387
Derivatives - 13,815,791 1,240,161 1,114,446 1,074,875 1,118,173 18,363,446
Total 89,718,598 185,543,356 103,939,839 90,084,402 48,851,838 89,779,177 607,917,210

Liabilities:
Financial liabilities at amortized cost:
Deposits from credit institutions⁽¹⁾ 1,139 55,872,675 18,564,342 19,850,530 2,598,172 2,135,948 99,022,806
Customer deposits⁽¹⁾ 65,241,618 102,942,180 76,987,570 42,399,934 16,624,469 2,029 304,197,800
Marketable debt securities⁽¹⁾ - 11,104,594 26,741,036 22,479,019 5,854,091 8,447,492 74,626,232
Subordinated liabilities 9,885,607 - - - - - 9,885,607
Debt Instruments Eligible to Compose Capital - - - - - 9,779,944 9,779,944
Other financial liabilities 66,265 31,566,995 35,648 18,086,272 - 27,600 49,782,780
Financial liabilities held for trading:
Short positions 206,423 - 1,139,847 31,349,407 - - 32,695,677
Derivatives - 7,639,956 7,723,730 1,069,718 604,593 1,428,838 18,466,835
Total 75,401,052 209,126,400 131,192,173 135,234,880 25,681,325 21,821,851 598,457,681
Difference (assets less liabilities) 14,317,546 (23,583,044 ) (27,252,334) (45,150,478 ) 23,170,513 67,957,326 9,459,529
~~(1) Includes obligations which may be subject to early payment, being: demand and time deposits, repurchase agreements with clients, LCI and LCA.~~
~~Consolidated Financial Statements | December 31, 2020 | F-110~~
~~Table of Contents~~

* Values expressed in thousands, except when indicated.

2020
Thousand of reais
On
Demand Up to
3 Months 3 to
12 Months 1 to
3 Years 3 to
5 Years After 5
Years Total
Assets:
Cash and balances with the Brazilian Central Bank 7,373,662 12,775,063 -    -    -    -    20,148,725
Debt instruments 432,579 13,195,527 33,903,698 64,225,680 70,182,705 48,162,275 230,102,464
Equity instruments -    -    -    -    -    2,329,361 2,329,361
Loans and amounts due from credit institutions 57,722,384 2,777,562 36,783,150 15,155,444 363,135 48,101 112,849,776
Loans and advances to customer 29,385,631 80,281,579 93,750,065 98,550,271 47,160,700 44,639,790 393,768,036
Derivatives -    14,558,434 1,994,418 4,103,735 1,869,509 3,721,418 26,247,514
Total 94,914,256 123,588,165 166,431,331 182,035,130 119,576,049 98,900,945 785,445,876

Liabilities:
Financial liabilities at amortized cost:
Deposits from credit institutions⁽¹⁾ -    83,922,876 43,315,412 3,764,159 -    654,516 131,656,962
Customer deposits⁽¹⁾ 85,433,287 139,191,140 121,804,752 62,768,886 36,578,335 37,572 445,813,972
Marketable debt securities⁽¹⁾ -    8,815,410 18,736,230 28,158,133 747,340 418,401 56,875,514
Debt Instruments Eligible to Compose Capital -    220,425 -    12,899,235 -    -    13,119,660
Other financial liabilities 23,352 21,858,532 20,730,398 17,203,162 4,787 2,452 59,822,683
Short positions -    45,807,946 -    -    -    -    45,807,946
Derivatives -    2,046,924 1,973,701 5,387,607 7,744,145 12,204,455 29,356,832
Total 85,456,639 301,863,252 206,560,493 130,181,182 45,074,607 13,317,396 782,453,569
Difference (assets less liabilities) 9,457,617     (178,275,087)     (40,129,162)     51,853,948     74,501,441     85,583,548     2,992,307

Consolidated Financial Statements | December 31, 2021 | F-106
Table of Contents

* Values expressed in thousands, except when indicated.

2019
Thousand of reais
On
Demand Up to
3 Months 3 to
12 Months 1 to
3 Years 3 to
5 Years After 5
Years Total
Assets:
Cash and balances with the Brazilian Central Bank 6,549,535 13,577,829 -    -    -    -    20,127,364
Debt instruments 7,747,516 1,174,094 22,926,088 45,058,398 35,118,355 61,307,478 173,331,929
Equity instruments -    -    -    -    -    2,358,229 2,358,229
Loans and amounts due from credit institutions 69,135,371 1,943,291 21,064,571 14,525,161 2,411,265 153,469 109,233,128
Loans and advances to customer 9,451,762 84,839,695 43,180,508 89,624,089 34,092,967 65,510,459 326,699,480
Derivatives 6,806,370 1,893,308 2,649,730 1,921,248 1,950,678 3,599,566 18,820,900
Total 99,690,554 103,428,217 89,820,897 151,128,896 73,573,264 132,929,201 650,571,030

Liabilities:
Financial liabilities at amortized cost:
Deposits from credit institutions⁽¹⁾ 390,626 16,584,181 49,097,816 25,655,631 4,877,076 2,666,086 99,271,415
Customer deposits⁽¹⁾ 69,048,756 130,872,214 76,244,908 43,395,748 16,923,318 29,654 336,514,597
Marketable debt securities⁽¹⁾ -    10,675,356 695,071 37,268,809 3,900,484 21,162,755 73,702,474
Debt Instruments Eligible to Compose Capital -    170,939 -    10,005,022 -    -    10,175,961
Other financial liabilities 10,334 24,360,724 14,509,911 16,678,725 4,717 1,543 55,565,954
Financial liabilities held for trading:
Short positions -    4,748,545 1,554,274 1,256,416 3,747,700 12,528,718 23,835,653
Derivatives 6,776,746 4,345,286 406,383 3,071,989 2,502,040 3,702,699 20,805,143
Total 76,226,462 191,757,244 142,508,362 137,332,340 31,955,334 40,091,454 621,496,030

Difference
(assets less liabilities)
23,464,093 (88,329,028) (52,687,465) 13,796,556 41,617,931 92,837,747 30,699,834
(1) Includes obligations which may be subject to early payment, being: demand and time deposits, repurchase agreements with clients, LCI and LCA.

e) Equivalent value in Reais of assets and liabilities

The main foreign currency balances in the consolidated financial statements, based on the nature of the related items, are as follows:

Equivalent Value in Thousand of Reais 2020 2019 2018 2021 2020 2019
Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities

Cash and reserves at the Central Bank of Brazil 15,835,124 - 15,359,225 - 6,947,282 - 10,851,016 -    15,835,124 -    15,359,225 -
Financial ssets/liabilities measured at fair value through profit or loss held for trading 27,012,315 7,867,168 3,349,879 3,210,360 1,211,296 101,833 2,587,588 21,784,041 27,012,315 7,867,168 3,349,879 3,210,360
Financial assets measured at fair value through other comprehensive income 17,062,156 - 20,386,034 - 7,049,727 - 17,102,273 -    17,062,156 -    20,386,034 -
Financial assets/liabilities measured at amortized cost 52,002,476 118,142,613 68,996,884 44,140,284 17,912,203 35,567,194 70,283,097 86,184,330 52,002,476 118,142,613 68,996,884 44,140,284
Total 111,912,071 126,009,781 108,092,022 47,350,644 33,120,508 35,669,027 100,823,974 107,968,371 111,912,070 126,009,781 108,092,022 47,350,644
f) Other Obligations

The Banco Santander rents properties, mainly used for branches, based on a standard contract which may be cancelled at its own criterion and includes the right to opt for renewals and adjustment clauses. The leases are classified as operating leases.

Consolidated Financial Statements | December 31, 2021 | F-107
Table of Contents

* Values expressed in thousands, except when indicated.
The total of the future minimum payments of non-cancellable operating leases is shown below:

2020 2019 2018 2021 2020 2019

Up to 1 Year 670,619 651,207 670,553 715,576 670,619 651,207
Between1 to 5 Years 1,607,995 1,492,289 1,435,970 1,420,853 1,607,995 1,492,289
More than 5 Years 171,420 147,125 167,868 181,417 171,420 147,125
2,450,034 2,290,621 2,274,391
Total 2,317,846 2,450,034 2,290,621
Additionally, Banco Santander has contracts ~~with no contractual maturity,~~for a matures indeterminate, totaling R$~~918 (2018~~801 (2020 - R$~~674)~~880 and 2019 - R$918) monthly rent corresponding to the contracts with this feature. Payment of ~~operating~~ leases recognized as expenses in ~~2019~~2021 fiscal year were R$~~700,958 (2018~~369,482 (2020 - R$~~683,011)~~358,656 and 2019 R$700,958).

Monthly rental contracts will be adjusted on an annual basis, as per prevailing legislation, at Índice Geral de Preços do Mercado (IGPM) variation. The lessee is entitled to unilaterally rescind the agreement, at any time, as contractual clauses and legislation.

g) Contingent assets

On December 31, 2021, 2020 ~~2019~~ and ~~2018~~2019 no contingent assets were recorded.

h) ~~COVID-19~~COVID- 19

~~The~~Since the Pandemic in 2000, the Bank ~~monitors~~has monitored its effects on the ~~effects~~quality of ~~this pandemic that affect its operations~~the credit portfolio and ~~that may adversely affect its results. Since~~ the beginning of the ~~pandemic~~continuity of its results. Strategic initiatives were implemented in ~~Brazil, Committees have been set up to monitor the effects of the spread and its impacts, in addition to government actions~~a timely manner, sufficient to mitigate the ~~effects~~impacts against the scenario of ~~COVID-19.~~increased default events due to the pandemic.
~~The Bank maintains its operational activities, observing~~Management procedures were structured in line with the ~~protocols~~guidelines and measures of the Ministry of Health and other Authorities. Among the actions taken, we highlight (a) the dismissal of employees from the risk group and intensification of work in the home office, (b) the definition of a follow-up protocol, with health professionals, for employees and family members who have the symptoms of COVID19 and (c) increased communication about preventive measures and remote means of care.
~~The~~ Federal Government through the National Monetary Council and the Central Bank of Brazil ~~has adopted measures~~ to mitigate the impacts caused by COVID-19, ~~specifically on credit operations, fundraising, reduction of reserve requirements and aspects related to capital,~~ such ~~as ( a)~~as: (a) measures to facilitate the ~~renegotiation~~renegotiations of the credit operations without ~~an increase in~~increasing provisions, (b) a reduction inof capital requirements, in order to expand the granting of credit ~~system's ability to grant credit~~by the Financial System and (c) a reduction inof compulsory reserve ~~requirements. ,~~rates, to improve liquidity conditions.

The Bank, ~~aware~~awareness of its responsibilities, availability of changes, changes in classification, availability of new products, reinforced credit in segments and more impacts and preventive recovery and collection actions. These actions carried out as a result of alerts were identified by the constant monitoring of the portfolio.
The operations benefiting from amendments made, ~~adjustments to its policies~~ in ~~order to respond to the COVID-19 pandemic and adopted measures such as those shown below:~~
~~• Extensions for individuals were granted with~~general, had a ~~2-month~~ grace period of 60 days with the possibility of ~~extension~~extending it for another ~~month.~~
•month for individual customers. In the case of a legal ~~entity,~~entities, extensions were granted with a grace period of up to 6 months in line with the BNDES (National Bank for Economic and Social Development).

~~The extensions were granted from March~~These measures made it possible to ~~September~~extend operations in good standing, with temporary criteria for classifying problem assets and restructurings, as well as allowing the maintenance of the classifications of credit operations, extended until December 2020.

~~Consolidated Financial Statements | December 31, 2020 | F-111~~
~~Table of Contents~~
~~Throughout 2020,~~During the ~~position~~period of extensions, ~~in response to~~ the ~~Pandemic COVID-19 reached~~actions adopted by the Bank benefited 1,728,197 customers, R$40,592 million in extended credit, equivalent to 9.72% of the total credit portfolio ~~as shown below:~~
Thousand of reais

Total

Extended Portfolio

Of which:

expired

Total

Portfolio

% Portfolio

Extended

Commercial and industrial 11,277,454 8,876,863 191,281,653 5.90%
Mortgage loans - construction 14,061,449 13,569,186 45,791,869 30.71%
Loans to individuals 15,193,901 15,062,757 178,652,145 8.50%
Leasing 59,404 29,388 2,096,359 2.83%
Total* 40,592,207 37,538,194 417,822,027 9.72%
* The total portfolio excludes exposures not accounted for in the ~~balance sheet~~
year. Of the total extensions that expired on December 31, 2020 of R$37,538 million, R$28,348 million were in stage 1, R$6,608 million were in stage 2 and R$2,567 million were in stage 3.

~~The~~In order to face the scenario of ~~uncertainties caused by the Pandemic COVID-19 brought an~~uncertainty and increase in ~~expected losses, for which continuous monitoring has been maintained.~~
~~In response,~~delinquency, in 2020 the Bank constituted an additional provision in the amount of R$~~3,200,000 (R$1,411,000 in stage 1, R$1,120,000 in stage 2 and R$669,000 in stage 3).~~3,200,000. This provision was calculated based on the analysis of ~~the~~ potential macroeconomic effects and ~~took into account not only~~considered quantitative and qualitative indicators, ~~but also~~as well as the ~~adequate and accurate~~ identification of risks and a collective assessment of exposures.

Throughout 2021, follow-ups were carried out until the end of grace periods and extension actions with the resumption of operations added to the standard model of credit management adopted by the bank. In this sense, the macroeconomic scenarios were updated in the process of measuring credit risk provisions, as well as identifying the credit portfolios impacted by the pandemic, using the total balance of additional provisions constituted in 2020 to absorb the need to increase expected losses from credit.
To estimate the expected loss, Santander Brasil uses prospective information. Three macroeconomic scenarios are considered, being Base, Pessimistic and Optimistic scenarios. For the ~~expected losses estimation, prospective information is taken into account. Santander Brazil considers three macroeconomic scenarios, periodically updated. The~~elaboration of the methodology, the 5-year evolution ~~for a period of five years~~ of the following main macroeconomic indicators ~~used to estimate~~was considered:
Prospectus for loss estimation
Pessimistic Scenarios Base Scenarios Optimistic Scenarios

Variables 2021 2022 2023 2024 2025 2021 2022 2023 2024 2025 2021 2022 2023 2024 2025
Interest rate 7.3% 14.3% 13.0% 13.0% 13.0% 7.3% 7.3% 6.5% 6.5% 6.5% 7.3% 5.5% 5.5% 4.0% 4.0%
Unemployment 14.4% 16.3% 18.2% 18.5% 18.2% 14.4% 13.8% 12.9% 12.1% 11.3% 14.4% 11.4% 9.1% 8.5% 7.9%
Housing Prices 9.0% 2.2% 2.2% 2.1% 2.0% 9.0% 9.2% 9.0% 8.6% 8.3% 9.0% 13.8% 13.4% 12.9% 12.5%
GDP growth 5.6% -3.5% -2.0% 0.2% 0.2% 5.6% 2.7% 2.2% 2.0% 2.0% 5.6% 6.5% 4.0% 4.0% 4.0%
Income Commitment 31.7% 38.2% 38.9% 39.1% 38.9% 31.7% 32.7% 34.6% 35.1% 35.6% 31.7% 29.1% 29.2% 29.3% 29.1%

In the process of estimating the expected ~~losses in Santander Brazil~~loss, a weight is ~~as follows (before pandemic impacts):~~
Pessimistic Scenarios Base Scenarios Optimistic Scenarios

Variables 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024
Interest Rate 7.0% 9.5% 9.0% 9.0% 9.0% 4.5% 5.5% 6.0% 6.0% 6.0% 3.5% 3.8% 5.0% 5.0% 5.0%
Unemployment Rate 12.8% 15.9% 17.7% 18.2% 17.9% 10.8% 10.2% 9.7% 8.8% 8.5% 10.1% 8.9% 7.8% 6.8% 6.6%
Housing Price Change -2.3% -2.4% -1.2% -0.3% 0.0% 0.8% 2.1% 3.6% 3.5% 3.5% 2.5% 7.2% 7.7% 7.3% 7.3%
GDP Growth -3.0% -3.3% -1.7% -0.9% 1.9% 2.3% 2.2% 2.4% 2.5% 2.5% 4.4% 5.0% 4.6% 4.5% 3.7%
Burden Income 21.0% 21.5% 22.0% 22.0% 22.0% 20.4% 20.4% 20.4% 20.4% 20.4% 19.5% 19.0% 18.8% 18.9% 18.9%
~~Each macroeconomic~~assigned to each scenario, ~~is associated~~ with ~~a determined likelihood of occurrence. Regarding its assignation, Santander Brazil links the highest weight~~greater relevance being attributed to the base ~~scenarios whilst links the lowest~~scenario (80%), while lower weights are attributed to the ~~most extreme scenarios:~~
Scenarios Weights 2020 2019 2018
Pessimistic scenarios 10% 10% 10%
Base scenarios 80% 80% 80%
Optimistic scenarios 10% 10% 10%
~~Regarding~~pessimistic (10%) and optimistic (10%) scenarios . The weights assigned to the scenarios considering the pandemic used to calculate the post-model adjustment (used for accounting purposes), the projected evolution of the main macroeconomic indicators for a period of five years is shown below:
4Q Pessimistic Scenarios Base Scenarios Optimistic Scenarios

Variables 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024
Interest Rate 2.0% 3.5% 9.0% 9.0% 9.0% 2.0% 2.8% 4.8% 6.0% 6.0% 2.0% 2.8% 4.8% 6.0% 6.0%
Unemployment Rate 15.2% 19.2% 19.0% 18.6% 18.0% 15.2% 12.4% 11.4% 10.7% 9.8% 15.2% 12.4% 11.4% 10.7% 9.8%
Housing Price Change -1.9% -2.7% -1.4% -0.2% 1.5% -1.9% 1.6% 3.1% 3.3% 3.3% -1.9% 1.6% 3.1% 3.3% 3.3%
GDP Growth -4.0% -6.0% -1.8% 2.4% 1.2% -4.0% 3.8% 2.5% 2.4% 2.5% -4.0% 3.8% 2.5% 2.4% 2.5%
Burden Income 21.3% 22.3% 22.7% 23.2% 23.0% 21.3% 20.9% 20.8% 20.7% 20.7% 21.3% 20.9% 20.8% 20.7% 20.7%
~~The sensitivity analysis of the main portfolios expected loss to variations of +/- 100 bps for the macroeconomic variables used~~ in the ~~construction of the scenarios is~~last 3 years are as follows:
Macroeconomic scenario
Change in Provision

Consumer% Corporate% Rest%
GDP Growth
-100 bp 0.89 1.66 0.75
+ 100 bp (0.91) (1.49) (0.41)
Burden Income
-100 bp (0.82) 1.56 (0.43)
+ 100 bp 1.61 0.69 1.49
Interest Rate (Selic)
-100 bp (1.43) 0.55 (0.29)
+ 100 bps 2.11 8.42 1.54
Ponderations 2021 2020 2019
Pessimistic Scenarios 10% 10% 10%
Base Scenarios 80% 80% 80%
Optimistic Scenarios 10% 10% 10%
Consolidated Financial Statements | December 31, 2021 | F-108
Table of Contents

* Values expressed in thousands, except when indicated.

44. ~~44.~~ Business segment reporting
In accordance with IFRS 8, an operating segment is a component of an entity:

(a) that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity),

(b) whose operating results are regularly reviewed by the entity’s ~~management~~Management responsible to make decisions about resources to be allocated to the segment and assess its performance, and

(c) For which different financial information are available.
Based on these guidelines, the Bank has identified the following reportable operating segments:

~~Consolidated Financial Statements | December 31, 2020 | F-112~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
• Commercial ~~Banking.~~
Banking,
• Global Wholesale ~~Banking.~~Banking,

The Bank has two segments, the commercial (except for the Corporate Banking business managed globally using the Global Relationship Model) and the Global Wholesale Banking segment includes the Investment Banking and Markets operations, including departments cash and stock trades.
Consolidated Financial Statements | December 31, 2021 | F-109
Table of Contents

* Values expressed in thousands, except when indicated.

The Bank operates in Brazil and abroad, through the Cayman branch, Luxembourg branch and its subsidiary in Spain, with Brazilian clients and therefore has no geographical segments.

The income statements and other significant data are as follows:
Income statements and other significant data
Thousand of reais 2020

(Condensed) Income Statement Commercial Banking Global Wholesale Banking
Total

NET INTEREST INCOME 41,457,352 2,985,361 44,442,713
Income from equity instruments 3,617 30,137 33,754
Income from companies accounted for by the equity method 84,051 28,210 112,261
Net fee and commission income 14,405,280 1,822,934 16,228,214
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) ⁽¹⁾ (13,515,305 ) 1,812,403 (11,702,902 )
Other operating expense (net) (767,088 ) (105,422 ) (872,510 )
TOTAL INCOME 41,667,906 6,573,623 48,241,529
Personnel expenses (8,139,785 ) (731,697 ) (8,871,482 )
Other administrative expenses (7,634,670 ) (608,808 ) (8,243,478 )
Depreciation and amortization (2,488,517 ) (90,610 ) (2,579,127 )
Provisions (net) (1,638,787 ) (17,759 ) (1,656,546 )
Impairment losses on financial assets (net) (17,379,570 ) (70,619 ) (17,450,189 )
Impairment losses on non-financial assets (net) (28,403 ) (56,504 ) (84,907 )
Other non-financial gains (losses) 308,176 —   308,176
OPERATING PROFIT BEFORE TAX ⁽¹⁾ 4,666,350 4,997,625 9,663,975

Currency Hedge⁽¹⁾ 13,583,011 —   13,583,011
ADJUSTED OPERATING INCOME BEFORE TAX ⁽¹⁾ 18,249,361 4,997,626 23,246,987

Thousand of reais 2021

(Condensed) Income Statement Commercial Banking Global Wholesale Banking Total

NET INTEREST INCOME 46,236,026 5,082,440 51,318,466
Income from equity instruments 10,216 79,824 90,040
Income from companies accounted for by the equity method 105,403 38,781 144,184
Net fee and commission income 13,285,099 1,988,202 15,273,301
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) ⁽¹⁾ (1,433,236) (347,268) (1,780,504)
Other operating expense (net) (974,391) (144,989) (1,119,380)
TOTAL INCOME 57,229,117 6,696,990 63,926,107
Personnel expenses (8,220,544) (805,158) (9,025,702)
Other administrative expenses (7,697,346) (593,371) (8,290,717)
Depreciation and amortization (2,342,639) (91,282) (2,433,921)
Provisions (net) (2,176,774) (2,643) (2,179,417)
Impairment losses on financial assets (net) (17,169,630) 56,896 (17,112,734)
Impairment losses on non-financial assets (net) (163,935) (1,864) (165,799)
Other non-financial gains (losses) 32,512 -    32,512
OPERATING PROFIT BEFORE TAX ⁽¹⁾ 19,490,761 5,259,568 24,750,329

Currency Hedge⁽¹⁾ 2,511,980 -    2,511,980
ADJUSTED OPERATING INCOME BEFORE TAX ⁽¹⁾ 22,002,741 5,259,568 27,262,309

Thousand of reais 2020

(Condensed) Income Statement Commercial Banking Global Wholesale Banking Total

NET INTEREST INCOME 41,457,352 2,985,361 44,442,713
Income from equity instruments 3,617 30,137 33,754
Income from companies accounted for by the equity method 84,051 28,210 112,261
Net fee and commission income 14,405,280 1,822,934 16,228,214
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) ⁽¹⁾ (13,515,305) 1,812,403 (11,702,902)
Other operating expense (net) (767,088) (105,422) (872,510)
TOTAL INCOME 41,667,906 6,573,623 48,241,529
Personnel expenses (8,139,785) (731,697) (8,871,482)
Other administrative expenses (7,634,670) (608,808) (8,243,478)
Depreciation and amortization (2,488,517) (90,610) (2,579,127)
Provisions (net) (1,638,787) (17,759) (1,656,546)
Impairment losses on financial assets (net) (17,379,570) (70,619) (17,450,189)
Impairment losses on non-financial assets (net) (28,403) (56,504) (84,907)
Other non-financial gains (losses) 308,176 -    308,176
OPERATING PROFIT BEFORE TAX ⁽¹⁾ 4,666,350 4,997,625 9,663,975

Currency Hedge⁽¹⁾ 13,583,011 -    13,583,011
ADJUSTED OPERATING INCOME BEFORE TAX ⁽¹⁾ 18,249,361 4,997,625 23,246,986

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-113~~F-110
Table of Contents

* Values expressed in thousands, except when indicated.

Thousand of reais 2019

(Condensed) Income Statement Commercial Banking Global Wholesale Banking Total

NET INTEREST INCOME 42,043,774 2,277,333 44,321,107
Income from equity instruments 4,864 14,069 18,933
Income from companies accounted for by the equity method 149,488 -    149,488
Net fee and commission income 13,923,272 1,789,880 15,713,152
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) ⁽¹⁾ (1,541,343) 1,215,351 (325,992)
Other operating expense (net) (1,069,052) (38,668) (1,107,720)
TOTAL INCOME 53,511,003 5,257,965 58,768,968
Personnel expenses (8,554,254) (773,460) (9,327,714)
Other administrative expenses (7,139,828) (473,984) (7,613,812)
Depreciation and amortization (2,297,010) (94,847) (2,391,857)
Provisions (net) (3,668,709) (12,877) (3,681,586)
Impairment losses on financial assets (net) (13,423,361) 53,455 (13,369,906)
Impairment losses on non-financial assets (net) (73,216) (58,219) (131,435)
Other non-financial gains (losses) 20,489 -    20,489
OPERATING PROFIT BEFORE TAX ⁽¹⁾ 18,375,114 3,898,033 22,273,147

Currency Hedge⁽¹⁾ 1,264,279 -    1,264,279
ADJUSTED OPERATING INCOME BEFORE TAX ⁽¹⁾ 19,639,393 3,898,033 23,537,426
(1) Includes, in the Commercial Bank, the currency hedge of the investment in dollars (a strategy to mitigate the tax effects and the variation of the exchange rate of offshore investments on net income), the result of which is recorded under “on financial assets and liabilities "fully offset in the line of Taxes

~~Table of Contents~~

Consolidated Financial Statements | December 31, 2021 | F-111
Table of Contents

* Values expressed in thousands, except when indicated.
Other aggregates

2021
Other aggregates: Commercial Banking Global Wholesale Banking Total
Total assets 838,267,118 92,941,277 931,208,396
Loans and advances to customers 394,086,048 70,757,994 464,844,042
Customer deposits 344,180,608 124,780,461 468,961,069

2020
Other aggregates: Commercial Banking Global Wholesale Banking Total
Total assets 837,339,314 96,239,065 933,578,379
Loans and advances to customers 317,553,409 76,214,628 393,768,037
Customer deposits 322,328,033 123,485,939 445,813,972

2019
Other aggregates: Commercial Banking Global Wholesale Banking Total
Total assets 675,514,634 85,097,984 760,612,618
Loans and advances to customers 259,644,994 67,054,486 326,699,480
Customer deposits 253,313,187 83,201,410 336,514,597

Thousand of reais 2019
(Condensed) Income Statement

NET INTEREST INCOME Commercial Banking Global Wholesale Banking Total
Income from equity instruments
Income from companies accounted for by the equity method 42,043,774 2,277,333 44,321,107
Net fee and commission income 4,864 14,069 18,933
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) ⁽¹⁾ 149,488 - 149,488
Other operating expense (net) 13,923,272 1,789,880 15,713,152
TOTAL INCOME (1,541,343 ) 1,215,351 (325,992 )
Personnel expenses (1,069,052 ) (38,668 ) (1,107,720 )
Other administrative expenses 53,511,003 5,257,965 58,768,968
Depreciation and amortization (8,554,254 ) (773,460 ) (9,327,714 )
Provisions (net) (7,139,828 ) (473,984 ) (7,613,812 )
Impairment losses on financial assets (net) (2,297,010 ) (94,847 ) (2,391,857 )
Impairment losses on non-financial assets (net) (3,668,709 ) (12,877 ) (3,681,586 )
Other non-financial gains (losses) (13,423,361 ) 53,455 (13,369,906 )
OPERATING PROFIT BEFORE TAX ⁽¹⁾ (73,216 ) (58,219 ) (131,435 )

Currency Hedge⁽¹⁾ 20,489 - 20,489
ADJUSTED OPERATING INCOME BEFORE TAX ⁽¹⁾ 18,375,114 3,898,033 22,273,147
NET INTEREST INCOME 1,264,279 - 1,264,279
Income from equity instruments 19,639,393 3,898,033 23,537,426
(1) Includes, in the Commercial Bank, the currency hedge of the investment in dollars (a strategy to mitigate the tax effects and the variation of the exchange rate of offshore investments on net income), the result of which is recorded under “on financial assets and liabilities "fully offset in the line of Taxes.
Thousand of reais 2018

(Condensed) Income Statement Commercial Banking Global Wholesale Banking Total

NET INTEREST INCOME 39,390,512 2,530,830 41,921,342
Income from equity instruments 9,974 22,649 32,623
Income from companies accounted for by the equity method 65,958 —   65,958
Net fee and commission income 12,537,112 1,595,047 14,132,159
Gains (losses) on financial assets and liabilities (net) and Exchange differences (net) (1) (6,752,093 ) 1,162,820 (5,589,273 )
Other operating expense (net) (965,466 ) (90,384 ) (1,055,850 )
TOTAL INCOME 44,285,998 5,220,961 49,506,959
Personnel expenses (8,404,198 ) (801,809 ) (9,206,007 )
Other administrative expenses (7,186,035 ) (400,096 ) (7,586,131 )
Depreciation and amortization (1,637,484 ) (102,475 ) (1,739,959 )
Provisions (net) (1,947,578 ) (52,026 ) (1,999,604 )
Impairment losses on financial assets (net) (12,419,979 ) (293,456 ) (12,713,435 )
Impairment losses on non-financial assets (net) (450,201 ) (58,109 ) (508,310 )
Other non-financial gains (losses) 156,258 —   156,258
OPERATING PROFIT BEFORE TAX (1) 12,396,779 3,512,992 15,909,771
Currency Hedge(1) 5,867,320 —   5,867,320
ADJUSTED OPERATING INCOME BEFORE TAX (1) 18,264,099 3,512,992 21,777,091
(1) Includes, at Banco Comercial, the foreign exchange hedge of the dollar investment (a strategy to mitigate the tax effects and exchange rate variation of offshore investments on net income), the result of which is recorded in “Gains (losses) on financial assets and liabilities ”fully offset in the Tax line.
2020
Other aggregates: Commercial Banking Global Wholesale Banking Total
Total assets 839,962,420 96,239,065 936,201,485
Loans and advances to customers 317,553,409 76,214,628 393,768,037
Customer deposits 322,328,033 123,485,939 445,813,972
2019
Other aggregates: Commercial Banking Global Wholesale Banking Total
Total assets 677,139,468 85,097,984 762,237,452
Loans and advances to customers 259,644,994 67,054,486 326,699,480
Customer deposits 253,313,187 83,201,410 336,514,597
2018
Other aggregates: Commercial Banking Global Wholesale Banking Total
Total assets 646,128,672 77,736,335 723,865,007
Loans and advances to customers 237,411,240 64,280,147 301,691,387
Customer deposits 227,689,079 76,508,721 304,197,800
45. Related party transactions
The parties related to the Bank are deemed to include, in addition to its subsidiaries, associates and jointly controlled entities, the Bank’s key management personnel and the entities over which the key management personnel may exercise significant influence or control.

Banco Santander has the Policy on Related Party Transactions approved by the Board of Directors, which aim to ensure that all transactions are made on the policy typified in view the interests of Banco Santander and its stockholders'. The policy defines powers to approve certain transactions by the Board of Directors. The rules laid down are also applied to all employees and directors of Banco Santander and its subsidiaries.

The transactions and remuneration of services with related parties are carried out in the ordinary course of business and under commutative conditions, including interest rates, terms and guarantees, and do not involve risks greater than normal collection or present other disadvantages.
a) Key-person management compensation
The Bank's Board of Directors' Meeting held on March 26, ~~2020~~2021 approved, in accordance with the favorable recommendation of the Compensation Committee, the proposal for the maximum global compensation for ~~the Directors~~Managers (Board of Directors and Executive Board) for the year ~~2020,~~of 2021, in the amount of up to R$~~400,000,000 (four hundred million reais)~~433,940, covering fixed, variable and share-based compensation and other ~~benefits,~~benefits. The proposal was ~~the subject of a resolution~~discussed at the Annual General Meeting (AGM) to be held on April 30, ~~2020.~~
~~Consolidated Financial Statements | December 31, 2020 | F-114~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
2021.
i) Long-term benefits
The Banco Santander as well as Banco Santander Spain, as other subsidiaries of Santander Group, have long-term compensation programs tied to their share's performance, based on the achievement of goals.
ii) Short-term benefits
The following table shows the Board of Directors’ and Executive Board’s:

Thousand of reais 2020 2019 2018

Fixed Compensation 90,889 89,518 90,580
Variable Compensation - in cash 83,352 70,816 48,526
Variable Compensation - in shares 81,306 80,832 34,155
Others (1) 47,832 46,937 54,494
Total Short-Term Benefits 303,379 288,103 227,755
Variable Compensation - in cash 98,407 92,704 31,797
Variable Compensation - in shares 97,729 102,046 30,060
Total Long-Term Benefits 196,136 194,750 61,857
Total (2) 499,515 482,853 289,612
~~(1)~~ ~~In the first half of 2018, Banco Santander management decided to provision and settle a certain benefit in advance, which was practiced by the Bank's liberality.~~
~~(2)~~ ~~Refers to the amount recognized as an expense for the year ended~~
Consolidated Financial Statements | December 31, 2019 and deferred expense from previous years approved on each respective year, by Banco Santander and its subsidiaries to their Directors for the positions they hold at Banco Santander and other companies2021 | F-112
Table of ~~the Santander Conglomerate. The amounts related to the Variable and Share-Based Compensation will be paid~~Contents

* Values expressed in ~~the subsequent periods.~~thousands, except when indicated.
Thousand of reais 2021 2020 2019

Fixed Compensation 96,544 90,889 89,518
Variable Compensation - in cash 115,627 83,352 70,816
Variable Compensation - in shares 94,607 81,306 80,832
Others ⁽¹⁾ 67,883 47,832 46,937
Total Short-Term Benefits 374,661 303,379 288,103
Variable Compensation - in cash 101,837 98,407 92,704
Variable Compensation - in shares 109,918 97,729 102,046
Total Long-Term Benefits 211,755 196,136 194,750
Total ⁽²⁾ 586,416 499,515 482,853
Additionally, in the exercise ended on December 31, ~~2020~~,2021, withholding taxes were collected on management compensation in the amount of R$~~29,162 (2019~~32,086 (2020 - R$~~33,912~~29,162 and ~~2018~~2019 - R$~~36,356)~~33,912).
iii) Contract termination
The termination of the employment relationship for non-fulfillment of obligations or voluntarily does not entitle executives to any financial compensation.
b) Lending operations
Under current law, it is not granted loans or advances involving:
I - directors, members of board of directors and audit committee as well as their spouses and relatives up to the second degree;
II - individuals or legal entities of Banco Santander, which hold more than 10% of the share capital;
III - Legal entities which hold more than 10% of the share capital, Banco Santander and its subsidiaries; and
IV - legal entities in which any of the officers, members of the Board of Directors and Audit Committee, as well as their spouses or relatives up to the second degree, hold more than 10% of the share capital.
~~Consolidated Financial Statements | December 31, 2020 | F-115~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
c) Ownership Interest
The table below shows the direct interest (common shares and preferred shares) as of December 31, 2021, 2020 ~~2019~~ and ~~2018~~:2019:

2020
Common Preferred Total
Shares Common Shares Preferred Shares Total
Stockholders' (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%)
Sterrebeeck B,V, ⁽¹⁾ 1,809,583 47.4 % 1,733,644 47.1 % 3,543,227 47.3 %
Grupo Empresarial Santander, S,L, ⁽¹⁾ 1,627,891 42.6 % 1,539,863 41.8 % 3,167,755 42.2 %
Banco Santander, S.A. ⁽¹⁾ 2,696 0.07 % - 0.0 % 2,696 0.04 %
Employees 2,046 0.05 % 2,046 0.06 % 4,092 0.05 %
Directors (*) 4,034 0.11 % 4,034 0.11 % 8,067 0.11 %
Others 353,616 9.3 % 381,420 10.4 % 735,036 9.8 %
Total 3,799,866 99.5 % 3,661,007 99.5 % 7,460,873 99.5 %
Treasury shares 18,829 0.5 % 18,829 0.5 % 37,658 0.5 %
Total 3,818,695 100 % 3,679,836 100 % 7,498,531 100 %
Free Float ⁽²⁾ 355,662 9.3 % 383,466 10.4 % 739,128 9.9 %
2019
Common Preferred Total
Shares Common Shares Preferred Shares Total
Stockholders' (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%)
Grupo Empresarial Santander, S,L, ⁽¹⁾ 1,107,673 29.0 % 1,019,645 27.7 % 2,127,318 28.4 %
Sterrebeeck B,V, ⁽¹⁾ 1,809,583 47.4 % 1,733,644 47.1 % 3,543,227 47.3 %
Banco Santander, S.A. ⁽¹⁾ 521,964 13.7 % 519,268 14.1 % 1,041,232 13.9 %
Employees 2,526 0.1 % 2,533 0.1 % 5,059 0.1 %
Directors (*) 4,525 0.1 % 4,524 0.1 % 9,049 0.1 %
Others 355,722 9.3 % 383,519 10.4 % 739,241 9.9 %
Total 3,801,993 99.6 % 3,663,133 99,5 % 7,465,126 99,6 %
Treasury shares 16,702 0.4 % 16,702 0.5 % 33,404 0.4 %
Total 3,818,695 100 % 3,679,835 100 % 7,498,530 100 %
Free Float ⁽²⁾ 358,248 9.4 % 386,053 10.5 % 744,301 9.9 %
2021
Common Preferred Total
Shares Common Shares Preferred Shares Total
Stockholders' (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%)
Sterrebeeck B.V. ⁽¹⁾ 1,809,583 47.4% 1,733,644 47.1% 3,543,227 47.3%
Grupo Empresarial Santander, S.L. ⁽¹⁾ 1,627,891 42.6% 1,539,863 41.9% 3,167,754 42.2%
Banco Santander, S.A. ⁽¹⁾ 2,696 0.1% -    0.0% 2,696 0.0%
Directors ^(*) 4,939 0.1% 5,029 0.1% 9,968 0.1%
Others 357,831 9.4% 385,545 10.5% 743,374 9.9%
Total 3,802,940 99.6% 3,664,081 99.6% 7,467,019 99.5%
Treasury shares 15,755 0.4% 15,755 0.4% 31,510 0.5%
Total 3,818,695 100.0% 3,679,836 100.0% 7,498,529 100.0%
Free Float ⁽²⁾ 357,830 9.4% 385,544 10.5% 743,374 9.9%

2020
Common Preferred Total
Shares Common Shares Preferred Shares Total
Stockholders' (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%)
Sterrebeeck B.V. ⁽¹⁾ 1,809,583 47.4% 1,733,644 47.1% 3,543,227 47.3%
Grupo Empresarial Santander, S.L. ⁽¹⁾ 1,627,891 42.6% 1,539,863 41.8% 3,167,755 42.2%
Banco Santander, S.A. ⁽¹⁾ 2,696 0.1% -    0.0% 2,696 0.04%
Employees 2,046 0.1% 2,046 0.1% 4,092 0.05%
Directors (*) 4,034 0.1% 4,034 0.1% 8,067 0.11%
Others 353,616 9.3% 381,420 10.4% 735,036 9.8%
Total 3,799,866 99.5% 3,661,007 99.5% 7,460,873 99.5%
Treasury shares 18,829 0.5% 18,829 0.5% 37,658 0.5%
Total 3,818,695 100.0% 3,679,836 100.0% 7,498,531 100.0%
Free Float ⁽²⁾ 355,662 9.3% 383,466 10.4% 739,128 9.9%

Consolidated Financial Statements | December 31, 2021 | F-113
Table of Contents

* Values expressed in thousands, except when indicated.

2018 2019
Common Preferred Total Common Preferred Total
Shares Common Shares Preferred Shares Total Shares Common Shares Preferred Shares Total
Stockholders' (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%) (thousand) Shares (%)
Grupo Empresarial Santander, S,L, ⁽¹⁾ 1,107,673 29.0 % 1,019,645 27.7 % 2,127,318 28.4 %
Sterrebeeck B,V, ⁽¹⁾ 1,809,583 47.4 % 1,733,644 47.1 % 3,543,227 47.2 %
Grupo Empresarial Santander, S.L. ⁽¹⁾ 1,107,673 29.0% 1,019,645 27.7% 2,127,318 28.4%
Sterrebeeck B.V. ⁽¹⁾ 1,809,583 47.4% 1,733,644 47.1% 3,543,227 47.3%
Banco Santander, S.A. ⁽¹⁾ 521,964 13.7 % 519,268 14.1 % 1,041,232 13.9 % 521,964 13.7% 519,268 14.1% 1,041,232 13.9%
Employees 2,986 0.1 % 2,987 0.1 % 5,973 0.1 % 2,526 0.1% 2,533 0.1% 5,059 0.1%
Administrators (*) 3,930 0.1 % 3,930 0.1 % 7,860 0.1 % 4,525 0.1% 4,524 0.1% 9,049 0.1%
Others 359,242 9.4 % 387,045 10.5 % 746,287 9.9 % 355,722 9.3% 383,519 10.4% 739,241 9.9%
Total 3,805,378 99.7 % 3,666,519 99.6 % 7,471,897 99.6 % 3,801,993 99.6% 3,663,133 99.5% 7,465,126 99.6%
Treasury shares 13,317 0.3 % 13,317 0.4 % 26,634 0.4 % 16,702 0.4% 16,702 0.5% 33,404 0.4%
Total 3,818,695 100 % 3,679,836 100 % 7,498,531 100 % 3,818,695 100.0% 3,679,835 100.0% 7,498,530 100.0%
Free Float ⁽²⁾ 362,228 9.5 % 390,032 10.6 % 752,260 10.0 % 358,248 9.4% 386,053 10.5% 744,301 9.9%
(1) Companies of the Santander Spain Group.
(2) Composed by Employees, Qatar Holding and other.
(*) None of the members of the Board of Directors and the Executive Board holds 1.0% or more of any class of shares.

d) ~~Related-party transactions~~
Related-Party Transactions
Santander has a Policy for Related Party Transactions approved by the Board of Directors, which aims to ensure that all transactions typified by the policy to take effect in view of the interests of Banco Santander and its stockholders. The policy defines the power to approve certain transactions by the Board of Directors. The planned rules also apply to all employees and officers of Banco Santander and its subsidiaries.
Operations and charges for services with related parties are carried out in the ordinary course of business and under reciprocal conditions, including interest rates, terms and guarantees, and do not entail greater risk than the normal collection or have other disadvantages.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-116~~F-114
Table of Contents

* Values expressed in thousands, except when indicated.
* Values expressed in thousands, except when indicated.
~~Beginning in 2018,~~Principal transactions and balances ~~with key management personnel are shown. The main transactions and balance are as follows:~~- Assets And Liabilities
Thousand of reais 2021
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾

Assets 895,492 3,347 32,135,748
Financial assets for trading (3,043,904) -    (73,209)
Banco Santander, S.A. – Espanha (1) (3,043,904) -    -
Super Pagamentos e Administração de Meios Eletrônicos S.A. -    -    241,716
Santander FI Santillana Multimercado Crédito Privado  (2) -    -    (1,241,109)
Apolo Fundo de Investimento em Direitos Creditórios -    -    955,737
FIDC Venda de Veículos -    -    (29,553)
Loans and other values with credit institutions - Cash and overnight operations in foreign currency 3,930,078 850 27,590,541
Banco Santander, S.A. – Espanha (3) 3,930,078 -    -
PSA Corretora de Seguros e Serviços Ltda. -    -    48
Santander Bank, National Association -    -    8,538,165
Banco Santander Totta, S.A. (2) -    -    950
Santander Bank Polska S.A.  (2) -    -    99
Santander UK plc -    -    171,920
Banco Santander, S.A. – México (2) -    -    21,123
Banco RCI Brasil S.A. -    850 -
Hyundai Corretora de Seguros Ltda. -    -    3
Santander Global Technology, S.L., SOCI -    -    192
Getnet S.A. -    -    18,858,041
Loans and advances to customers 109 -    3,570,635
Webmotors S.A. -    -    21,763
Banco Santander Espanha (1) 109 -    -
Santander Tecnología México, S.A. de C.V. -    -    122
Gesban Servicios Administrativos Globales, S.L. -    -    23
Santander Brasil Gestão de Recursos Ltda. -    -    169
Gestora de Inteligência de Crédito -    -    67,511
Loop Gestão de Pátios S.A. -    -    9,861
Super Pagamentos e Administração de Meios Eletrônicos S.A. -    -    191
Getnet S.A. -    -    3,450,923
Car10 Tecnologia e Informação S.A. -    -    38
Key Management Personnel (5) -    -    20,034
Other Assets 9,209 2,497 1,048,039
Banco Santander, S.A. – Espanha (1) 9,209 -    -
Banco RCI Brasil S.A. -    2,497 -
Zurich Santander Brasil Seguros e Previdência S.A. (4) -    -    965,926
Getnet S.A. -    -    15
Others -    -    82,098
Guarantees and Limits -    -    (258)
Key Management Personnel (5) -    -    (258)

Liabilities (25,832,894) (63,599) (9,602,791)
Deposits of Brazil Central Bank and deposits of credit institutions (11,178,490) (63,599) (7,802,709)
Banco Santander, S.A. – Espanha (1) (11,178,490) -    -
Banco RCI Brasil S.A. -    (63,599) -
Santander Caceis Brasil DTVM S.A.(2) -    -    (722,222)
Getnet S.A. -    -    (7,079,955)
Others -    -    (532)
Securities -    -    (128,593)
Key Management Personnel (5) -    -    (128,593)
Customer deposits -    -    (828,107)
Zurich Santander Brasil Seguros e Previdência S.A. (4) -    -    (63,864)
Santander Brasil Gestão de Recursos Ltda. -    -    (44,141)
Webmotors S.A. -    -    (3,744)
Santander Caceis Brasil DTVM S.A. -    -    (562)
Gestora de Inteligência de Crédito -    -    (36,097)
Super Pagamentos e Administração de Meios Eletrônicos S.A. -    -    (21,725)
Getnet S.A. -    -    (372,151)
Key Management Personnel (5) -    -    (28,672)
Others -    -    (257,151)
Other financial liabilities - Dividends and interest on capital Payable (564,786) -    -
Banco Santander Espanha (73) -    -
Grupo Empresarial Santander, S.L. (1) (464,295) -    -
Sterrebeeck B.V. (1) (100,418) -    -
Other Payables (1,011) -    (843,382)
Banco Santander Espanha (1) (1,011) -    -
Santander Caceis Brasil DTVM S.A. -    -    (12,286)
Zurich Santander Brasil Seguros e Previdência S.A. (4) -    -    (28,801)
Getnet S.A. -    -    (123,863)
Key Management Personnel (5) -    -    (664,264)
Others -    -    (14,168)
Debt Instruments Eligible to Compose Capital (14,088,607) -    -
Banco Santander Espanha (1) (14,088,607) -    -

Thousand of reais 2020
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾
Assets 2,966,012 3,589,575 8,962,950
Financial assets for trading (1,326,965 ) - (2,527,296 )
Banco Santander, S.A. – Espanha (1) (1,326,965 ) - -
Super Pagamentos e Administração de Meios Eletrônicos S.A. - - (211,154 )
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - (2,316,142 )
Loans and other values with credit institutions - Cash and overnight operations in foreign currency 4,240,680 3,587,028 10,446,557
Banco Santander, S.A. – Espanha (3) 4,240,680 - -
PSA Corretora de Seguros e Serviços Ltda - - 113
Santander Digital Assets, SL - - 8,105
Santander Bank, National Association - - 10,315,450
Banco Santander Totta, S.A. (2) - - 1,250
Bank Zachodni (2) - - 171
Santander UK plc - - 92,703
Banco Santander, S.A. – México (2) - - 27,993
Banco RCI Brasil S.A. - 3,587,028 -
Hyundai Corretora de Seguros Ltda - - 3
Integry Tecnologia e Serviços A,H,U Ltda, - - 45
Super Pagamentos e Administração de Meios Eletrônicos S.A. - - 532
Santander Global Technology, S,L,, SOCI - - 192
Loans and advances to customers - - 998,063
Zurich Santander Brasil Seguros e Previdência S.A. (4) - - 823,467
Zurich Santander Brasil Seguros S.A. (4) - - 57,081
Webmotors S.A. - - 18,455
Banco Santander Espanha (1) - - 224
Isban Mexico, S.A. de C,V, - - 122
Gesban Servicios Administrativos Globales, S,L, - - 23
Santander Brasil Gestão de Recursos Ltda - - 169
Gestora de Inteligência de Crédito - - 66,667
Loop Gestão de Patios S.A. - - 11,966
Key management Personnel (5) - - 19,889
Other Assets 52,297 2,547 34,589
Banco Santander, S.A. – Espanha (1) 52,297 - -
Banco RCI Brasil S.A. - 2,547 -
Zurich Santander Brasil Seguros e Previdência S.A. (4) - - 34,589
Guarantees and Limits - - 11,038
Key management Personnel (5) - - 11,038
Liabilities (24,084,795 ) (226,046 ) (1,779,587 )
Deposits of Brazil Central Bank and deposits of credit institutions (10,456,623 ) (226,046 ) (37,214 )
Banco Santander, S.A. – Espanha (1) (10,456,623 ) - -
Super Pagamentos e Administração de Meios Eletrônicos S.A. - - (36,390 )
Loop Gestão de Pátios S.A. - - (824 )
Banco RCI Brasil S.A. - (226,046 ) -
Securities - - (117,368 )
Key management Personnel (5) - - (117,368 )
Customer deposits - - (869,888 )
Zurich Santander Brasil Seguros e Previdência S.A. (4) - - (64,836 )
Santander Brasil Gestão de Recursos Ltda - - (335 )
Webmotors S.A. - - (1,411 )
Santander Securities Services Brasil DTVM S.A. - - (581,543 )
Santander Brasil Asset (2) - - (100 )
Gestora de Inteligência de Crédito - - (149,257 )
Key management Personnel (5) - - (36,762 )
Others - - (35,644 )
Other financial liabilities - Dividends and interest on capital Payable (508,491 ) - -
Banco Santander Espanha (195 ) - -
Grupo Empresarial Santander, S,L, (1) (239,890 ) - -
Sterrebeeck B,V, (1) (268,406 ) - -
Other Payables (21 ) - (755,117 )
Banco Santander Espanha (1) (21 ) - -
Santander Brasil Asset (2) - - (95 )
Santander Securities Services Brasil DTVM S.A. - - (9,373 )
Zurich Santander Brasil Seguros e Previdência S.A. (4) - - (78,686 )
Key management Personnel (5) - - (633,276 )
Others - - (33,687 )
Debt Instruments Eligible to Compose Capital (13,119,660 ) - -
Banco Santander Espanha (1) (13,119,660 ) - -

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-117~~F-115
Table of Contents

* Values expressed in thousands, except when indicated.

Thousand of Reais 2020
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾

Assets 2,966,012 3,589,575 8,962,950
Financial assets for trading - Derivatives net (1,326,965) -    (2,527,296)
Banco Santander, S.A. – Espanha (1) (1,326,965) -    -
Super Pagamentos e Administração de Meios Eletrônicos S.A. (2) -    -    (211,154)
Santander FI Santillana Multimercado Crédito Privado (2) -    -    (2,316,142)
Loans and other values with credit institutions - Cash and overnight operations in foreign currency 4,240,680 3,587,028 10,446,557
Banco Santander, S.A. – Espanha (3) 4,240,680 -    -
PSA Corretora de Seguros e Serviços Ltda. -    -    113
Santander Digital Assets, SL -    -    8,105
Santander Bank, National Association -    -    10,315,450
Banco Santander Totta, S.A. (2) -    -    1,250
Bank Zachodni (2) -    -    171
Santander UK plc -    -    92,703
Banco Santander, S.A. – México (2) -    -    27,993
Banco RCI Brasil S.A. -    3,587,028 -
Hyundai Corretora de Seguros Ltda. -    -    3
Integry Tecnologia e Serviços A.H.U Ltda. -    -    45
Super Pagamentos e Administração de Meios Eletrônicos S.A. -    -    532
Santander Global Technology, S.L., SOCI -    -    192
Loans and advances to customers -    -    998,063
Zurich Santander Brasil Seguros e Previdência S.A. (4) -    -    823,467
Zurich Santander Brasil Seguros S.A. (4) -    -    57,081
Webmotors S.A. -    -    18,455
Banco Santander Espanha (1) -    -    224
Isban Mexico, S.A. de C.V. -    -    122
Gesban Servicios Administrativos Globales, S.L. -    -    23
Santander Brasil Gestão de Recursos Ltda. -    -    169
Gestora de Inteligência de Crédito -    -    66,667
Loop Gestão de Pátios S.A. -    -    11,966
Key Management Personnel (5) -    -    19,889
Other Assets 52,297 2,547 34,589
Banco Santander, S.A. – Espanha (1) 52,297 -    -
Banco RCI Brasil S.A. -    2,547 -
Zurich Santander Brasil Seguros e Previdência S.A. (4) -    -    34,589
Guarantees and Limits -    -    11,038
Key Management Personnel (5) -    -    11,038

Liabilities (24,084,795) (226,046) (1,779,587)
Deposits of Brazil Central Bank and deposits of credit institutions (10,456,623) (226,046) (37,214)
Banco Santander, S.A. – Espanha (1) (10,456,623) -    -
Super Pagamentos e Administração de Meios Eletrônicos S.A. -    -    (36,390)
Loop Gestão de Pátios S.A. -    -    (824)
Banco RCI Brasil S.A. -    (226,046) -
Securities obligations -    0    (117,368)
Key Management Personnel (5) -    -    (117,368)
Customer deposits -    0    (869,888)
Zurich Santander Brasil Seguros e Previdência S.A. (4) -    -    (64,836)
Santander Brasil Gestão de Recursos Ltda. -    -    (335)
Webmotors S.A. -    -    (1,411)
Santander Caceis Brasil DTVM S.A. -    -    (581,543)
Santander Brasil Asset (2) -    -    (100)
Gestora de Inteligência de Crédito -    -    (149,257)
Key Management Personnel (5) -    -    (36,762)
Others -    -    (35,644)
Other financial liabilities - Dividends and interest on capital Payable (508,491) -    -
Banco Santander Espanha (195) -    -
Grupo Empresarial Santander, S.L. (1) (239,890) -    -
Sterrebeeck B.V. (1) (268,406) -    -
Other Payables (21) -    (755,117)
Banco Santander Espanha (1) (21) -    -
Santander Brasil Asset (2) -    -    (95)
Santander Caceis Brasil DTVM S.A. -    -    (9,373)
Zurich Santander Brasil Seguros e Previdência S.A. (4) -    -    (78,686)
Key Management Personnel (5) -    -    (633,276)
Others -    -    (33,687)
Debt Instruments Eligible to Compose Capital (13,119,660) -    -
Banco Santander Espanha (1) (13,119,660) -    -

~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Thousand of Reais 2019
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾
Assets 5,294,152 4,387,013 874,668
Financial assets for trading - Derivatives net (763,547 ) - (113,931 )
Banco Santander, S.A. – Espanha (1) (763,547 ) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - (113,931 )
Loans and other values with credit institutions - Cash and overnight operations in foreign currency 5,896,120 - 70,261
Banco Santander, S.A. – Espanha (3) 5,896,120 - -
Banco Santander Totta, S.A. (2) - - 7,921
Bank Zachodni (2) - - 94
Santander UK plc - - 16,701
Banco Santander, S.A. – México (2) - - 45,545
Loans and advances to customers 912 20,367 884,696
Zurich Santander Brasil Seguros e Previdência S.A. - - 814,320
Zurich Santander Brasil Seguros S.A. - - 58,778
Webmotors S.A. - 20,367 -
Banco Santander Espanha (1) 912 - -
Isban Mexico, S.A. de C,V, - - 122
Gesban Servicios Administrativos Globales, S,L, - - 23
Santander Brasil Gestão de Recursos Ltda - - 169
Key management Personnel (5) - - 11,284
Loans and other values with credit institutions ⁽¹⁾ 86,638 4,365,518 192
Banco Santander, S.A. – Espanha (1) 86,638 - -
Banco RCI Brasil S.A. - 4,365,518 -
Santander Global Technology, S,L,, SOCI - - 192
Other Assets 74,029 1,128 28,476
Banco Santander, S.A. – Espanha (1) 74,029 - -
Banco RCI Brasil S.A. - 1,128 -
Zurich Santander Brasil Seguros e Previdência S.A. (4) - - 28,476
Guarantees and Limits - - 4,974
Key Management personnel (5) - - 4,974
Liabilities (17,105,753 ) (169,103 ) (1,529,828 )
Deposits of Brazil Central Bank and deposits of credit institutions (42,060 ) (167,017 ) (20,571 )
Banco Santander, S.A. – Espanha (1) (42,060 ) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - (20,571 )
Banco RCI Brasil S.A. - (167,017 ) -
Securities obligations - - (89,074 )
Key management personnel (5) - - (89,074 )
Customer deposits - (2,086 ) (1,008,416 )
Zurich Santander Brasil Seguros e Previdência S.A. (4) - - (199,934 )
Santander Brasil Gestão de Recursos Ltda - - (332,916 )
Webmotors S.A. - (2,082 ) -
Santander Securities Services Brasil DTVM S.A. - - (404,427 )
Santander Brasil Asset (2) - - (16,762 )
Key Management personnel (5) - - (36,104 )
Others - (4 ) (18,273 )
Other financial liabilities - Dividends and interest on capital Payable (6,874,602 ) - (12,226 )
Banco Santander, S.A. – Espanha (1) (1,067,623 ) - -
Grupo Empresarial Santander, S,L, (1) (2,177,207 ) - -
Sterrebeeck B,V, (1) (3,629,772 ) - -
Banco Madesant (2) - - (1,948 )
Key Management personnel (5) - - (10,278 )
Other Payables (13,130 ) - (399,541 )
Banco Santander, S.A. – Espanha (1) (13,130 ) - -
Santander Brasil Asset - - (7,203 )
Santander Securities Services Brasil DTVM S.A. - - (5,066 )
Zurich Santander Brasil Seguros e Previdência S.A. (4) - - (21,219 )
Key Management personnel (5) - - (357,249 )
Others - - (8,804 )
Debt Instruments Eligible to Compose Capital (10,175,961 ) - -
Banco Santander, S.A. – Espanha (1) (10,175,961 ) - -

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-118~~F-116
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~
Thousand of Reais 2019
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾

Assets 5,294,152 4,387,013 874,668
Financial assets for trading - Derivatives net (763,547) -    (113,931)
Banco Santander, S.A. – Espanha (1) (763,547) -    -
Santander FI Santillana Multimercado Crédito Privado (2) -    -    (113,931)
Loans and other values with credit institutions - Cash and overnight operations in foreign currency 5,896,120 -    70,261
Banco Santander, S.A. – Espanha (3) 5,896,120 -    -
Banco Santander Totta, S.A. (2) -    -    7,921
Bank Zachodni (2) -    -    94
Santander UK plc -    -    16,701
Banco Santander, S.A. – México (2) -    -    45,545
Loans and advances to customers 912 20,367 884,696
Zurich Santander Brasil Seguros e Previdência S.A. -    -    814,320
Zurich Santander Brasil Seguros S.A. -    -    58,778
Webmotors S.A. -    20,367 -
Banco Santander Espanha (1) 912 -    -
Isban Mexico, S.A. de C.V. -    -    122
Gesban Servicios Administrativos Globales, S.L. -    -    23
Santander Brasil Gestão de Recursos Ltda. -    -    169
Key Management Personnel (5) -    -    11,284
Loans and other values with credit institutions ⁽¹⁾ 86,638   4,365,518 192
Banco Santander, S.A. – Espanha (1) 86,638 -    -
Banco RCI Brasil S.A. -    4,365,518 -
Santander Global Technology, S.L., SOCI -    -    192
Other Assets 74,029 1,128 28,476
Banco Santander, S.A. – Espanha (1) 74,029 -    -
Banco RCI Brasil S.A.   -    1,128 -
Zurich Santander Brasil Seguros e Previdência S.A. (4) -    -    28,476
Guarantees and Limits -    -    4,974
Key Management Personnel (5) -    -    4,974

Liabilities (17,105,753) (169,103) (1,529,828)
Deposits of Brazil Central Bank and deposits of credit institutions (42,060) (167,017) (20,571)
Banco Santander, S.A. – Espanha (1) (42,060) -    -
Santander FI Santillana Multimercado Crédito Privado (2) -    -    (20,571)
Banco RCI Brasil S.A. -    (167,017) -
Bonds and securities -    -    (89,074)
Key Management Personnel (5) -    -    (89,074)
Customer deposits -    (2,086) (1,008,416)
Zurich Santander Brasil Seguros e Previdência S.A. (4) -    -    (199,934)
Santander Brasil Gestão de Recursos Ltda -    -    (332,916)
Webmotors S.A. -    (2,082) -
Santander Caceis Brasil DTVM S.A. -    -    (404,427)
Santander Brasil Asset (2) -    -    (16,762)
Key Management Personnel (5) -    -    (36,104)
Others -    (4) (18,273)
Other financial liabilities - Dividends and interest on capital payable (6,874,602) -    (12,226)
Banco Santander, S.A. – Espanha (1) (1,067,623) -    -
Grupo Empresarial Santander, S.L. (1) (2,177,207) -    -
Sterrebeeck B.V. (1) (3,629,772) -    -
Banco Madesant (2) -    -    (1,948)
Key Management Personnel (5) -    -    (10,278)
Other Payables (13,130) -    (399,541)
Banco Santander, S.A. – Espanha (1) (13,130) -    -
Santander Brasil Asset -    -    (7,203)
Santander Caceis Brasil DTVM S.A. -    -    (5,066)
Zurich Santander Brasil Seguros e Previdência S.A. (4) -    -    (21,219)
Key Management Personnel (5) -    -    (357,249)
Others -    -    (8,804)
Debt Instruments Eligible to Compose Capital (10,175,961) -    -
Banco Santander, S.A. – Espanha (1) (10,175,961) -    -

* Values expressed in thousands, except when indicated.
Thousand of Reais 2018
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾
Assets 8,169,537 3,112,734 1,381,770
Financial assets for trading - Derivatives net (72,815 ) 205,337 266,027
Banco Santander, S.A. – Espanha (1) (72,815 ) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - 266,027
Banco RCI Brasil S.A. - 205,337 -
Loans and other values with credit institutions - Cash and overnight operations in foreign currency 8,194,590 - 146,988
Banco Santander Espanha (3) 8,194,590 - -
Banco Santander Totta, S.A. (2) - - 7,883
Abbey National Treasury Services Plc (2) - - 87,260
Bank Zachodni (2) - - 193
Santander UK plc - - 46,615
Banco Santander, S.A. – México (2) - - 5,037
Loans and advances to customers 347 - 966,462
Zurich Santander Brasil Seguros e Previdência S.A. (4) - - 913,875
Zurich Santander Brasil Seguros S.A. (4) - - 45,851
Banco Santander Espanha (1) 347 - -
Isban Mexico, S.A. de C,V, - - 122
Gesban Servicios Administrativos Globales, S,L, - - 23
Santander Brasil Gestão de Recursos Ltda - - 169
Santander Securities Services Brasil Participações S.A. (2) - - 927
Key management personnel (5) - - 5,495
Loans and other values with credit institutions ⁽¹⁾ 15,143 2,905,947 2,293
Banco Santander Espanha 15,143 - -
Banco RCI Brasil S.A. - 2,905,947 -
BHJV Assessoria e Consultoria em Gestão Empresarial LTDA - - 10
Produban Brasil Tecnologia - - 2,091
Santander Global Technology, S,L,, SOCI - - 192
Other Assets 32,272 1,450 -
Banco Santander Espanha 32,272 - -
Banco RCI Brasil S.A. - 1,450 -
Liabilities (23,166,005 ) (38,380 ) (2,975,342 )
Deposits of Brazil Central Bank and deposits of credit institutions (107,084 ) (36,871 ) (1,410,619 )
Banco Santander, S.A. – Espanha (1) (107,084 ) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado (2) - - (1,151,399 )
Banco Santander Río S.A. (2) - - (259,220 )
Banco RCI Brasil S.A. - (36,871 ) -
Securities obligations - - (96,133 )
Key management personnel (5) - - (96,133 )
Customer deposits - (1,509 ) (1,134,675 )
Santander Securities Services Brasil Participações S.A. (2) - - (58,968 )
Zurich Santander Brasil Seguros e Previdência S.A. - - (234,249 )
Gestora de Inteligência de Crédito - - (190,674 )
Santander Brasil Gestão de Recursos Ltda - - (126,988 )
Webmotors S.A. - (1,509 ) -
Santander Securities Services Brasil DTVM S.A. - - (427,209 )
Santander Brasil Asset (2) - - (18,639 )
Key management personnel (5) - - (37,889 )
Others - - (40,059 )
Other financial liabilities - Dividends and interest on capital Payable (3,922,473 ) - (5,544 )
Banco Santander, S.A. – Espanha (1) (609,159 ) - -
Grupo Empresarial Santander, S,L, (1) (1,242,259 ) - -
Sterrebeeck B,V, (1) (2,071,055 ) - -
Banco Madesant (2) - - (1,112 )
Key management personnel (5) - - (4,432 )
Other Payables (9,603 ) - (424,504 )
Banco Santander, S.A. – Espanha (1) (9,603 ) - -
Santander Brasil Asset - - (14,476 )
Santander Securities Services Brasil DTVM S.A. - - (4,291 )
Zurich Santander Brasil Seguros e Previdência S.A. (4) - - (16,924 )
Key management personnel (5) - - (381,292 )
Others - - (7,521 )
Debt Instruments Eligible to Compose Capital (19,126,845 ) - -
Banco Santander Espanha (19,126,845 ) - -
~~(*)~~ All loans and other amounts with related parties were made in the normal course of business and on a sustainable basis, including interest rates and guarantees and do
not involve risks greater than normal collection or have other disadvantages.
(1) Banco Santander (Brasil) S.A. is indirectly controlled by Banco Santander Espanha (note 1-a), through the subsidiaries Grupo Empresarial Santander, S.L. and Sterrebeeck B.V.
(2) Refers to the parent company's subsidiaries (Banco Santander Espanha).
(3) As of December 31, ~~2020,~~2021, it refers to cash and cash equivalents in the amount of ~~R $ 2,459,371 (2019 - R $ 1,089,578 and 2018 - R $ 1,515,437)~~R$1,476,611 (2020 – R$ 2,459,371).
(4) Significant influence of Banco Santander Espanha.
(5) The balance with key management personnel refers to operations contracted prior to the term of the mandates.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-119~~F-117
Table of Contents

* Values expressed in thousands, except when indicated.
Principal transactions and balances - Income
Thousand of Reais 2021
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾

Income (2,896,127) 37,036 1,622,821
Interest and similar income - Loans and amounts due from credit institutions 7,534 - 77,832
Banco Santander Espanha 7,534 - -
Apolo Fundo de Investimento em Direitos Creditórios - -
76,004
Key Management Personnel - - 1,828
Guarantees and Limits - - 45
Key Management Personnel - - 45
Interest expense and similar charges - Customer deposits - - (634,659)
Santander Brasil Gestão de Recursos Ltda. - - (1,159)
Gestora de Inteligência de Crédito - - (2,354)
Webmotors S.A. - - (233)
Super Pagamentos e Administração de Meios Eletrônicos S.A. - - (6,916)
Getnet S.A.
-
-
(23,448)
Banco Santander (Suisse), S.A.
-
-
(1,437)
Key Management Personnel - - (594,194)
Others - - (4,918)
Interest expense and similar charges - Deposits from credit institutions (122,318) - (4,652)
Banco Santander – Espanha (122,318) - -
Santander FI Santillana Multimercado Crédito Privado (1) - - (30,024)
Santander Caceis Brasil DTVM S.A. (2) - - 25,372
Fee and commission income (expense) - 37,036 3,511,120
Banco RCI Brasil S.A. - 37,036 -
Banco Santander International - - 43,375
Zurich Santander Brasil Seguros  S.A. - - 118,324
Zurich Santander Brasil Seguros e Previdência S.A. - - 3,200,930
Getnet S.A. -
-
        145,554
Key Management Personnel - - 399
Others - - 2,538
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) (2,560,112) - (769,218)
Banco Santander, S.A.  Espanha (2,560,112) - -
Santander FI Santillana Multimercado Crédito Privado - - (3,666)
Santander Caceis Brasil DTVM S.A. (2) - - (29,413)
Zurich Santander Brasil Seguros e Previdência S.A. - - (152,376)
Zurich Santander Brasil Seguros S.A. (3)
-
-
310,706
Getnet S.A.
-
-
(881,699)
Key Management Personnel - - (13,083)
Others - - 313
Administrative expenses and Amortization (221,231) - (558,452)
Banco Santander, S.A.  Espanha (221,231) - -
ISBAN Chile S.A. - - (4)
Aquanima Brasil Ltda. - - (29,526)
Santander Caceis Brasil DTVM S.A. (2) - - (45,196)
Santander Global Technology, S.L., SOCI - - (446,313)
Getnet S.A.
-
-
(2,092)
Others - - (35,321)
Others Administrative expenses - Donation - - 805
Fundação Sudameris - - 805

~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Thousand of Reais 2020
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾

Income (2,164,484 ) 204,209 1,442,100
Interest and similar income - Loans and amounts due from credit institutions 13,934 185,646 1,485
Banco RCI Brasil S.A. 13,934 —   —
Pessoal Chave da Administração —   185,646 —
Key management personnel —   —   1,485
Guarantees and Limits —   —   61
Key management personnel —   —   61
Interest expense and similar charges - Customer deposits —   —   (19,215 )
Santander Brasil Gestão de Recursos Ltda —   —   (5.664 )
Gestora de Inteligência de Crédito —   —   (1.039 )
Webmotors S.A. —   —   (2 )
Super Pagamentos e Administração de Meios Eletrônicos S.A. —   —   (7.198 )
Pessoal Chave da Administração —   —   (4.657 )
Others —   —   (655 )
Interest expense and similar charges - Deposits from credit institutions (569,355 ) (6,226 ) (15,032 )
Banco Santander – Espanha (569,355 ) —   —
Banco RCI Brasil S.A. —   (6,226 ) —
SAM Brasil Participações —   —   (3 )
Santander Securities Services Brasil DTVM S.A. (2) —   —   (14,645 )
Santander Asset management, S.A. SGIIC, —   —   (384 )
Fee and commission income (expense) (2,002 ) 24,789 3,092,951
Banco Santander – Espanha (2,002 ) —   —
Banco RCI Brasil S.A. —   24,789 —
Banco Santander International —   —   45,261
Webmotors S.A. —   —   223
Zurich Santander Brasil Seguros S.A. —   —   321,008
Zurich Santander Brasil Seguros e Previdência S.A. —   —   2,706,398
Key management personnel —   —   308
Others —   —   19,753
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) (541,693 ) —   (413,101 )
Banco Santander, S.A. – Espanha (541,693 ) —   —
Real Fundo de Investimento Multimercado Santillana Credito Privado —   —   (396,689 )
Santander Securities Services Brasil DTVM S.A. (2) —   —   (4,662 )
Zurich Santander Brasil Seguros e Previdência S.A. —   —   (17,344 )
Key management personnel —   —   180
Others —   —   5,414
Administrative expenses and Amortization (202,787 ) —   (1,354,006 )
Banco Santander, S.A. – Espanha (202,787 ) —   —
ISBAN Chile S.A. —   —   (20 )
Aquanima Brasil Ltda, —   —   (52,431 )
TECBAN - Tecnologia Bancaria Brasil —   —   (364,349 )
Santander Securities Services Brasil DTVM S.A. (2) —   —   (46,813 )
Santander Global Technology, S,L,, SOCI —   —   (358,364 )
Key management personnel —   —   (499,514 )
Others —   —   (32,515 )
Others Administrative expenses - Donation —   —   (19,630 )
   Santander Cultural —   —   (330 )
Fundação Santander —   —   (1,600 )
Instituto Escola Brasil —   —   (700 )
Fundação Sudameris —   —   (17,000 )
Result on the sale of assets not classified as non-current assets held for sale —   —   168,588
Super Pagamentos e Administração de Meios Eletrônicos S.A. —   —   168,588
Debt Instruments Eligible to Compose Capital (862,581 ) —   —
Banco Santander Espanha (862,581 ) —   —

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-120~~F-118
Table of Contents

* Values expressed in thousands, except when indicated.

Thousand of Reais 2020
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾

Income (2,164,484) 204,209 1,442,100
Interest and similar income - Loans and advances to customers 13,934 185,646 1,485
Banco Santander Espanha 13,934 -    -
Banco RCI Brasil S.A. -    185,646 -
Key Management Personnel -    -    1,485
Guarantees and Limits -    -    61
Key Management Personnel -    -    61
Interest expense and similar charges - Customer deposits -    -    (19,215)
Santander Brasil Gestão de Recursos Ltda. -    -    (5,664)
Gestora de Inteligência de Crédito -    -    (1,039)
Webmotors S.A. -    -    (2)
Super Pagamentos e Administração de Meios Eletrônicos S.A. -    -    (7,198)
Key Management Personnel -    -    (4,657)
Others -    -    (655)
Interest expense and similar charges - Deposits from credit institutions (569,355) (6,226) (15,032)
Banco Santander  Espanha (569,355) -    -
Banco RCI Brasil S.A. -    (6,226) -
SAM Brasil Participações -    -    (3)
Santander Caceis Brasil DTVM S.A. (2) -    -    (14,645)
Santander Asset Management, S.A. SGIIC. -    -    (384)
Fee and commission income (expense) (2,002) 24,789 3,092,951
Banco Santander  Espanha (2,002) -    -
Banco RCI Brasil S.A. -    24,789 -
Banco Santander International -    -    45,261
Webmotors S.A. -    -    223
Zurich Santander Brasil Seguros  S.A. -    -    321,008
Zurich Santander Brasil Seguros e Previdência S.A. -    -    2,706,398
Key Management Personnel -    -    308
Others -    -    19,753
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) (541,693) -    (413,101)
Banco Santander, S.A.  Espanha (541,693) -    -
Santander FI Santillana Multimercado Crédito Privado -    -    (396,689)
Santander Caceis Brasil DTVM S.A. (2) -    -    (4,662)
Zurich Santander Brasil Seguros e Previdência S.A. -    -    (17,344)
Key Management Personnel -    -    180
Others -    -    5,414
Administrative expenses and Amortization (202,787) -    (1,354,006)
Banco Santander, S.A.  Espanha (202,787) -    -
ISBAN Chile S.A. -    -    (20)
Aquanima Brasil Ltda. -    -    (52,431)
TECBAN - Tecnologia Bancária Brasil -    -    (364,349)
Santander Caceis Brasil DTVM S.A. (2) -    -    (46,813)
Santander Global Technology, S.L., SOCI -    -    (358,364)
Key Management Personnel -    -    (499,514)
Others -    -    (32,515)
Others Administrative expenses - Donation -    -    (19,630)
Santander Cultural -    -    (330)
Fundação Santander -    -    (1,600)
Instituto Escola Brasil -    -    (700)
Fundação Sudameris -    -    (17,000)
Result on the sale of assets not classified as assets held for sale -    -    168,588
Super Pagamentos e Administração de Meios Eletrônicos S.A. -    -    168,588
Debt Instruments Eligible to Compose Capital (862,581) -    -
Banco Santander Espanha (862,581) -    -

~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Thousand of Reais 2019
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾
Income (1,458,386 ) 226,141 1,254,022
Interest and similar income - Loans and advances to customers 219,060 437,322 630
Interest and similar income - Loans and amounts due from credit institutions 109,530 218,661 630
Banco Santander Espanha 109,530 - -
Banco RCI Brasil S.A. - 218,661 -
Key management personnel - - 630
Guarantees and Limits - - 24
Key management personnel - - 24
Interest expense and similar charges - Customer deposits - (25 ) (27,433 )
Santander Brasil Gestão de Recursos Ltda - - (16,387 )
Gestora de Inteligência de Crédito - - (3,275 )
Webmotors S.A. - (25 ) -
Key management personnel - - (7,747 )
Others - - (24 )
Interest expense and similar charges - Deposits from credit institutions (174 ) (3,375 ) (96,579 )
Banco Santander – Espanha (174 ) - -
Banco RCI Brasil S.A. - (3,375 ) -
SAM Brasil Participações - - (37 )
Real Fundo de Investimento Multimercado Santillana Credito Privado - - (67,821 )
Santander Securities Services Brasil DTVM S.A. (2) - - (27,595 )
Santander Asset Management, S.A. SGIIC, - - (1,126 )
Fee and commission income (expense) 2,310 10,418 2,635,325
Banco Santander – Espanha 2,310 - -
Banco RCI Brasil S.A. - 10,201 -
Banco Santander International - - 35,294
Webmotors S.A. - 217 -
Zurich Santander Brasil Seguros S.A. - - 231,920
Zurich Santander Brasil Seguros e Previdência S.A. - - 2,356,596
Key management personnel - - 343
Others - - 11,172
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) (724,169 ) 462 44,858
Banco Santander, S.A. – Espanha (724,169 ) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado - - (598 )
Santander Securities Services Brasil DTVM S.A. (2) - - (2,297 )
Zurich Santander Brasil Seguros e Previdência S.A. - - 43,858
Key management personnel - - 168
Others - 462 3,727
Administrative expenses and Amortization (153,332 ) - (1,283,788 )
Banco Santander, S.A. – Espanha (153,332 ) - -
ISBAN Chile S.A. - - (28 )
Aquanima Brasil Ltda, - - (32,032 )
TECBAN - Tecnologia Bancaria Brasil - - (345,610 )
Santander Securities Services Brasil DTVM S.A. (2) - - (49,241 )
Santander Global Technology, S,L,, SOCI - - (336,952 )
Key management personnel - - (482,852 )
Others - - (37,073 )
Others Administrative expenses - Donation - - (19,015 )
Fundação Santander - - (1,615 )
Instituto Escola Brasil (1,300 )
Fundação Sudameris - - (16,100 )
Debt Instruments Eligible to Compose Capital (692,551 ) - -
Banco Santander Espanha (692,551 ) - -

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-121~~F-119
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~
Thousand of Reais 2019
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾

Income (1,458,386) 226,141 1,254,022
Interest and similar income - Loans and advances to customers 219,060 437,322 630
Interest and similar income - Loans and amounts due from credit institutions 109,530 218,661 630
Banco Santander Espanha 109,530 -    -
Banco RCI Brasil S.A. -    218,661 -
Key Management Personnel -    -    630
Guarantees and Limits -    -    24
Key Management Personnel -    -    24
Interest expense and similar charges - Customer deposits -    (25) (27,433)
Santander Brasil Gestão de Recursos Ltda. -    -    (16,387)
Gestora de Inteligência de Crédito -    -    (3,275)
Webmotors S.A. -    (25) -
Key Management Personnel -    -    (7,747)
Others -    -    (24)
Interest expense and similar charges - Deposits from credit institutions (174) (3,375) (96,579)
Banco Santander – Espanha (174) -    -
Banco RCI Brasil S.A. -    (3,375) -
SAM Brasil Participações -    -    (37)
Santander FI Santillana Multimercado Crédito Privado -    -    (67,821)
Santander Securities Services Brasil DTVM S.A. (2) -    -    (27,595)
Santander Asset Management, S.A. SGIIC. -    -    (1,126)
Fee and commission income (expense) 2,310 10,418 2,635,325
Banco Santander – Espanha 2,310 -    -
Banco RCI Brasil S.A. -    10,201 -
Banco Santander International -    -    35,294
Webmotors S.A. -    217 -
Zurich Santander Brasil Seguros  S.A. -    -    231,920
Zurich Santander Brasil Seguros e Previdência S.A. -    -    2,356,596
Key Management Personnel -    -    343
Others -    -    11,172
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) (724,169) 462 44,858
Banco Santander, S.A. – Espanha (724,169) -    -
Santander FI Santillana Multimercado Crédito Privado -    -    (598)
Santander Caceis Brasil DTVM S.A. (2) -    -    (2,297)
Zurich Santander Brasil Seguros e Previdência S.A. -    -    43,858
Key Management Personnel -    -    168
Others -    462 3,727
Administrative expenses and Amortization (153,332) -    (1,283,788)
Banco Santander, S.A. – Espanha (153,332) -    -
ISBAN Chile S.A. -    -    (28)
Aquanima Brasil Ltda. -    -    (32,032)
TECBAN - Tecnologia Bancária Brasil -    -    (345,610)
Santander Caceis Brasil DTVM S.A. (2) -    -    (49,241)
Santander Global Technology, S.L., SOCI -    -    (336,952)
Key Management Personnel -    -    (482,852)
Others -    -    (37,073)
Others Administrative expenses - Donation -    -    (19,015)
Fundação Santander -    -    (1,615)
Instituto Escola Brasil -    -    (1,300)
Fundação Sudameris -    -    (16,100)
Debt Instruments Eligible to Compose Capital (692,551) -    -
Banco Santander Espanha (692,551) -    -

* Values expressed in thousands, except when indicated.
Thousand of Reais 2018
Parent ⁽¹⁾ Joint-controlled
companies Other Related-Party ⁽²⁾
Income (972,799 ) 192,889 1,323,622
Interest and similar income - Loans and advances to customers 272,500 273,332 1,541
Key management personnel - - 461
Interest and similar income - Loans and amounts due from credit institutions 136,250 136,666 1,080
Banco Santander Espanha 136,250 - -
Banco RCI Brasil S.A. - 136,666 -
Abbey National Treasury Services Plc - - 157
Cibrasec - - 923
Interest expense and similar charges - Customer deposits - (92 ) (23,146 )
ISBAN Brasil S.A. - - (90 )
Santander Brasil Gestão de Recursos Ltda - - (8,329 )
Santander Cultural - - (36 )
Gestora de Inteligência de Crédito - - (5,743 )
Webmotors S.A. - (92 ) -
Santander Brasil Tecnologia S.A. (current name of Produban Serviços de Informática S.A.) - - (215 )
Key management personnel - - (8,707 )
Others - - (27 )
Interest expense and similar charges - Deposits from credit institutions (6,889 ) (5,871 ) (134,896 )
Banco Santander – Espanha (6,889 ) - -
Banco RCI Brasil S.A. - (5,871 ) -
Santander Securities Services Brasil Participações S.A. (2) - - (26,378 )
SAM Brasil Participações - - (47 )
Real Fundo de Investimento Multimercado Santillana Credito Privado - - (102,928 )
Santander Securities Services Brasil DTVM S.A. (2) - - (4,442 )
Santander Asset Management, S.A. SGIIC, - - (1,101 )
Fee and commission income (expense) 6,213 32,960 2,653,014
Banco Santander – Espanha 6,213 - -
Banco RCI Brasil S.A. - 31,981 -
Banco Santander International - - 30,789
Webmotors S.A. - 979 -
Zurich Santander Brasil Seguros S.A. - - 300,868
Zurich Santander Brasil Seguros e Previdência S.A. - - 2,302,295
Key management personnel - - 355
Others - - 18,707
Gains (losses) on financial assets and liabilities (net) and exchange differences (net) (680,903 ) 29,226 (199,985 )
Banco Santander, S.A. – Espanha (680,903 ) - -
Real Fundo de Investimento Multimercado Santillana Credito Privado - - (210,324 )
Abbey National Treasury Services Plc - - (17,726 )
Banco RCI Brasil S.A. - 29,226 -
Santander Securities Services Brasil DTVM S.A. - - 1,312
Zurich Santander Brasil Seguros e Previdência S.A. - - 40,305
Key management personnel - - 239
Others - - (13,791 )
Administrative expenses and Amortization - - (952,432 )
ISBAN Brasil S.A. - - (14,210 )
Santander Brasil Tecnologia S.A. (atual denominação da Produban Serviços de Informática S.A.) - - (33,567 )
ISBAN Chile S.A. - - (24 )
Aquanima Brasil Ltda, - - (30,021 )
TECBAN - Tecnologia Bancaria Brasil - - (313,433 )
Santander Securities Services Brasil DTVM S.A. - - (46,884 )
Santander Global Technology, S,L,, SOCI - - (175,466 )
Key management personnel (289,612 )
Others - - (49,216 )
Others Administrative expenses - Donation - - (20,013 )
Santander Cultural - - (2,748 )
Fundação Santander - - (1,330 )
Fundação Sudameris - - (15,935 )
Debt Instruments Eligible to Compose Capital (427,470 ) - -
Banco Santander Espanha (427,470 ) - -
(1) Banco Santander (Brasil) S.A. is indirectly controlled by Banco Santander Spain, through its subsidiary Grupo Empresarial Santander, S.L. and Sterrebeeck B.V.
(2) Refers to the Company's subsidiaries (Banco Santander, S.A .-..- Spain).

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~~Table of Contents~~

* Values expressed in thousands, except when indicated.

46. Risk management
Risk management at Banco Santander is based on the following principles:
A. Independence of the management activities related to the business;
B. Involvement of the ~~senior management~~Senior Management in decision-making;
C. Consensus in the decision making on credit operations between the Risk and Business departments;
D. Collegiate decision-making, which includes the branch network, aiming to encourage diversity of opinions and avoiding the attribution of individual decisions;
E. The use of statistical tools to estimate default, which includes internal rating, credit scoring and behavior scoring, RORAC (Return on Risk Adjusted Capital), VaR (Value at Risk), economic capital, scenario assessment, among others;
F. Global approach, which an integrated treatment of risk factors in the business departments and the concept of economic capital as a consistent metric for risk undertaken and for business management;
G. Common management tools
H. Organizational structure
I. Scopes and responsibilities
J. Risk limitation

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* Values expressed in thousands, except when indicated.
K. Recognition
L. Effective information channel
M. Maintenance of a medium-low risk profile, and low volatility by:
• The portfolio diversification, limiting concentration in clients, groups, sectors, products or geographically speaking; the complexity level of market operations reduction; the analysis of social and environmental risks of businesses and projects financed by the bank; continuous follow up to prevent the portfolios from deteriorating.
• Policies and procedures definition that are part of the Regulatory Framework Risk, which regulates the risk activities and processes. They follow the instructions of the Board of Directors, the regulations of the BACEN and the international best practices in order to protect the capital and ensure business' profitability.
At Banco Santander, the risk management and control process is structured using as reference the framework defined at corporate level and described according to the following phases:
I. Adaptation of corporate management frameworks and policies that reflect Banco Santander’s risk management principles.
Within this regulatory framework, the ~~corporate risk management framework,~~Corporate Risk Management Framework, regulates the principles and standards governing Banco Santander´s risk activities, based on the corporate organization and a management models, meeting the necessary regulatory requirements for credit management.
The organizational model comprises the management map, which defines the risk function and governance, and the regulatory framework itself.
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* Values expressed in thousands, except when indicated.
II. Identification of risks through the constant review and monitoring of exposures, the assessment of new products, businesses and deals (singular transactions);
III. Risks measurement using methods and models periodically tested.
IV. Preparation and distribution of a complete set of reports that are reviewed daily by the heads at all levels of Banco Santander management.
V. Implementation of a risk control system which checks, on a daily basis, the degree to which the Bank´s risk profile matches the risk policies approved and the risk limits set. The most noteworthy corporate tools and techniques (aforementioned) already in use at Banco Santander are in different stages of maturity regarding the level of implementation and use in the Bank. For wholesale segment, these techniques are in line with the corporate level development. For local segments, internal ratings and ~~scorings~~scoring based models, VaR and market risk scenario analysis and stress testing were already embedded in risk management routine while Expected loss, Economic Capital and RORAC have been integrated in risk management.
VI. Internal ratings- and scorings-based models which, by assessing the various qualitative and quantitative risk components by client and transaction, making it possible to estimate, firstly, the probability of default and, subsequently, the expected loss, based on Loss Given Default (LGD) estimates.
VII. Economic capital, as a homogeneous measurement of the assumed risk and the basis for the measurement of the performance management.
VIII. RORAC, used both as a transaction pricing tool in the whole sale segment (more precisely in global ranking and markets - bottom-up approach) as for in the analysis of portfolios and units (top-down approach).
IX. VaR, which is used for controlling and setting the market risk limits for the various treasury portfolios.
X. Scenario analysis and stress testing to supplement the analysis market and credit risk in order to assess the impact of alternative scenarios, even over provisions and capital.

a) Corporate Governance of the Risk Function
The structure of Banco Santander’s Risk Committee is defined in accordance with the highest standards of prudent management, while respecting local legal and regulatory environment.
~~Its main responsibilities are:~~
A. Integrate and adapt the Bank's risk to local level, further than the risk management strategy, tolerance level and predisposition to the risk, previously approved by the executive committee and board of directors, all matched with corporate standards of Banco Santander Spain;
B. Approve the proposals, operations and limits of clients and portfolio;
C. Regularly monitor all the risks inherent to the business, proving if your profile is adequate to what was established in the risk appetite.

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* Values expressed in thousands, except when indicated.
D. Authorize the use of management tools and local risk models and being aware of the result of their internal validation.
E. Keeping updated, assessing and monitoring any observations and recommendations periodically formulated by the supervisory authorities regarding their functions.
The organizational structure of the executive vice-presidency consists of areas which are responsible for credit risk management, market and structural, model risk management and non-financial risks. The credit risk management structure is ~~made up of departments that operate~~composed by directors who act from the point of view of ~~portfolio management~~retail and ~~credit analysis and decision nuclei in an individualized way in Individuals, Companies and Wholesale.~~wholesale portfolios management. A specific ~~area's~~area has the mission is to consolidate the portfolios and their respective risks, ~~subsidizing~~supporting the management with the integrated risk vision, as well as the Group's headquarters in ~~Spain, with~~Spain. There is an ~~integrated view of risks.~~
~~The credit risk management structure is made up of departments that operate from~~area responsible for the ~~point of view of managing the retail~~attendance to regulators, external and wholesale portfolios. A specific area's mission is to consolidate portfolios and their respective risks, subsidizing management, as well as the Group's headquarters in Spain, with an integrated view of risks.
internal auditors.
A specific structure is responsible for serving internal and external regulators, supervisors and auditors.
It has a core called ERM-Enterprise risk management, integrated by a set of functions, transversal to all risks, necessary for its adequate management. ~~The~~These areas are part of this structure of Methodology (development and parameterization of models) ~~are part of this structure; Decision Engines;~~; Credit Risk Control; Risk Control and Performance ~~covering~~(covering Risk Culture); Integrated management and Relationship with Supervisors and ~~Local Provision & IFRS9.~~
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~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Stress Test.
b) Credit Risk
b.1) Introduction to the treatment of credit risk
The ~~credit risk management~~Credit Risk Management provides subsidies to define strategies as risk appetite, to establish limits, including exposure analysis and trends as well as the effectiveness of the credit policy. The goal is to maintain a risk profile and adequate minimum profitability to offset the estimated default, both client and portfolio, as defined by the Executive Committee and Board of Directors. Additionally, it is responsible for the risk management systems applied in the identification, measurement, control and reduction of exposure to risk in individual or clustered by similar operations.
The ~~risk management~~Risk Management is specialized according to each clients' characteristics, being segregated between individual clients (with the accompanied of dedicated analysts) and customers with similar characteristics (standardized).
• Individualized management: It is performed by a defined risk analyst, which prepares the analysis, and forwards it to the Risk Committee and monitors the client's progress. It covers the Wholesale segment clients (Corporate and GB&M), Retail (Companies 3 and Governments, Institutions and Universities);
• Standardized management: Aimed at individuals and companies not classified as individualized clients. Based on automated models of decision-making and internal risk assessment, complemented by commercial heave and analysts specialized teams to handle exceptions.
Macroeconomic aspects and market conditions, sectored and geographical concentration, as well as client profiling and economic prospects are also evaluated and considered in the appropriate measuring of credit risk.
b.2) Reduction to recoverable value (“impairment”)
The Bank recognizes adjustments for expected credit losses with respect to the following financial instruments that are not measured at fair value through profit or loss:
- financial assets that are debt instruments;
- amounts receivable from leasing;
- financial guarantee contracts issued; and
- loan commitments issued.
No impairment losses are recognized on equity instruments.
The Bank measures the adjustments for losses at an amount equal to the expected credit losses over the useful life, except for the instruments below, for which they are recorded as expected credit losses in 12 months:
- debt instruments that present a low credit risk at the closing date; and
- other financial instruments (except lease receivables) in which the credit risk has not increased substantially since their initial recognition.
Adjustments for losses on lease receivables are always measured at an amount equal to expected credit losses over their useful life.
Measurement of expected credit losses
Expected credit losses are a probability-weighted estimate of credit losses. They are measured as follows:
- financial assets subject to impairment at the closing date: as the difference between the gross book value and the present value of estimated future cash flows;
- loan commitments: as the present value of the difference between the contractual cash flows due to the Bank if the commitment is used in full and the cash flows that the Bank expects to receive; and
- financial guarantee contracts: payments expected to reimburse the holder, less any amounts that the Bank expects to recover.
Modified assets
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced by a new asset due to the debtor's financial difficulties, it is necessary to assess whether the financial asset should be derecognized and expected credit losses are measured as follows :
- If the expected restructuring does not result in a write-off of the existing asset, the expected cash flows arising from the modified financial asset are included in the calculation of the cash insufficiencies of the existing asset.
- If the expected restructuring results in the derecognition of the existing asset, the expected fair value of the new asset is treated as the final cash flow of the existing financial asset at the time of its derecognition.
This amount is included in the calculation of cash shortfalls arising from the existing financial asset discounted from the estimated retirement date to the closing date, using the original effective interest rate of the existing financial asset.
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* Values expressed in thousands, except when indicated.
Determination of significant increases in credit risk
On each balance sheet date, the Bank assesses whether financial assets recorded at amortized cost and debt financial instruments recorded at fair value through Other Comprehensive Income are subject to impairment, as well as other financial instruments subject to that assessment.
A financial asset is “subject to impairment” when one or more events that have a negative impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is subject to impairment includes the following observable data:
- significant financial difficulty of the debtor or issuer;
- delays in contractual obligations;
- breach of contract, such as default or delay;
- the restructuring of a loan or advance by the Bank under conditions that the Bank would not consider as interesting to carry out;
- the likelihood that the debtor will enter bankruptcy or other financial reorganization; or
- the disappearance of an active market for a security due to financial difficulties.
A financial instrument that has been renegotiated due to deterioration in the borrower's condition is generally considered to be subject to impairment, unless there is evidence that the risk of not receiving the contractual cash flows has been significantly reduced and there are no other indicators of impairment.
Presentation of the provision for impairment losses in the balance sheet
Provisions for impairment losses are presented in the balance sheet as follows:
- financial assets measured at amortized cost: as a deduction from the gross carrying amount of the assets;
- loan commitments and financial guarantee contracts: as a provision; and
- debt instruments measured at fair value through Other Comprehensive Income: no provision for losses is recognized in the balance sheet, as the book value of these assets corresponds to their fair value.
Individual or collective assessment
An individual measurement of impairment was based on Management's best estimate of the present value of cash flows expected to be received. In estimating these cash flows, Management exercised judgment as to the financial situation of a debtor and the net realizable value of any underlying collateral. Each asset reduced to recoverable value was evaluated on its merits, while the test strategy and the estimate of cash flows considered recoverable were approved by the Bank's credit risk officers.
When assessing the need for collective allowance for losses, Management considered factors such as credit quality, portfolio size, concentrations and economic factors. To estimate the necessary allowance, assumptions were established to define how the inherent losses were modeled and to determine the necessary data parameters, based on historical experience and current economic conditions.
Measurement of impairment
Losses due to impairment of assets measured at amortized cost were calculated as the difference between the book value and the present value of estimated future cash flows, discounted at the asset's original effective interest rate. Impairment losses on assets measured at fair value through Other Comprehensive Income were calculated as the difference between book value and fair value.
Reversal of impairment
For assets measured at amortized cost: If an event that occurred after the impairment caused a reduction in the amount of the impairment loss, the reduction in the impairment loss was reversed through profit or loss.
For debt securities measured at fair value through Other Comprehensive Income: If, in a subsequent period, the fair value of a debt security reduced to recoverable amount has increased and that increase could be objectively linked to an event that occurred after recognition from the impairment loss, the impairment loss was reversed through profit or loss; otherwise, any increase in fair value was recognized through Other Comprehensive Income.
Any subsequent recovery in the fair value of an equity security measured at fair value through Other Comprehensive Income and reduced to recoverable amount was recognized at any time in Other Comprehensive Income.
Information, assumptions and techniques used in estimating the impairment
Classification of financial instruments by stages
The portfolio of financial instruments subject to impairment is divided into three levels, based on the stage of each instrument related to its level of credit risk:
- Stage 1: It is understood that a financial instrument at this stage does not have a significant increase in risk since its initial recognition. The provision for this Asset represents the expected loss resulting from possible non-compliance over the next 12 months;
- Stage 2: If a significant increase in risk is identified since initial recognition, without having materialized deterioration, the financial instrument will be classified within this stage. In this case, the amount referring to the provision for expected loss due to default reflects the estimated loss of the residual life of the financial instrument. For the assessment of the significant increase in credit risk, the quantitative measurement indicators used in the normal management of credit risk will be used, as well as other qualitative variables, such as the indication that it is a non-impaired operation if considered as refinanced or operations included in a special arrangement; and
- Stage 3: A financial instrument is recorded within this stage, when it shows evident signs of deterioration as a result of one or more events that have already occurred and that materialize in a loss. In this case, the amount referring to the allowance for losses reflects the expected losses from credit risk over the expected residual life of the financial instrument.
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* Values expressed in thousands, except when indicated.
Impairment estimation methodology
The measurement of the impairment loss is carried out through the following factors:
- Default Exposure or EAD: is the transaction value exposed to credit risk, including the current available balance ratio that could be provided at the time of default. The models developed incorporate assumptions about changes in the payment schedule for operations.
- Probability of Default (PD): is defined as the probability that the counterparty can meet its obligations to pay principal and/or interest. For the purposes of IFRS 9, both will be considered: PD - 12 months (Stage 1), which is the probability that the financial instrument will default during the next 12 months as well as PD - lifetime (Stages 2 and 3) , which considers the probability that the operation will default between the balance sheet date and the operation's residual maturity date. The standard requires that future information relevant to the estimation of these parameters must be considered.
- Loss on Default (LGD): is the loss resulting from default, ie the percentage of exposure that cannot be recovered in the event of default. It mainly depends on the guarantees associated with the operation, which are considered as risk mitigation factors associated with each credit financial asset and the expected future cash flows to be recovered. As established in the regulation, future information must be considered for its estimation.
- Discount rate: is the rate applied to estimated future cash flows over the expected life of the asset, to bring them to present value.
In order to estimate the aforementioned parameters, the Bank has applied its experience in the development of internal models to calculate the parameters both for regulatory purposes and for internal management.
Default definition
The Bank considers a financial asset to be in default when:
- it is probable that the debtor will not pay its credit obligations to the Bank in full; or
- the debtor has significant credit obligations to the Bank overdue for more than 90 days, as a general rule.
Overdrafts are considered overdue if the customer violates a recommended limit or has been granted a limit lower than the current outstanding amount.
When assessing whether a debtor is in default, the Bank considers indicators:
- qualitative – for example, breaches of covenants;
- quantitative – for example, overdue status and non-payment of another obligation of the same issuer to the Bank; and
- based on data collected internally and obtained from external sources.
b.3) Measures and measurement tools
Rating tools
The Bank uses proprietary internal rating models to measure the credit quality of a given customer or transaction. Each rating relates to a certain probability of default or non-payment, determined on the basis of the customer's historical experience, to predict default. Rating/Scores models are used in the Bank’s loan approval and risk monitoring process.
The classification of loans into different categories is made according to the analysis of economic and financial situation of the client and any other registratered information updated frequently. New modes of operation are subject to credit risk evaluation, verification and adaptation to the controls adopted by the Bank.
Ratings assigned to customers are reviewed periodically to include any new financial information available and the experience in the Banking relationship. The frequency of the reviews is increased in case of customers that reach certain levels in the automatic warning systems and of customers classified as requiring special monitoring. The own rating tools are monitored and reviewed to qualifications by them awarded are progressively enhanced.
Credit risk parameters
We assess all borrowings for an allowance for impairment of credit risk. Loans are individually assessed for impairment or collectively assessed by grouping similar risk characteristics. Loans individually assessed for impairment are not collectively assessed.
~~The estimative~~
To individually measure the impairment loss of loans assessed for impairment, we consider borrowers' conditions, such as their economic and financial situation, level of indebtedness, capacity to generate cash flow, quality of management, corporate governance, quality of internal controls, payment history, industry experience, contingencies and credit limits, as well as asset characteristics, such as their nature and purpose, type, sufficiency and liquidity level of guarantees, and also based on experience historical impairment loss and other circumstances known at the time of valuation.
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* Values expressed in thousands, except when indicated.
To measure the impairment loss of loans collectively assessed for impairment, we separate financial assets into groups considering credit risk characteristics and similarities. In other words, according to the segment, type of assets, guarantees and other factors associated with the historical impairment experience and other circumstances known at the time of the assessment. The impairment loss is calculated using statistical models that consider the following factors:
Default Exposure (EAD): is the amount of a transaction exposed to credit risk, including the proportion of current outstanding balance exposure that could be provided at default. Models developed incorporate hypotheses considering possible changes in the payment schedule.
Default probability (PD): is the probability that a counterparty will not fulfill its obligation to pay principal and/or interest. For the purposes of IFRS 9, this will consider both the PD-12 months, which is the probability that the financial instrument will default in the next 12 months, as well as the lifetime PD, which is the probability of the transaction to default considering its term. remaining. Future relevant information is considered necessary to estimate these parameters ~~Probability of Default (PD) and~~ as per the standard.
Loss Given Default (LGD) ~~are based on internal experience, i.e. on default observations and on the experience in defaulted loan recoveries during a defined credit cycle.~~
~~For low risk portfolios, such as banks, sovereign risk or global wholesale clients, the parameters are based on CDS market data and with global broadness, using Group Santander´s world presence.~~
~~For the other portfolios, parameter estimative are based on the Bank’s internal experience.~~
~~In addition to the Probability of Default (PD), the Bank~~: is managing its credit portfolio, seeking to make loans to borrowers that have higher volumes of guarantees associated with the operations and also works constantly on strengthening its credit recovery department. These and other actions combined, are responsible for ensuring the adequacy of LGD parameters (Loss Given Default, the loss ~~resulting from the borrower's default event to honor the principal and/or interest payments).~~
~~LGD calculation is based on net losses~~produced in case of ~~non-performing loans, considering the guarantees associated with the transaction, revenues and expenses related to the recovery process and also the timing~~ default.
Besides that, the Loss identification period, or “LIP,” is also considered in the estimation of the risk parameters that is represented by the time period between the occurrence of a loss event and the identification of an objective evidence of this loss. In other words, it ~~represents~~reflects the ~~time horizon from~~percentage of exposure that could not be recovered in the event of a default event. It mainly depends on the guarantees, which are considered to mitigate the credit ~~loss occurrence until~~risk associated with each financial asset, and the ~~effective confirmation of such loss.~~future cash flows that are expected to be recovered. According to the standard, forward-looking information must be considered in the estimate.

~~The~~Discount rate: the rate applied to estimated future cash flows during the expected life of the asset, which is equal to the net present value of the financial instrument at its book value.
To estimate the above parameters, the Bank ~~use proprietary~~applied its experience in the development of internal ~~rating~~ models to measure the credit quality of a given client or transaction. Each rating relates to a certain probability of default or non-payment, determined on the basis of the client's history, with the exception of certain portfolios classified as “low default portfolios”. These ratingscalculate parameters for both regulatory and ~~models are used in loan approval and risk monitoring processes.~~management purposes.

The table shown in note 9.b shows the portfolio by ~~the~~ internal risk rating levels and ~~their~~its probability of ~~default.~~default.
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* Values expressed in thousands, except when indicated.
Thousand of reais 2020 2019 2018

By maturity
Less than 1 Year 219,062,744 186,196,849 186,373,511
Between 1 and 5 years 147,013,817 117,841,564 99,309,551
More than 5 years 51,745,465 43,218,247 36,250,128
Loans and advances to customers, gross 417,822,026 347,256,660 321,933,190

By internal classification of risk
Low (1) 347,315,356 257,133,115 240,440,294
Medium-low (1) 24,277,405 56,549,196 50,485,682
Medium (2) 26,231,871 11,754,806 11,967,262
Medium-High (2) 3,896,457 8,512,386 7,722,198
High (3) 16,100,937 13,307,156 11,317,754
Loans and advances to customers, gross 417,822,026 347,256,660 321,933,190
~~(1)~~ ~~Transactions classifieds on Stage 1~~
~~(2)~~ ~~Transactions classifieds on Stage 2~~
~~(3)~~ ~~Transactions classifieds on Stage 3~~

Thousand of reais 2021 2020 2019

By maturity
Less than 1 Year 270,050,934 219,062,744 186,196,849
Between 1 and 5 years 160,932,317 147,013,817 117,841,564
More than 5 years 62,371,451 51,745,465 43,218,247
Loans and advances to customers, gross 493,354,702 417,822,026 347,256,660

By internal classification of risk
Low 374,505,211 347,315,357 257,133,115
Medium-low 79,216,725 24,277,404 56,549,196
Medium 14,589,977 26,231,871 11,754,806
Medium-High 9,413,111 3,896,457 8,512,386
High 15,629,678 16,100,937 13,307,156
Loans and advances to customers, gross 493,354,702 417,822,026 347,256,660
~~The expected~~
Expected credit losses, measured using sufficient and available historical data, are ~~shown below.~~presented below.

2020

Exposure Probability of default⁽¹⁾ Default loss
Commercial and industrial 191,281,653 5 % 41 %
Real Estate Credit - construction 45,791,869 3 % 7 %
Individual loans 178,652,145 9 % 52 %
Leasing 2,096,359 1 % 31 %
~~(1) Prior to Post model adjustment impacts.~~
2021

Probability of default
(PD) Default loss
(LGD)
Exposure

Commercial and industrial 247,674,251 6% 50%
Real Estate Credit - construction 54,738,606 2% 8%
Individual loans 188,408,840 10% 61%
Leasing 2,533,004 2% 31%

2019

Exposure Probability of default Default loss
Commercial and industrial 145,387,439 7 % 40 %
Real Estate Credit - construction 39,720,713 3 % 10 %
Individual loans 160,036,668 10 % 64 %
Leasing 2,111,840 2 % 41 %
2018

Exposure Probability of default Default loss
Commercial and industrial 141,293,616 8 % 42 %
Real Estate Credit - construction 36,515,352 4 % 12 %
Individual loans 137,287,593 8 % 64 %
Leasing 1,836,629 5 % 32 %
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* Values expressed in thousands, except when indicated.
~~The exposure above are related to the credit operations, The Bank understands that the exposure related to the avals and sureties and other financial assets at amortized cost have low risk,~~
2020

Probability of default
(PD) Default loss
(LGD)
Exposure

Commercial and industrial 191,281,653 5% 41%
Real Estate Credit - construction 45,791,869 3% 7%
Individual loans 178,652,145 9% 52%
Leasing 2,096,359 1% 31%

2019

Probability of default
(PD) Default loss
(LGD)
Exposure

Commercial and industrial 145,387,439 7% 40%
Real Estate Credit - construction 39,720,713 3% 10%
Individual loans 160,036,668 10% 64%
Leasing 2,111,840 2% 41%

~~b.3)~~b.4) Observed loss: measures of credit cost
The Bank periodically estimate losses related to credit risk and then we compare those estimates with actual losses of the month. Periodically conduct tests in order to monitor and maintain control over credit risk.
To complement the use of admission and rating, the Bank use other measures that supports the prudent and effective management of credit risk, based on the loss observed.
The cost of credit is measured by the sum of credit losses and to the average ~~loans~~loans’ portfolio of the same year.
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* Values expressed in thousands, except when indicated.
~~b.4)~~b.5) Credit risk cycle
Banco Santander has a global view of its credit portfolio throughout the various phases of the risk cycle, with a level of detail that allows us to evaluate the current situation of risk and any movements. This mapping is followed by the Board of Directors and the Executive Committee of the bank that no only sets policies and risk procedures, limits and delegates responsibilities. It also approves and supervises the activities of the area.
The risk management process consists of identifying, measuring, analyzing, controlling, negotiating and deciding on, as appropriate, the risks incurred in the Bank’s operations and companies of the conglomerate. The risk cycle comprises three different phases:
• Pre-sale: this phase includes the risk planning and setting targets, determination of the Bank’s risk appetite, approval of new products, risk analysis and credit rating process, and limit setting.
• Sale: this is the decision-making phase for both pre-classified and specific transactions.
• Post-sale: this phase comprises the risk monitoring, measurement and control processes and the recovery process.
Planning and setting risk limits
Risk limit setting is a dynamic process that identifies Banco Santander’s risk appetite by assessing business proposals and its risk attitude. This process is defined through the risk appetite approved by the Bank's ~~management~~Management and the units.
In the case of individualized risks, the most basic level is the customer, for which individual limits are set.
For GCB clients, a pre-classification model is used based on a system of measurement and monitoring of economic capital. In relation to the Corporate segment, the operational limit model is used in maximum nominal credit amounts.
To the risks of customers with standardized management, the limits of the portfolios are planned using credit management programs (SGP) agreed document for the areas of business and risks, and approved by the Executive Committee. This document contains the results expected for the business in terms of risk and return, beyond the limits which govern the activity and risk management. This client group has a more automated treatment in risks.
Risk analysis and rating process
Risk analysis is a pre-requisite for the approval of loans to clients by the Bank. This analysis consists of examining the counterparty’s ability on meeting its contractual obligations to the Banco Santander, which involves analyzing the client’s credit quality, its risk transactions, solvency, and sustainability of business and the return to be obtained in view of the risk assumed.
The risk analysis is conducted annually, at least, and can be held shortly when client profile indicates (through systems with centralized alerts, managers visits to clients or specific credit analysis), or when operations are not covered by pre-classification.

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* Values expressed in thousands, except when indicated.
Decision-Making on Operations
The process of decision making on operations aims to analyze and adopt adopt in accordance with pre-established policies, ~~taking into account~~considering risk appetite and any elements of the operation that are important in assessing risk and return.
The Banco Santander uses, among others, the RORAC methodology (profitability on risk-adjusted capital), for risk analysis and pricing in the decision-making process on transactions and deals.
Risk monitoring and control
In Individual retail, customers are systematically reviewed through a daily credit rating process. This process allows for ~~revaluations~~reassessments in credit exposure, allowing for increases in exposure for customers with good credit quality. In case of detection of deterioration in the risk level, ~~of risk,~~ actions ~~are automatically generated~~ to contain credit risk and preventive ~~actions.~~
actions are automatically generated.
In the case of ~~individualized~~individual management, ~~the~~ preventive detection of deterioration in the credit quality of the operation is the responsibility of the commercial manager ~~in conjunction~~together with the risk analyst. Additionally, ~~risk monitoring is carried out~~risks are monitored through a permanent observation process for early identification of incidents that may ~~occur~~result in the evolution of operations, customers and their environment.
This monitoring ~~process may~~can result in the ~~client’s~~ classification of the client in ~~SCAN. This~~SCAN (this is a system ~~which~~that allows the differentiation of the management level and the action to be taken ~~case-by-case.~~
on a case-by-case basis).
Risk control function
The control function is performed by assessing risks from various complementary perspectives, the main pillars are the control by geographical location, business area, management model, product and process, facilitating thus the detection of specific areas requiring measures for which decisions should be taken. To obtain an overview of the bank's loan portfolio over the various phases of the credit cycle, with a level of detail that allows the assessment of the current risk situation and any movements.
Any changes in the Bank’s risk exposure are controlled on an ongoing and systematic basis. The impacts of these changes in certain future situations, both of an exogenous nature and those arising from strategic decisions, are assessed in order to establish measures that place the profile and amount of the loss portfolio within the parameters set by Executive Commission.
~~Consolidated Financial Statements | December 31, 2020 | F-127~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
~~b.5)~~b.6) Credit recovery
"Strategies and action channels are defined according to the days of past due loans and the amounts, that result in a Map of Responsibilities and always look as the first alternative, the client's recovery.
The Bank uses tools as behavioral scoring to study the collection performance of certain groups, in order to reduce costs and increase recoveries. These models seek to measure the probability of clients becoming overdue adjusting collection efforts so that clients less likely to recover, receive timely actions. In cases the payments is most likely to happen, the focus is given in maintaining a healthy relationship with clients. All clients with severe or rescheduled credits delays values have internal restrictions.
Clients with high risk index have a model of recovery, with a commercial follow-up and a recovery specialist.
~~b.6)~~b.7) Credit risk from other perspective
Certain areas and specific views of credit risk deserve a specialist’s attention, complementary to global risk management.
Concentration risk

Concentration risk is an essential factor to be analyzed in the ~~area of~~ credit risk ~~management.~~management area. The Bank ~~constantly~~continuously monitors the degree of concentration of ~~its~~ credit risk in its portfolios, by economic sector, ~~geographical area/~~geographic location/country, ~~product~~groups of customers and ~~client group.~~
products.
The ~~risk committee~~Risk Committee establishes the risk policies and ~~reviews~~analyzes the exposure limits required ~~to ensure adequate~~for the proper management of the portfolio's credit risk ~~portfolio~~ concentration.
From ~~the~~a sectorial ~~standpoint,~~point of view, the distribution of the corporate client portfolio is adequately diversified.
The Bank's Executive ~~Vice-Presidence of~~Vice President for Risks works ~~closely~~together with the Executive ~~Vice-Presidence of Financial~~Vice President for Strategic Finance in the management of credit ~~portfolio management,~~portfolios, which includes reducing the concentration of exposures through ~~several~~various techniques, ~~such as~~including the ~~arrangement~~maintenance of guarantees to mitigate the ~~companies~~ risk ~~credit~~of companies, derivatives for ~~hedge~~protection purposes (hedge) or the ~~performance~~execution of securitization transactions in order to optimize the risk/return ~~ratio~~rate of the ~~total portfolio.~~
portfolio as a whole.
Credit risk from financial market operations
This heading includes the credit risk arising in treasury operations with clients, mainly credit institutions. These operations are performed both via money market financing products with different financial institutions and via derivative instruments arranged for the purpose of serving our clients.
Risk control is performed using an integrated, real-time system that enables the Bank to know at any time the unused exposure limit with respect to any counterparty, any product and maturity and at any Bank unit.

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* Values expressed in thousands, except when indicated.
Credit risk is measured at its current market value and its potential value (exposure value considering the future variation in the underlying market factors). Therefore, the equivalent credit risk (CRE) is defined as the sum of net replacement value plus the maximum potential value of the contracts in the future.
Environmental risk
The Banco Santander's Social and Environmental Responsibility Policy (PRSA), which follows the guidelines of CMN Resolution ~~3232/2014~~4,945/2021 and the SARB Regulation Nº. 14 of Febraban, establishes guidelines and consolidates specific policies for socio-environmental practices in business and in relationships with stakeholders. These practices include the management of socio-environmental risks, impacts and opportunities related to topics such as adequacy in credit granting and use, supplier management and socio-environmental risk analysis, which is carried out through the analysis of clients' socio-environmental practices. and Varejo, of the Corporate segment 3 (one of the Corporate Retail segments of the Bank), which have limits or credit risk above R$R $ 5 million and which are part of the 14 socio-environmental care sectors. In this case, the socio-environmental risk is analyzed in order to mitigate the issues of operational risk, capital risk, credit risk and reputational risk. Since 2009, Santander has been a signatory to the Equator Principles and this set of guidelines is used to mitigate socio-environmental risks in the financing of large projects.
~~The mitigation~~Mitigation of ~~socioenvironmental~~social and environmental risks in financing large projects is carried out based on analyzes based on the guidelines of the Equator Principles, a set of ~~socioenvironmental~~social and environmental criteria referenced in the International Finance ~~Corporation~~Corporation's (IFC) Performance Standards on Social and Environmental Sustainability and in the Environmental Guidelines , Health and Safety of the World Bank Group.
The commitments assumed in the PRSA are detailed in other Bank policies, such as the Anti-Corruption Policy, Supplier Relationships and Homologation Policies and Social and Environmental Risk Policies, as well as the Private Social Investment Policy, which aims to guide the strategy in this area. and to present guidelines for social programs that strengthen this strategy.
~~b.7)~~b.8) Credit ~~management~~Management - Main changes
The business trends observed in the year ~~2020~~2021 were consistent with the trends presented ~~2019,~~2020, where in a challenging economic scenario. The Bank maintained the good quality of its business and did not presented major variances in its delinquency ratios. In December ~~2020,~~2021, this ratio achieved ~~5.55%~~5.46% compared to ~~6.75%~~5.55% of December ~~2019~~2020 and ~~6.98%~~6.75%, of December, ~~2018.~~2019.
~~Consolidated Financial Statements | December 31, 2020 | F-128~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Below is a table showing the evolution of the main credit ~~indicators.~~indicators.

2020 2019 2018 2021 2020 2019

Credit risk exposure - customers (Thousand of Reais) 466,104,042 391,569,227 364,193,664 Credit risk exposure - customers (Thousand of Reais) 540,872,632 466,104,042 391,569,227
Loans and advances to customers, gross (note 9) 417,822,026 347,256,660 321,933,190 Loans and advances to customers, gross (note 9) 493,354,702 417,822,026 347,256,660
Contingent Liabilities - Guarantees and other sureties (note 43,a) 48,282,016 44,312,567 42,260,474
Contingent Liabilities - Guarantees and other sureties (note 43.a) Contingent Liabilities - Guarantees and other sureties (note 43.a) 47,517,931 48,282,016 44,312,567
Non-performing loans ratio (%) - unaudited 5.55 % 6.75 % 6.98 % 5.46% 5.55% 6.75%
Impairment coverage ratio (%) - unaudited 110.64 % 96.58 % 102.42 % 110.40% 110.64% 96.58%
Specific credit loss provisions, net of RAWO (*) (Thousand of Reais) - unaudited 25,640,488 22,625,750 22,969,315 Specific credit loss provisions, net of RAWO (*) (Thousand of Reais) - unaudited 29,723,376 25,640,488 22,625,750
Cost of credit (% of risk) - unaudited 4.35 % 3.93 % 3.90 % 3.73% 4.35% 3.93%
Data prepared on the basis of management criteria and the accounting criteria of the controller unit. Data prepared on the basis of management criteria and the accounting criteria of the controller unit.
(*) RAWO = Recoveries of Assets Derecognized. (*) RAWO = Recoveries of Assets Derecognized.
The Bank incorporates information about the future both in its assessment if the credit risk of an instrument has increased substantially since the initial recognition and in its measurement of the expected credit losses. Based on guidance from its internal committees and economic experts and considering a range of actual and anticipated external information, the Bank develops a base scenario as well as other possible scenarios. This process involves the projection of two or more additional economic scenarios and considers the respective probabilities of each result. External information includes economic data and forecasts published by government agencies and monetary authorities and selected private sector analysts and academics.
The base case represents the most likely result and is in line with the information used by the Bank for other purposes, such as strategic planning and budgeting. The other scenarios represent more optimistic and pessimistic results. Periodically, the Bank conducts more extreme stress tests to adjust its determination of these other representative ~~scenarios.~~scenarios
12/31/2020
In Reais Million
Over-collateralized assets Under-collateralized assets

Carrying value of the assets Fair value of collateral % collateral coverage Carrying value of the assets Fair value of collateral % collateral coverage
Individuals (1) 57,633 182,430 317 % 3,091 2,756 89 %
Mortgages 45,746 100,201 219 % 46 38 83 %
Very small, small and middle-market companies, corporates and foreign loans (2) 41,428 143,168 346 % 56,052 42,728 76 %
Total 144,807 425,799 294 % 59,188 45,522 77 %
~~(1) Vehicles and others loans.~~
~~(2) Cayman and Luxemburgo.~~
~~Unsecured loans: 213,824.~~
12/31/2019
In Reais Million
Over-collateralized assets Under-collateralized assets

Carrying value of the assets Fair value of collateral % collateral coverage Carrying value of the assets Fair value of collateral % collateral coverage
Individuals (1) 53,899 150,853 280 % 2,762 2,592 94 %
Mortgages 39,016 84,862 218 % 3 3 86 %
Very small, small and middle-market companies, corporates and foreign loans (2) 34,008 116,236 342 % 33,140 26,587 80 %
Total 126,923 351,951 277 % 35,905 29,182 81 %
~~(1) Vehicles and others loans.~~
~~(2) Cayman and Luxemburgo.~~
~~Unsecured loans: 195,765.~~
~~Consolidated Financial Statements | December 31, 2020 | F-129~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

c) Market Risk

Market risk is the exposure to risks such as interest rates, exchange rates, prices of goods, prices in the stock market and others values, according to the type of product, volume of operations, term and conditions of the agreement and underlying volatility.

The Bank operates according to global policies, within the Group’s risk tolerance level, aligned with the objectives in Brazil and in the world.

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* Values expressed in thousands, except when indicated.
With this purpose, it has developed its own Risk ~~management~~Management model, according to the following principles:
●Functional independence;
· ~~Functional independence;~~
· ~~Executive capacity sustained by knowledge and proximity with the client;~~
· ~~Global reach of the function (different types of risks);~~
· Collective decision-making, that evaluates a variety of possible scenarios and do not compromise the results with individual decision (including Brazil Executive Risk Committee - Comitê Executivo de Riscos Brasil). This Comitee delimits and approves the operations. The Asset and Liabilities Committee, which responds for the capital management and structural risks, including country-risk, liquidity and interest rates.
· ~~Management and improvement of the equation risk/return; and~~
· Advanced methodologies for risk management, such as Value at Risk – VaR (historical simulation of 521 days with a confidence level of 99% and time horizon of one day), scenarios, financial margin sensibility, equity value and contingency plan.
●Executive capacity sustained by knowledge and proximity with the client;
●Global reach of the function (different types of risks);
●Collective decision-making, that evaluates a variety of possible scenarios and do not compromise the results with individual decision (including Brazil Executive Risk Committee - Comitê Executivo de Riscos Brasil). This Comitee delimits and approves the operations. The Asset and Liabilities Committee, which responds for the capital management and structural risks, including country-risk, liquidity and interest rates.
●Management and improvement of the equation risk/return; and
●Advanced methodologies for risk management, such as Value at Risk – VaR (historical simulation of 521 days with a confidence level of 99% and time horizon of one day), scenarios, financial margin sensibility, equity value and contingency plan.
The Market Risks structure is part of the Vice Presidency of Credit and Market Risks, an independent area that applies risk policies taking into consideration the guidelines of the Board of Directors and the Risks Division of Santander in Spain.

c.1) Activities subject to market risk
The measurement, control and monitoring of the market risk area comprises all operations in which net worth risk is assumed. This risk arises from changes in the risk factors –interest rate, exchange rate, equities, commodity prices and the volatility thereof– and from the solvency and liquidity risk of the various products and markets in which the Bank operates.
The activities are segmented by risk type as follows:
I. Trading: this item includes financial services for clients, trading operations and positioning mainly in fixed-income, equity , foreign currency products and shares.
II. Balance sheets management: A risk management assessment aims to give stability to interest income from the commercial and economic value of the Bank, maintaining adequate levels of liquidity and solvency. The risk is measured by the balance sheets exposure to movements in interest rates and level of liquidity.
III. Structural risks:
· Structural foreign currency risk/hedges of results: foreign currency risk arising from the currency in which investments in consolidable and non-consolidable companies are made (structural exchange rate). This item also includes the positions taken to hedge the foreign currency risk on future results generated in currencies other than the Real (hedges of results).
· ~~Structural equities risk: this item includes equity investments in non-consolidated financial and non-financial companies that give rise to equities risk.~~
●Structural foreign currency risk/hedges of results: foreign currency risk arising from the currency in which investments in consolidable and non-consolidable companies are made (structural exchange rate). This item also includes the positions taken to hedge the foreign currency risk on future results generated in currencies other than the Real (hedges of results).
●Structural equities risk: this item includes equity investments in non-consolidated financial and non-financial companies that give rise to equities risk.
The Financial ~~management~~Management area is responsible for the balance sheet management risk and structural risks through the application of uniform methodologies adapted to the situation of each market in which the Bank operates. Thus, in the convertible currencies area, Financial ~~management~~Management directly manages the Parent's risks and coordinates the management of the other units operating in these currencies. Decisions affecting the management of these risks are taken through the ALCO (Asset Liability Control committees) in the respective countries.
The Financial ~~management~~Management goal is to ensure the stability and recurring nature of both the net interest margin of the commercial activity and the Bank’s economic value, whilst maintaining adequate liquidity and solvency levels.
Each of these activities is measured and analyzed using different tools in order to reflect their risk profiles as accurately as possible.

Interest rate Risk
~~The~~The following table aggregates by product the cash flows of the operations of our perimeter of companies that have interest income. The transactions are presented by the book balance at the closing date of the years 2021, 2020 ~~2019~~ and ~~2018.~~2019. It is not associated with the risk management of changes in interest rates or indexer mismatches, which is done by monitoring metrics of Marketplace. However, it allows to evaluate the concentrations of term and possible risks and below it, the balances of the same products are presented at the redemption value at maturity, except for the line dealing with receivables and obligations linked to derivative contracts.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-130~~F-129
Table of Contents

* Values expressed in thousands, except when indicated.

2021
Position of accounts subject to interest rate risk In millions of Reais
0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 years Above 5 years Total

Remunerated Assets:

Financial assets measured at fair value in income -    -    -    -    3,122    3,122
Debt instruments -    -    -    -    3,122    3,122
Equity instruments -    -    -    -    -    -
Derivatives -    -    -    -    -    -
Financial assets measured at fair value in profit or loss for trading 5,573    4,205    5,128    17,846    12,447    45,199
Debt instruments 355  �� 858    2,358    10,267    9,963    23,801
Equity instruments 21    1    8    11    3    44
Derivatives 5,197    3,346    2,762    7,568    2,481    21,354
Financial assets not intended for trading Mandatory measured at the fair value of the result 54,053    1,012    4,779    59,267    32,808    151,919
Debt instruments 54,053    1,012    4,779    59,267    32,808    151,919
Loans and Advances to Customers -    -    -    -    -    -
Financial assets measured at fair value in other comprehensive income -    -    -    -    -    -
Debt instruments -    -    -    -    -    -
Equity instruments -    -    -    -    -    -
Financial Assets Measured at Amortized Cost 135,081    131,966    96,793    178,655    102,292    644,787
Loans and Other Amounts with Credit stitutions 73,293    1,479    2,255    2,616    -    79,643
Loans and advances to customers 60,735    128,631    71,041    158,933    94,368    513,708
Debt Instruments 1,053    1,856    23,497    17,106    7,924    51,436
Total 194,707    137,183    106,700    255,768    150,669    845,027
-    -    -    -    -    -
Remunerated Liabilities: -    -    -    -    -    -
-    -    -    -    -    -
Financial Liabilities Measured at Fair Value in income Held for Trading 18,955    2,564    2,191    11,196    2,703    37,609
Derivatives 6,174    2,564    2,191    11,196    2,703    24,828
Short Positions 12,781    -    -    -    -    12,781
Financial liabilities at amortized cost 309,659    116,052    108,718    180,572    31,897    746,898
Deposits from the Central Bank of Brazil and deposits from credit institutions 43,414    48,359    27,340    11,415    4,035    134,563
Customer deposits 260,711    50,470    70,403    110,290    24    491,898
Bonds and securities 5,534    17,223    10,975    58,867    8,334    100,933
Debt Instruments Eligible to Capital -    -    -    -    19,504    19,504
Total 328,614    118,616    110,909    191,768    34,600    784,507
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
2020
In millions of Reais
Position of Accounts Subject to Interest Rate Risk 0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 days Above 5 years Total

Remunerated Assets:

Financial assets measured at fair value in income - 153 50 250 1,747 2,200
Equity Instruments - 153 50 250 1,747 2,200
Equity Instruments - - - - - -
Derivatives - - - - - -
Financial assets measured at fair value in profit or loss for trading 15,635 18,487 4,867 57,091 17,707 113,788
Debt Instruments 3,480 11,789 3,150 47,287 14,078 79,784
Equity Instruments 1,164 - - - - 1,164
Derivatives 10,992 6,698 1,717 9,804 3,629 32,840
Financial assets not intended for trading Mandatory measured at the fair value of the result 439 - - - - 439
Equity Instruments 439 - - - - 439
Loans and Advances to Customers - - - - - -
Financial assets measured at fair value in other comprehensive income 3,455 3,625 12,177 63,651 22,430 105,339
Debt Instruments 3,383 3,625 12,177 63,651 22,430 105,267
Equity Instruments 72 - - - - 72
Financial assets measured at amortized cost 50,776 130,066 55,339 152,438 63,844 452,462
Loans and Other Amounts with Credit Institutions 25,201 39,879 2,765 3,799 - 71,644
Loans and advances to customers 25,490 88,071 50,829 134,805 61,795 360,990
Debt Instruments 85 2,117 1,745 13,833 2,049 19,828
Total 70,305 152,331 72,433 273,429 105,728 674,227

Remunerated Liabilities:

Financial Liabilities Measured at Fair Value in Income Held for Trading 55,313 7,878 2,088 12,629 3,515 81,424
Derivatives 10,160 7,878 2,088 12,629 3,515 36,270
Short Positions 45,153 45,153
Financial liabilities at amortized cost 174,848 100,497 91,433 131,589 16,667 515,035
Deposits from the Central Bank of Brazil and deposits from credit institutions 4,007 32,846 22,603 7,891 3,031 70,379
Customer deposits 163,297 44,035 61,293 98,867 203 367,694
Bonds and securities 7,544 23,616 7,537 24,832 313 63,841
Debt Instruments Eligible to Capital - - - - 13,120 13,120
Total 230,161 108,376 93,521 144,218 20,182 596,458

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-131~~F-130
Table of Contents

* Values expressed in thousands, except when indicated.

2020
Position of accounts subject to interest rate risk In millions of Reais
0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 years Above 5 years Total

Remunerated Assets:

Financial assets measured at fair value in income -    153 50 250 1,747 2,200
Debt instruments -    153 50 250 1,747 2,200
Equity instruments -    -    -    -    -    -
Derivatives -    -    -    -    -    -
Financial assets measured at fair value in profit or loss for trading 15,635 18,487 4,867 57,091 17,707 113,788
Debt instruments 3,480 11,789 3,150 47,287 14,078 79,784
Equity instruments 1,164 -    -    -    -    1,164
Derivatives 10,992 6,698 1,717 9,804 3,629 32,840
Financial assets not intended for trading Mandatory measured at the fair value of the result 439 -    -    -    -    439
Debt instruments 439 -    -    -    -    439
Loans and Advances to Customers -    -    -    -    -    -
Financial assets measured at fair value in other comprehensive income 3,455 3,625 12,177 63,651 22,430 105,339
Debt instruments 3,383 3,625 12,177 63,651 22,430 105,267
Equity instruments 72 -    -    -    -    72
Financial Assets Measured at Amortized Cost 50,776 130,066 55,339 152,438 63,844 452,462
Loans and Other Amounts with Credit stitutions 25,201 39,879 2,765 3,799 -    71,644
Loans and advances to customers 25,490 88,071 50,829 134,805 61,795 360,990
Debt Instruments 85 2,117 1,745 13,833 2,049 19,828
Total 70,305 152,331 72,433 273,429 105,728 674,227

Remunerated Liabilities:

Financial Liabilities Measured at Fair Value in income Held for Trading 55,313 7,878 2,088 12,629 3,515 81,424
Derivatives 10,160 7,878 2,088 12,629 3,515 36,270
Short Positions 45,153 -    -    -    -    45,153
Financial liabilities at amortized cost 174,848 100,497 91,433 131,589 16,667 515,035
Deposits from the Central Bank of Brazil and deposits from credit institutions 4,007 32,846 22,603 7,891 3,031 70,379
Customer deposits 163,297 44,035 61,293 98,867 203 367,694
Bonds and securities 7,544 23,616 7,537 24,832 313 63,841
Debt Instruments Eligible to Capital -    -    -    -    13,120 13,120
Total 230,161 108,376 93,521 144,218 20,182 596,458

~~Table of Contents~~
* Values expressed in thousands, except when indicated.
2019
Position of accounts subject to interest rate risk In millions of Reais
0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 years Above 5 years Total

Interest-earning assets:

Financial assets measured at fair value through profit or loss 3,891 1,091 737 8,444 4,446 18,609
Debt instruments - 3 140 188 889 1,220
Equity instruments 171 - - - - 171
Trading derivatives 3,720 1,088 597 8,256 3,557 17,218
Other Financial Assets At Fair Value Through Profit Or Loss 4,261 802 3,981 16,737 7,075 32,856
Debt instruments 2,232 802 3,981 16,737 7,075 30,827
Equity instruments 2,029 - - - - 2,029
Investments Held to Maturity 98 96 280 3,679 3,981 8,134
Reserves from Brazilian Central Bank 69,663 - - - - 69,663
Financial Assets Measured at Amortized Cost 28,416 75,794 51,603 112,467 54,815 323,095
Total 106,329 77,783 56,601 141,327 70,317 452,357

Interest-bearing liabilities:

Deposits from credit institutions 224,610 62,181 69,277 70,882 2,556 429,506
Subordinated debts - - - 10,077 - 10,077
Marketable debt securities 3,677 25,781 19,125 28,134 3,475 80,192
Trading derivatives 4,597 1,621 1,074 9,119 3,828 20,239
Short positions 23,501 - - - - 23,501
Total 256,385 89,583 89,476 118,212 9,859 563,515

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-132~~F-131
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~

2019
Position of accounts subject to interest rate risk In millions of Reais
0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 years Above 5 years Total

Interest-earning assets:

Financial Assets Held for Trading 3,891 1,091 737 8,444 4,446 18,609
Debt instruments -    3 140 188 889 1,220
Equity instruments 171 -    -    -    -    171
Trading derivatives 3,720 1,088 597 8,256 3,557 17,218
Other Financial Assets at Fair Value Through Profit Or Loss 4,261 802 3,981 16,737 7,075 32,856
Debt instruments 2,232 802 3,981 16,737 7,075 30,827
Equity instruments 2,029 -    -    -    -    2,029
Investments Held to Maturity 98 96 280 3,679 3,981 8,134
Reserves  from Brazilian Central Bank 69,663 -    -    -    -    69,663
Financial Assets Measured at Amortized Cost 28,416 75,794 51,603 112,467 54,815 323,095
Total 106,329 77,783 56,601 141,327 70,317 452,357

Interest-bearing liabilities:

Deposits from credit institutions 224,610 62,181 69,277 70,882 2,556 429,506
Subordinated debts -    -    -    10,077 -    10,077
Marketable debt securities 3,677 25,781 19,125 28,134 3,475 80,192
Trading derivatives 4,597 1,621 1,074 9,119 3,828 20,239
Short positions 23,501 -    -    -    -    23,501
Total 256,385 89,583 89,476 118,212 9,859 563,515

* Values expressed in thousands, except when indicated.Position of accounts subject to currency risk
Currency Risk

2021
Position of accounts subject to currency risk In millions of Reais

Asset: Dollar Euro Others Total

Cash/Applications/Debt Instruments 114,021    1,337    5,163    120,521
Loans and advances to customers 5,529    2,218    608    8,355
Derivatives 289,245    14,190    8,011    311,446
Others 1,251    -    -    1,251
Total 410,046    17,744    13,782    441,573

Liabilities: Dollar Euro Others Total

Funding in foreign currency 80,991    2,194    2,130    85,315
Derivatives 225,554    14,279    8,631    248,464
Others 105,570    1,220    2,912    109,701
Total 412,115    17,711    13,673    443,480

2018
Position of accounts subject to interest rate risk In millions of Reais
0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 years Above 5 years Total

Interest-earning assets:

Financial Assets Held For Trading 8,193 6,155 12,013 67,606 25,964 119,931
Debt instruments 5,359 5,192 8,294 58,363 23,460 100,668
Equity instruments 807 - - - - 807
Trading derivatives 2,027 963 3,719 9,243 2,504 18,456
Other Financial Assets At Fair Value Through Profit Or Loss 677 9,091 368 16,702 3,577 30,415
Debt instruments 379 9,091 368 16,702 3,577 30,117
Equity instruments 298 - - - - 298
Non-Current Assets Held For Sale 24 521 89 3,603 3,826 8,063
Reserves from Brazilian Central Bank 70,103 - - - - 70,103
Loans and Receivables 27,387 101,441 35,900 85,318 60,966 311,012
Total 106,387 107,208 48,370 173,229 94,333 539,524
Interest-bearing liabilities:

Deposits from credit institutions 200,818 47,172 65,606 71,413 5,343 390,352
Subordinated debts 9,857 - - - 9,687 19,544
Marketable debt securities 13,353 20,875 14,612 30,138 9,715 88,693
Trading derivatives 1,104 1,370 3,257 9,673 3,322 18,726
Short positions 32,440 - - - - 32,440
Total 257,572 69,417 83,475 111,224 28,067 549,755
~~Currency Risk~~
2020
In millions of Reais

Asset: Dollar Euro Others Total

Cash/Applications/Debt Instruments 42,860 1,870 569 45,299
Loans and advances to customers 5,803 3,187 1,140 10,130
Investments in Foreign Subsidiaries and Dependence 57,914 215 - 58,129
Derivatives 125,495 10,451 2,795 138,741
Others 25,866 - - 25,866
Total 257,937 15,723 4,504 278,164

Liabilities: Dollar Euro Others Total

Funding in foreign currency 61,173 384 - 61,557
Derivatives 147,911 14,449 2,854 165,214
Others 39,972 219 437 40,629
Total 249,057 15,052 3,291 267,400

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-133~~F-132
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~
2020
Position of accounts subject to currency risk In millions of Reais

Asset: Dollar Euro Others Total

Cash/Applications/Debt Instruments 42,860 1,870 569 45,299
Loans and advances to customers 5,803 3,187 1,140 10,130
Investments in Foreign Subsidiaries and Dependence 57,914 215 -    58,129
Derivatives 125,495 10,451 2,795 138,741
Others 25,866 -    -    25,866
Total 257,938 15,723 4,504 278,165

Liabilities: Dollar Euro Others Total

Funding in foreign currency 61,173 384 -    61,557
Derivatives 147,911 14,449 2,854 165,214
Others 39,972 219 437 40,629
Total 249,056 15,052 3,291 267,400

* Values expressed in thousands, except when indicated.

2019
Position of accounts subject to currency risk In millions of Reais

Asset: Dollar Euro Others Total

Cash/Applications/Debt Instruments 12,406 224 1 12,631
Loans and advances to customers 4,776 1,920 -    6,696
Investments in Foreign Subsidiaries and Dependence 50,193 3,557 -    53,750
Derivatives 150,538 13,053 9,712 173,303
Others 10,521 574 -    11,095
Total 228,434 19,328 9,713 257,475

Liabilities: Dollar Euro Others Total

Funding in foreign currency 59,416 925 49 60,390
Derivatives 169,136 20,184 8,515 197,835
Others -    60 1,009 1,069
Total 228,552 21,169 9,573 259,294

2019
In millions of Reais

Asset: Dollar Euro Others Total

Cash/Applications/Debt Instruments 12,406 224 1 12,631
Loans and advances to customers 4,776 1,920 - 6,696
Investments in Foreign Subsidiaries and Dependence 50,193 3,557 - 53,750
Derivatives 150,538 13,053 9,712 173,303
Others 10,521 574 - 11,095
Total 228,434 19,328 9,713 257,475

Liabilities: Dollar Euro Others Total

Funding in foreign currency 59,416 925 49 60,390
Derivatives 169,136 20,184 8,515 197,835
Others - 60 1,009 1,069
Total 228,552 21,169 9,573 259,294

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-134~~F-133
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~

* Values expressed in thousands, except when indicated.
2018
In millions of Reais

Asset: Dollar Euro Others Total

Cash/Applications/Debt Instruments 348,797 - - 348,797
Loans and advances to customers 4,505 155 - 4,660
Investments in Foreign Subsidiaries and Dependence 45,345 3,390 - 48,735
Derivatives 231,240 18,163 2,490 251,893
Others 23,619 1,974 42 25,635
Total 653,506 23,682 2,532 679,720

Liabilities: Dollar Euro Others Total

Funding in foreign currency 390,418 462 145 391,025
Derivatives 262,396 24,809 2,391 289,596
Others 1,007 - - 1,007
Total 653,821 25,271 2,536 681,628
c.2) Methodologies

Trading
Banco Santander calculates minimum capital requirement for market risks using the internal model since approval by Bacen in May 2018.
The standard methodology ~~for measuring and controlling market risks~~ applied to ~~financial intermediation~~trading activities by the Banco Santander in 2021, 2020 and 2019 ~~and 2018~~ was ~~Value~~the value at ~~Risk~~risk (VaR), which measures the maximum expected loss with a ~~certain~~given confidence level ~~of confidence, in a certain period.~~and time horizon. This methodology iswas based on a standard historical simulation with a 99% confidence level and a one-day time horizon. Statistical adjustments were made to ~~efficiently incorporate~~enable the efficient incorporation of the most recent events that condition the level of risk assumed.
~~Consolidated Financial Statements | December 31, 2020 | F-135~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Specifically, the Bank uses a time window of two years or 521 daily data obtained retrospectively from the reference date of the VaR calculation. Two figures are calculated each day, one by applying an exponential decline factor which gives a lesser weighting to more distant observations in time, and another with uniform weightings for all observations. The VaR reported is the higher of these two figures.
VaR is not the only ~~measure available to determine the risk to which an institution is exposed.~~measure. It is used ~~for its ease of understanding calculation,~~because it is easy to calculate and because it provides a good reference toof the level of risk incurred by the ~~Bank, but~~Bank. However, other ~~metrics and methodologies~~measures are ~~also used~~simultaneously being implemented to ~~allow~~enable the Bank to exercise greater risk control in all the markets in which it operates.
~~Among~~One of these measures is scenario analysis, ~~stands out,~~ which consists of defining behavior scenarios for ~~several~~various financial variables and determining the impact on results byof applying them to the ~~Bank's~~Bank’s activities. These scenarios can replicate past events ~~(crises, for example)~~(such as crisis) or, ~~else~~conversely, determine plausible scenarios that are unrelated to past events. A minimum of three types of scenarios are defined (plausible, severe and extreme) which, together with VaR, make it possible to obtain a much more complete ~~spectrum~~view of the risk profile.
The positions are monitored daily through an exhaustive control of ~~the variations of~~changes in the portfolios, ~~in order~~aiming to detect possible incidents and correct them immediately.
A The daily ~~income account~~calculation of the result is also an excellent indicator of the risk, as it allows ~~observing~~the Bank to observe and ~~detecting~~detect the impact of changes in financial variables in the portfolios.
~~Finally, in the control of credit management activities (credits actively traded - trading book) and derivatives,~~Lastly, due to their atypical ~~character,~~nature, derivatives and credit trading management (actively traded credit – Trading Book) activities are controlled by assessing specific measures ~~are evaluated.~~on a daily basis. In the case of derivatives, these measures are ~~assessed for sensitivity~~sensitive to ~~price~~ fluctuations in the price of the underlying (delta and gamma), in volatility (vega) and in time (theta). ~~In the case of~~For credit trading management activities, ~~(actively traded) in~~ the ~~trading portfolios, the~~measures controlled ~~measures~~ include sensitivity to spread, jump-to-default and ~~concentration of positions~~position concentrations by rating level.

c.3) Balance-sheet management

Interest rate risk
The Bank analyses the sensitivity of the net interest margin and market value of equity to changes in interest rates. This sensitivity arises from maturity and interest rate repricing gaps in the various balance sheets items.
On the basis of the balance-sheets interest rate position, and considering the market situation and outlook, the necessary financial measures are adopted to align this position with that desired by the Bank. These measures can range from the taking of positions on markets to the definition of the interest rate features of commercial products.

Consolidated Financial Statements | December 31, 2021 | F-134
Table of Contents

* Values expressed in thousands, except when indicated.
The measures used by the Bank to control interest rate risk in these activities are the interest rate gap, the sensitivity of net interest margin (NIM) and market value of equity (MVE) to changes in interest rates, the duration of capital, value at risk (VaR), the EaR (Earning Atat Risk) and scenario analysis.

Interest rate gap of assets and liabilities
The interest rate gap analysis focuses on the mismatches between the reevaluation deadlines of on-balance-sheets assets and liabilities and off-balance-sheets items. This analysis facilitates a basic snapshot of the balance sheet structure and enables concentrations of interest rate risk in the various maturities to be detected. Additionally, it is a useful tool for estimating the possible impact of potential changes in interest rates on the entity's net interest margin and market value of equity.

The flows of all the on and off-balance sheet headings must be broken down and placed at the point of repricing or maturity. The duration and sensitivity of contracts that do not have a maturity date they are analyzed and estimated using an internal model.

Net interest margin (NIM) sensitivity
The sensitivity of the net interest margin measures the change in the expected accruals for a specific period (12 months) given a shift in the interest rate curve.
The sensitivity of the net interest margin is calculated by simulating the margin both for a scenario of changes in the interest rate curve and for the current scenario. The sensitivity is the difference between the two margins calculated.

Market value of equity (MVE) sensitivity
The sensitivity of the market value of equity is a complementary measure to the sensitivity of the net interest margin.
This sensitivity measures the interest rate risk implicit in the market value of equity based on the effect of changes in interest rates on the present values of financial assets and liabilities.

Value at risk (VaR) and Earnings at Risk (EaR)

It is defined with 99% base points of the MVE’s loss distribution function, calculated considering the market value of the positions, based on the payback obtained in the last two years and with degree of statistical certainty (level of trust) to a defined time horizon.
~~Consolidated Financial Statements | December 31, 2020 | F-136~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
It is also applied a similar methodology to calculate the maximum loss in NII (EaR), in order to consider the interest rate risk even in economic value impact as in financial margin.
The unit sums the return vectors of the VAR with the return vectors of EaR, resulting the total return vector. The composition is made considering in the metric of EaR the losses in financial margin that occur between the initial moment (reference date) and the holding period of the not-trading portfolio. The losses in the economic value takes in consideration the impact of the ending positions after the holding period.

c.4) Liquidity risk
Liquidity risk is associated with the Bank's ability to finance purchase commitments at reasonable market prices and to carry out its business plans with stable sources of ~~financing,~~financing.

Liquidity ~~management~~Management of Santander Bank

For the control and liquidity management, the Santander bank uses short and long-term metrics and stress metrics that are capable of measuring the safe liquidity buffer so that the bank comfortably honors its obligations to the market and shareholders.
Then, we can cite:

Short-term metrics and liquidity stress:
a. LCR
The Santander Bank uses the Liquidity Coverage Ratio (LCR) in its liquidity risk management. LCR is a short-term index for a 30 days stress scenario, results from the division of ~~high quality~~high-quality assets and net outflows in 30 days.
The Total High Liquidity Assets – HQLA is composed mainly of Brazilian federal government bonds and compulsory returns. The net outflows are composed mainly of losses of deposits, offset in part by inflows, mainly loans.
Consolidated Financial Statements | December 31, 2021 | F-135
Table of Contents

* Values expressed in thousands, except when indicated.

b. Liquidity stress scenarios:
The Liquidity management requires the analysis of financial scenarios in which potential problems whit liquidity are assessed, for which is necessary to construct and study scenarios in crisis situations. The model used for this analysis is the Stress ~~Test.~~
Test
The stress test ~~evaluate~~evaluates the financial structure of the institution and its capacity to resist and react to more extreme situations.
The purpose of the Liquidity Stress Test is to allow the simulation of adverse market conditions, making it possible to evaluate the impacts on the institution´s liquidity and ability to payments, in order to anticipate the solutions or even avoid positions that excessively liquidity in stress scenarios.
The scenarios are ~~define~~defined from the analysis of market behavior during previous crisis. Four crisis scenarios are ~~develop,~~developed, with different intensities.
From the stress ~~models~~model’s analysis, the concept of minimum liquidity was ~~define,~~defined, which is sufficient to support liquidity losses for a determined day horizon in all simulated crisis scenarios.

Long-term metrics
Its objective is to measure the stability of sources of financing against the assets committed. The NSFR metric developed by BIS and adapted by the local regulator, which objective through determined percentages, to verify if the institution has stable source of funding to sustain its assets. This metrics has different weights by term, client’s segment and product type. It is calculated monthly by the institution.

c. Liquidity indicators
In order to help management, some liquidity indicators are calculated on a monthly basis, like ratios of concentration by counterparties and concentration by segments.

Clients Funding
The Bank has different funding sources, both in products and mix of clients, with a healthy distribution between the segments. The total of ~~clients~~clients’ resources is currently in R$ 78,6 billion and presented an increase comparing with 2019 amount, highlighting the increasing of time deposit funding and the keeping of financial letters inventory.
highlighting the increasing of time deposit funding and the keeping of financial letters
In millions of Reais
Customers Funding 2021 2020
0 a 30 days Total % 0 a 30 days Total %
Demand deposits 39,574 39,574 100% 35,550 35,550 100%
Savings accounts 65,220 65,220 100% 62,210 62,210 100%
Time deposits 92,496 308,950 30% 77,298 279,778 28%
Interbank deposit 763 4,001 19% 818 5,145 16%
Funds from acceptances and issuance of securities 5,621 88,089 6% 7,544 70,628 11%
Borrowings and Onlendings - 90,709 0% 3,189 67,760 5%
Subordinated Debts / Debt Instruments Eligible to Compose Capital - 19,641 0% - 13,120 0%
Total 203,674 616,184 33% 186,609 534,191 100%

In millions of Reais
Customers Funding 2019
0 a 30 days Total %
Demand deposits 29,524 29,524 100%
Savings accounts 49,040 49,040 100%
Time deposits 53,321 190,344 28%
Interbank deposit 871 4,299 20%
Funds from acceptances and issuance of securities 3,921 85,963 5%
Borrowings and Onlendings 5,077 54,880 9%
Subordinated Debts / Debt Instruments Eligible to Compose Capital -    10,175 0%
Total 141,754 424,225 33%
Time deposits 53,321 190,344 28%
Interbank deposit 871 4,299 20%
Funds from acceptances and issuance of securities 3,921 85,963 5%
Borrowings and Onlendings 5,077 54,880 9%
Subordinated Debts / Debt Instruments Eligible to Compose Capital -    10,175 0%
Total 141,754 424,225 33%

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-137~~F-136
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~

* Values expressed in thousands, except when indicated.
In millions of Reais
2020 2019
0 a 30 days Total % 0 a 30 days Total %
Demand deposits 35,550 35,550 100 % 29,524 29,524 100 %
Savings accounts 62,210 62,210 100 % 49,040 49,040 100 %
Time deposits 77,298 279,778 28 % 53,321 190,344 28 %
Interbank deposit 818 5,145 16 % 871 4,299 20 %
Funds from acceptances and issuance of securities 7,544 70,628 11 % 3,921 85,963 5 %
Borrowings and Onlendings 3,189 67,760 5 % 5,077 54,880 9 %
Subordinated Debts / Debt Instruments Eligible to Compose Capital - 13,120 0 % - 10,175 0 %
Total 186,609 534,191 100 % 141,754 424,225 33 %
In millions of Reais
2018
0 a 30 days Total %
Demand deposits 18,854 18,854 100 %
Savings accounts 46,068 46,068 100 %
Time deposits 49,771 190,971 26 %
Interbank deposit 863 4,118 21 %
Funds from acceptances and issuance of securities 3,681 70,110 5 %
Borrowings and Onlendings 5,181 45,936 11 %
Subordinated Debts / Debt Instruments Eligible to Compose Capital 9,857 19,666 50 %
Total 134,275 395,723 34 %
~~Consolidated Financial Statements | December 31, 2020 | F-138~~
~~Table of Contents~~

* Values expressed in thousands, except when indicated.
Assets and liabilities in accordance with the remaining contractual maturities, considering the undiscounted flows are as follows:

2020 2021
In millions of Reais In millions of Reais
Future Cash Flows Except for Derivatives 0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 years Above 5 years Total
0 to
30 days
31 to
180 days
181 to
365 days
1 to
5 years
Above
5 years
Total

Remunerated Assets:

Financial assets measured at fair value in income - 174 98 667 2,900 3,839         -            -            -            -      3,122
Debt Instruments - 174 98 667 2,900 3,839
Debt instruments         -            -            -            -      3,122
Financial assets measured at fair value in profit or loss for trading 16,028 19,211 5,763 63,618 25,489 130,108   5,573   4,197   5,031 16,366   8,023 39,191
Debt Instruments 3,873 12,513 4,046 53,814 21,859 96,104
Debt instruments      355      850   2,261   8,786   5,539 17,791
Equity Instruments 1,164 - - - - 1,164        21          1          8        11          3        44
Derivatives 10,992 6,698 1,717 9,804 3,629 32,840   5,197   3,346   2,762   7,568   2,481 21,354
Financial assets not intended for trading Mandatory measured at the fair value of the result 439 - - - - 439
Equity Instruments 439 - - - - 439
Financial assets measured at fair value in other comprehensive income 5,000 3,874 13,850 75,849 35,538 134,110 54,012   1,007   4,690 50,092 15,833 125,635
Debt Instruments 4,928 3,874 13,850 75,849 35,538 134,038
Debt instruments 54,012   1,007   4,690 50,092 15,833 125,635
Equity Instruments 72 - - - - 72         -            -            -            -            -            -
Financial assets measured at amortized cost 53,147 145,280 69,004 208,295 135,783 611,509           109,330 98,848 78,187 172,736 78,053 537,155
Loans and Other Amounts with Credit Institutions 24,638 40,579 2,901 4,205 - 72,324 73,290   1,464   2,041   2,313         -    79,108
Loans and advances to customers 28,424 102,379 64,194 188,430 135,987 519,415 34,989 94,872 55,118 150,204 76,554 411,737
Debt Instruments 85 2,321 1,909 15,660 (205 ) 19,771
Debt instruments   1,051   2,512 21,028 20,219   1,499 46,310
Total 74,615 168,538 88,715 348,429 199,709 880,005 168,915 104,053 87,907 239,195 105,032 705,102

Remunerated Liabilities:

Financial Liabilities Measured at Fair Value in Income Held for Trading 55,313 7,878 2,088 12,629 3,515 81,424 18,955   2,564   2,191 11,196   2,703 37,609
Derivatives 10,160 7,878 2,088 12,629 3,515 36,270   6,174   2,564   2,191 11,196   2,703 24,828
Short Positions 45,153 45,153
Short positions 12,781         -            -            -            -    12,781
Financial liabilities at amortized cost 176,223 101,111 93,103 145,931 16,471 532,838 289,743 106,358 102,585 165,145 25,366 689,197
Deposits from the Central Bank of Brazil and deposits from credit institutions 3,707 33,039 22,860 8,014 2,802 70,421 33,714 46,465 25,626 10,610   2,742 119,157
Customer deposits 165,171 44,571 62,606 110,809 215 383,372 252,070 48,364 67,467 105,690        23 473,613
Bonds and securities 7,345 23,502 7,637 27,109 333 65,925   3,959 11,529   9,492 48,845   3,097 76,922
Debt Instruments Eligible to Capital - - - - 13,120 13,120         -            -            -            -    19,504
Total 463,072 217,979 190,382 317,119 39,972 1,228,525 308,698 108,922 104,776 176,341 28,069         726,806

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-139~~F-137
Table of Contents

* Values expressed in thousands, except when indicated.

2020
Non-Discounted Future Flows Except Derivatives In millions of Reais
0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 years Above 5 years Total

Interest-earning assets:

Financial assets measured at fair value in income -    174 98 667 2,900 3,839
Debt instruments -    174 98 667 2,900 3,839
Financial assets measured at fair value in profit or loss for trading 16,028 19,211 5,763 63,618 25,489 130,108
Debt instruments 3,873 12,513 4,046 53,814 21,859 96,104
Equity Instruments 1,164 -    -    -    -    1,164
Derivatives 10,992 6,698 1,717 9,804 3,629 32,840
Financial assets not intended for trading
Mandatory measured at the fair value of the
result 439 -    -    -    -    439
Equity Instruments 439 -    -    -    -    439
Financial assets measured at fair value in other comprehensive income 5,000 3,874 13,850 75,849 35,538 134,110
Debt instruments 4,928 3,874 13,850 75,849 35,538 134,038
Equity Instruments 72 -    -    -    -    72
Financial assets measured at amortized cost 53,147 145,280 69,004 208,295 135,783 611,509
Loans and Other Amounts with Credit
Institutions 24,638 40,579 2,901 4,205 -    72,324
Loans and advances to customers 28,424 102,379 64,194 188,430 135,987 519,415
Debt instruments 85 2,321 1,909 15,660 (205) 19,771
Total 74,615 168,538 88,715 348,429 199,709 880,005

Remunerated Liabilities:

Financial Liabilities Measured at Fair Value in
Income Held for Trading 55,313 7,878 2,088 12,629 3,515 81,424
Derivatives 10,160 7,878 2,088 12,629 3,515 36,270
Short positions 45,153 -    -    -    -    45,153
Financial liabilities at amortized cost 176,223 101,111 93,103 145,931 16,471 532,838
Deposits from the Central Bank of Brazil and
deposits from credit institutions 3,707 33,039 22,860 8,014 2,802 70,421
Customer deposits 165,171 44,571 62,606 110,809 215 383,372
Bonds and securities 7,345 23,502 7,637 27,109 333 65,925
Debt Instruments Eligible to Capital -    -    -    -    13,120 13,120
Total 463,072 217,979 190,382 317,119 39,972 1,228,525

~~Table of Contents~~
* Values expressed in thousands, except when indicated.
2019
Non-Discounted Future Flows Except Derivatives In millions of Reais
0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 years Above 5 years Total

Interest-earning assets:

Financial assets measured at fair value through profit or loss 3,766 1,103 802 8,894 6,157 20,722
Debt instruments 46 15 205 638 2,600 3,504
Trading derivatives 3,720 1,088 597 8,256 3,557 17,218
Other financial assets at fair value through profit or loss 2,642 1,160 4,853 23,638 15,502 47,795
Debt instruments 2,642 1,160 4,853 23,638 15,502 47,795
Investments Held to Maturity 99 111 327 4,066 6,030 10,633
Reserves from Brazilian Central Bank 69,663 - - - - 69,663
Financial Assets Measured at Amortized Cost 32,417 89,335 65,395 159,615 110,607 457,369
Total 108,587 91,709 71,377 196,213 138,296 606,182

Interest-bearing liabilities:

Deposits from credit institutions 218,883 61,461 71,953 79,666 2,660 434,623
Subordinated Debts / Debt Instruments Eligible to Compose Capital - - - 12,673 - 12,673
Marketable debt securities 3,697 26,096 19,829 31,407 4,628 85,657
Trading derivatives 4,597 1,621 1,074 9,119 3,828 20,239
Short positions 23,501 - - - - 23,501
Total 250,678 89,178 92,856 132,865 11,116 576,693

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-140~~F-138
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~
2019
Non-Discounted Future Flows Except Derivatives In millions of Reais
0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 years Above 5 years Total

Interest-earning assets:

Financial Assets Held For Trading 3,766 1,103 802 8,894 6,157 20,722
Debt instruments 46 15 205 638 2,600 3,504
Trading derivatives 3,720 1,088 597 8,256 3,557 17,218
Other financial assets at fair
value through profit or loss 2,642 1,160 4,853 23,638 15,502 47,795
Debt instruments 2,642 1,160 4,853 23,638 15,502 47,795
Investments Held to
Maturity 99 111 327 4,066 6,030 10,633
Reserves from Brazilian
Central Bank 69,663 -    -    -    -    69,663
Financial Assets Measured at Amortized Cost 32,417 89,335 65,395 159,615 110,607 457,369
Total 108,587 91,709 71,377 196,213 138,296 606,182

Interest-bearing liabilities:

Deposits from credit institutions 218,883 61,461 71,953 79,666 2,660 434,623
Subordinated Debts / Debt Instruments Eligible to Compose Capital -    -    -    12,673 -    12,673
Marketable debt securities 3,697 26,096 19,829 31,407 4,628 85,657
Trading derivatives 4,597 1,621 1,074 9,119 3,828 20,239
Short positions 23,501 -    -    -    -    23,501
Total 250,678 89,178 92,856 132,865 11,116 576,693

* Values expressed in thousands, except when indicated.
2018
Non-Discounted Future Flows Except Derivatives In millions of Reais
0 to 30 days 31 to 180 days 181 to 365 days 1 to 5 years Above 5 years Total

Interest-earning assets:

Financial Assets Held For Trading 7,388 6,199 12,162 80,590 52,584 158,923
Debt instruments 5,361 5,236 8,443 71,347 50,080 140,467
Trading derivatives 2,027 963 3,719 9,243 2,504 18,456
Available-For-Sale Financial Assets 379 9,230 379 18,666 6,037 34,691
Debt instruments 379 9,230 379 18,666 6,037 34,691
Non-Current Assets Held For Sale 24 558 126 3,904 5,119 9,731
Reserves from Brazilian Central Bank 70,103 - - - - 70,103
Loans and Receivables 29,234 111,216 45,564 116,107 85,637 387,758
Total 107,128 127,203 58,231 219,267 149,377 661,206

Interest-bearing liabilities:

Deposits from credit institutions 198,259 46,926 67,142 79,161 8,819 400,307
Subordinated Debts / Debt Instruments Eligible to Compose Capital 9,857 - - - 9,687 19,544
Marketable debt securities 13,395 21,343 15,290 33,627 9,717 93,372
Trading derivatives 1,104 1,370 3,257 9,673 3,322 18,726
Short positions 32,440 - - - - 32,440
Total 255,055 69,639 85,689 122,461 31,545 564,389
Scenario analysis / Contingency plan
Based on the results obtained in the Stress Test, the ~~bank draws up~~Bank prepares the Liquidity Contingency Plan, which ~~constitutes~~consists of a formal set of preventive and corrective actions to be ~~triggered~~taken in ~~times~~moments of liquidity crisis. The activation of the Plan results from the monitoring of internal parameters related to the ~~conditions of the~~Bank's market and ~~the Bank’s liquidity. These~~liquidity conditions. Such parameters serve to identify different levels of crisis severity and, ~~then,~~thus, determine ifwhether or not there is a need to start the activation process.
After the crisis is identified, a clear communication is established between the internal areas capable of ~~carrying out the~~executing corrective actions and mitigating the problems ~~originated.~~
caused. These corrective actions are measures capable of generating liquidity to solve or mitigate the effects of the crisis and are taken considering ~~their~~its complexities, implementation ~~period~~deadlines and ~~its~~ liquidity impact.
The parameters and measures of this Plan are reviewed at any time ~~when~~that it becomes necessary, however its minimum review period ~~of review~~ is annual.

c.5) Structural foreign currency risk / Hedges of results / Structural equities risk
These activities are monitored by measuring positions, VaR and results.
~~Consolidated Financial Statements | December 31, 2020 | F-141~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

c.5.1) Complementary measures

Calibration and test measures
~~Back-testing~~The back-testing consists of ~~performing~~ a comparative analysis between ~~VaR~~the estimates of Value at Risk (VaR) and the daily “clean” results ~~(profit or loss on~~(result of the portfolios at the ~~end~~close of the ~~preceding~~previous day, ~~valued~~evaluated at ~~following-day prices)~~the prices of the following day) and “dirty” (managerial ~~income taking into account~~result leading to also ~~the~~considering costs, intraday results and loading). The ~~aim~~purpose of these tests is to verify and provide a measure of the accuracy of the models used ~~to calculate VaR.~~in the VaR calculation.
~~Back-testing analyses performed at~~The back-testing analyzes carried out by Banco Santander comply, at ~~the very~~ least, with the BIS recommendations regarding the verification of the internal systems used ~~to measure~~in the measurement and ~~manage~~management of financial risks. ~~Additionally, the Santander~~The Bank also ~~conducts~~performs hypothesis tests: excess tests, normality tests, ~~Spearman’s rank~~Spearman correlation, average excess measures, etc.
~~The assessment~~Evaluation models are regularly calibrated and tested by a specialized unit.
Consolidated Financial Statements | December 31, 2021 | F-139
Table of Contents

* Values expressed in thousands, except when indicated.

c.6) Control system

Limit setting
The ~~limit~~boundary setting process ~~is performed together with~~runs alongside the budgeting activity and is ~~the~~a tool used to establish the assets and liabilities available tofor each business activity. ~~Limit setting~~Setting limits is a dynamic process that responds to the level of risk considered acceptable by ~~management.~~
Management. The ~~limits~~boundary structure ~~requires~~consists of developing a process ~~to be performed~~ that ~~pursues,~~considers, among others, the following ~~objectives:~~aspects:
~~1. To identify~~Identify and delimit, ~~in an efficient~~efficiently and ~~comprehensive manner,~~comprehensively, the main types of financial ~~risk incurred,~~risks generated, so that they are consistent with the management of the business ~~management~~ and with the defined strategy.
~~2. To quantify~~Quantify and communicate to the business areas ~~the risk~~what levels and ~~profile deemed~~risk profiles are considered acceptable by ~~senior management so as~~Management, in order to avoid ~~undesired~~unwanted risks.
~~3. To provide~~Give flexibility to the business areas ~~for the~~to assume financial risks in an efficient and timely ~~assumption of financial risks,~~manner, due to changes in the market and business ~~strategy,~~strategies, and always within the ~~risks level~~risk levels considered acceptable by the ~~Bank.~~institution.
~~4. To allow~~Allow business ~~makers~~generators to ~~assume~~take risks ~~which, although~~in a prudent ~~are~~and sufficient volume to ~~obtain~~achieve the budgeted results.
~~5. To delimit~~Delimit the range of products and ~~underlying assets with~~underlyings in which each Treasury unit can operate, considering ~~features~~characteristics such as ~~assessment model~~models and valuation systems, liquidity of the instruments involved, etc.

c.7) Risks and results in ~~2020~~2021

Financial Intermediation Activities
The average VaR from the Bank´s trading portfolio in ~~2020~~2021 ended in R$~~30,3~~ 34.5 million. The dynamic management of this profile allows the Bank to change its strategy to capitalize the opportunities offered by aan uncertain environment.

c.7.1) ~~Asset and liability~~balance sheet management

Interest rate risk

Convertible currencies
At ~~2020 year-end,~~the end of 2021, the sensitivity of the net interest margin at one year to parallel increases of 100 basis points applied to Banco Santander portfolios was concentrated on the BRL interest rate curve was ~~positive by~~ R$~~334~~553 million.
Also, at ~~2020~~2021 year-end, the sensitivity market value of equity to parallel increases of 100 basis points applied to the Banco Santander in the BRL interest rate curve was ~~positive by~~ R$~~2,063~~1,675 million.

Quantitative risk analysis
~~The interest rate~~Interest risk in balance ~~sheets~~sheet management portfolios, measured in terms of ~~sensitivity of the~~ net interest ~~margin (NIM) at~~income sensitivity, for one year toat a parallel ~~increase~~rise of 100 ~~b.p. in~~basis points of the interest rate curve, ~~was at~~increased by R$121 million between 2021 and 2020, reaching the ~~beginning~~maximum of ~~2019 and 2018,~~R$607 million in June, 2021. Value sensitivity decreased by R$96 million during the year 2021, reaching a maximum level of R$~~134~~1,882 million in ~~December 2019. The sensitivity value decreased R$202 million during 2019, reaching a maximum of R$2,342 million in October.~~ September, 2021. The main factors that occurred in ~~2019~~2021 and influenced ~~in sensitivity~~the sensitivities were the ~~volatility~~fall in the yield curve (convexity effect), portfolio decline and updating of the ~~exchange rate (convexity effect), portfolio’s decayment update~~implicit methodologies on the cash flows of ~~implicit methodology on cash flow of the Bank’s products and liquidity.~~Banco Santander products.
Million of Reais
2021 2020 2019
Sensibilities
Net Interest Margin 553 432 334
Market Value of Equity 1,675 1,771 2,063
Value at Risk - Balance
VaR 791 1,365 1,755

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-142~~F-140
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~
* Values expressed in thousands, except when indicated.
Million of Reais
2020 2019 2018
Sensibilities
Net Interest Margin 432 334 200
Market Value of Equity 1,771 2,063 1,861
Value at Risk - Balance
VaR 1,365 1,755 1,744
c.8) Sensitivity analysis

The risk management is focused on portfolios and risk factors pursuant to the requirements of regulators and good international practices.
Financial instruments are segregated into trading and Banking portfolios, as in the management of market risk exposure, according to the best market practices and the transaction classification and capital management criteria of the New Standardized Approach of regulators. The trading portfolio consists of all transactions with financial instruments and products, including derivatives, held for trading, and the Banking portfolio consists of core business transactions arising from the different Banco Santander business lines and their possible hedges. Accordingly, based on the nature of Banco Santander’s activities, the sensitivity analysis was presented for trading and Banking portfolios.
Banco Santander performs the sensitivity analysis of the financial instruments in accordance with requirements of regulatory bodies and international best practices, considering the market information and scenarios that would adversely affect the positions and the income of the Bank.
The table below summarizes the stress amounts generated by Banco Santander’s corporate systems, related to the Banking and trading portfolio, for each one of the portfolio scenarios as of December 31, ~~2020~~.2021.

Trading portfolio

2020 2021
Risk Factor Description Scenario 1 Scenario 2 Scenario 3 Description Scenario 1 Scenario 2 Scenario 3
Interest Rate - Reais Exposures subject to changes in interest fixed rate (24,305 ) (275,618 ) (551,236 ) Exposures subject to changes in interest fixed rate (4,943) (108,670) (217,339)
Coupon Interest Rate Exposures subject to changes in coupon rate of interest rate (880 ) (9,048 ) (18,096 ) Exposures subject to changes in coupon rate of interest rate (550) (7,132) (14,265)
Coupon - US Dollar Exposures subject to changes in coupon US Dollar rate (5,757 ) (8,376 ) (16,753 ) Exposures subject to changes in coupon US Dollar rate (5,564) (34,407) (68,815)
Coupon - Other Currencies Exposures subject to changes in coupon foreign currency rate (109 ) (5,593 ) (11,187 ) Exposures subject to changes in coupon foreign currency  rate (5,270) (19,539) (39,077)
Foreign currency Exposures subject to foreign exchange (15,859 ) (396,473 ) (792,947 ) Exposures subject to foreign exchange (1,127) (1,900) (3,801)
Eurobond/Treasury/Global Exposures subject to Interest Rate Variation on Papers Traded on the International Market (1,653 ) (1,359 ) (2,718 ) Exposures subject to Interest Rate Variation on Papers Traded on the International Market (426) (10,658) (21,315)
Inflation Exposures subject to change in coupon rates of price indexes (37,322 ) (267,221 ) (534,442 ) Exposures subject to change in coupon rates of price indexes (5,218) (6,018) (12,035)
Shares and Indexes Exposures subject to change in shares price (184 ) (4,604 ) (9,208 ) Exposures subject to change in shares price (1,553) (38,814) (77,629)
Commodities Exposures subject to change in commodities' prices (52 ) (1,288 ) (2,575 ) Exposures subject to change in commodities' prices (1,184) (29,609) (59,217)
Total ⁽¹⁾ (86,122 ) (969,581 ) (1,939,161 ) (25,835) (256,747) (513,493)
(1) Amounts net of taxes.

Scenario 1: a shock of ~~+10 and -10~~10 base points on the interest curves and 1% to price changes (currency and stocks);
Scenario 2: a shock of +25% and -25% in all risk factors, are considered the greatest losses per risk factor;
Scenario 3: a shock of +50% and -50% in all risk factors, are considered the greatest losses per risk factor.

Portfolio Banking
2020 2021
Risk Factor Description Scenario 1 Scenario 2 Scenario 3 Description Scenario 1 Scenario 2 Scenario 3
Interest Rate - Reais Exposures subject to changes in interest fixed rate (24,638 ) (639,741 ) (1,870,133 ) Exposures subject to changes in interest fixed rate (48,956) (1,673,128) (3,756,544)
TR and Long-Term Interest Rate - (TJLP) Exposures subject to changes in Exchange of TR in TJLP (49,854 ) (576,298 ) (903,045 ) Exposures subject to changes in Exchange of TR in TJLP (6,413) (97,524) (145,711)
Inflation Exposures subject to change in coupon rates of price indexes (42,424 ) (286,671 ) (585,067 ) Exposures subject to change in coupon rates of price indexes (34,286) (455,628) (838,652)
Coupon - US Dollar Exposures subject to changes in coupon US Dollar rate (2,803 ) (60,177 ) (109,050 ) Exposures subject to changes in coupon US Dollar rate (13,530) (60,291) (117,298)
Coupon - Other Currencies Exposures subject to changes in coupon foreign currency rate (6,615 ) (60,266 ) (69,259 ) Exposures subject to changes in coupon foreign currency  rate (3,891) (7,770) (15,642)
Interest Rate Markets International Exposures subject to changes in interest rate negotiated roles in international market (14,660 ) 166,540 317,466 Exposures subject to changes in interest rate negotiated roles in international market (31,456) (78,782) (161,417)
Foreign Currency Exposures subject to Foreign Exchange (655 ) (16,371 ) (32,742 ) Exposures subject to Foreign Exchange 560 13,995 27,989
Total ⁽¹⁾ (141,649 ) (1,472,984 ) (3,251,830 ) (137,972) (2,359,128) (5,007,275)
(1) Amounts net of ~~taxes,~~
~~Consolidated Financial Statements | December 31, 2020 | F-143~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.taxes.

Scenario 1: a shock of +10bps and -10bps in interest rate curves and 1% price variance (currency and stocks); are considered the greatest losses per risk factor;
Scenario 2: a shock of +25% and -25% in all risk factors, are considered the greatest losses per risk factor;
Scenario 3: a shock of +50% and -50% in all risk factors, are considered the greatest losses per risk ~~factor,~~factor.
Consolidated Financial Statements | December 31, 2021 | F-141
Table of Contents

* Values expressed in thousands, except when indicated.
d) Bank´s business is highly dependent on the proper functioning of information technology ~~systems,~~systems.

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

e) Independent Structure

The Operational Risk & Internal Control area, ~~under~~subordinated to the Executive vice Presidency of Risk, ~~Vice-Presidency, acts~~operates independently as a second line of defense, supporting and challenging the first line of defense. ~~Guidelines,~~They maintain guidelines, policies and processes to ensure the conduct and adequacy of the Operational Risk Control and ~~management~~Management Model.
~~One~~The area adopts the definition of the Basel Committee, the Central Bank of Brazil and ~~other corporate~~the Corporative instructions applicable locally ~~for~~to Operational Risk ~~such~~ as the possibility of ~~loss of~~losses resulting from the inadequacy or failure of processes, operational ~~processes,~~and systems, or byfrom external events. In addition, ~~Banco Santander 's~~the Bank´s Board of Directors opted for the Alternative Standardized Approach (ASA) ~~to calculate~~for the calculation of the portion of ~~the~~ Reference Equity (PR) related to Operational Risk.

e.1) Operational Risks & Internal Control

The Operational Risk & Internal Control area has a mission with Banco Santander: To support the fulfillment of strategic objectives and the decision-making process, in adapting and meeting mandatory requirements, maintaining soundness, reliability, reducing and mitigating losses due to risks operational, in addition to implementation, dissemination of the Operational Risk culture.

Additionally, the Operational Risk & Internal Control area works to prevent Operational Risks and supports the continuous strengthening of the Internal Controls system, meeting the requirements of the Regulatory Bodies, Basel Accord, resolutions of the National Monetary Council (CMN) and Applicable Regulators. This Model also follows the guidelines established by Banco Santander Spain based on the COSO - Committee of Sponsoring Organizations of the Treadway Commission –Internal Control– Integrated Framework 2013.

Control and management model
Santander Brasil has implemented a model based on lines of defense that aims to improve and continuously develop the management and control of operational risks, ensuring that structures can assess, monitor, control, mitigate, report and reduce the risks and losses to which they are exposed.
The attributions of this model include carrying out activities for the identification, evaluation, monitoring, control, mitigation and reporting of Operational Risk. Thus, different analyzes and follow-ups are carried out and reported. The main instruments that make up the Operational Risk Control and management Model are presented below:

·● Definition of the operational risk appetite;
·● Capture and evaluation of loss events (internal and external);
·● Training, Communication and Culture;
·● Evaluation of products and services;
·● Self-assessment of operational risks;
·● Scenario analysis;
·● Risk and Control Indicators;
·● Internal controls.
~~Consolidated Financial Statements | December 31, 2020 | F-144~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

Model Governance
The Model has the approval of the Executive Risk Committee and approval by the Board of Directors, integrating the Organization's corporate governance structure and responsibility. Periodically, the relevant matters of Operational Risks are communicated to senior management for awareness and deliberations.

Consolidated Financial Statements | December 31, 2021 | F-142
Table of Contents

* Values expressed in thousands, except when indicated.
As part of the Risk Governance system, the Senior Forum on Internal Controls and Operational Risks (CIRO) is also implemented, whose objective is to deliberate for the Risk Pro Officers (RPO), of the 1st Line of Defense, policies, processes, procedures, strategy and decisions on the topics to be applied in the business units, and has a bimonthly periodicity.
In order to ensure a structured process for disseminating the culture of Operational Risk management and control, the relevant topics are dealt with in specific Committees and Forums.

e.2) Responsibilities and duties of the Operational Risks and Internal Controls area
The Operational Risks & Internal Control area acts as second line of defense in the Santander’s operational risk model and aim to achieve compliance with Santander Group’s corporate policies, and other regulations established by both local and global regulators. In addition, the area is responsible for the oversight and challenge of activities performed by the first line of defense and aim to achieve an integrated operational risk management approach. The main responsibilities attributed to the Operational Risk and Internal Control are listed below:
•
Disseminate the Operational Risk and Internal Controls management-oriented culture and converge towards the prevention and reduction of Operational Risk events and losses, mitigating the financial, legal, and reputational impacts.
• Improve risk analysis to reduce, consolidate and prioritize mitigation actions.
• Maintain the dynamics and control of operational risk exposure in line with risk appetite.
• Establish roles and responsibilities, with follow-up with those responsible in the lines of defense.
• Ensure business continuity and strengthen the Internal Controls environment.
• Provide adequate level of coverage in business units.
• Provide support for the Organization's strategic decisions based on the integrated Operational Risk profile and emerging trends.
• Implement the best practices for management and control of operational risks in the 1st and 2nd Lines of Defense.
• Identify the Operational Risk profile of the Organization.
• Provide continuous improvement of existing methodologies and deepening the culture of responsibility for Operational Risks and Internal ~~Controls.~~Controls

e.3) Differential factor

The Operational Risks & Internal Control area invests in the development, training and updating of its professionals so they can keep up with changes in the business environment, in addition to offering training programs for other professionals through the intranet and on-site courses. Among the personal course, we highlight the achievement of training aimed at increasing culture of RO management, training for the capture of operational losses, among others.
This has made a significant contribution to the Bank consistently achieve its strategic and operational goals, by providing knowledge of the exposure to assumed operational risks and the controlled environment, maintaining the Bank’s low-risk profile and ensuring the sustainable development of its operations.
The Bank highlights:

• Mandatory training for all Banco Santander employees through e-learnings ("NetCursos"), addressing the issue of operational ~~risks;~~
risks,
• The creation, dissemination, and maintenance of Instruction Manuals, promoting corporate values and ~~commitment;~~
commitment.
• Coordination of the annual process for projecting losses caused by operational risks, defining action plans to reduce these losses and for ~~accountability;~~
accountability.
• Development of key risk indicators, aiming to monitor the main operational ~~risks;~~
risks.
• ~~Composition~~Management of ~~lines of defense for~~ the ~~role of ORM~~“ORMN – Operational ~~risk management networks: "“~~Risk Management Network” considering roles performed by:
i)“RPO-Risk Pro Officer” ~~whose function is to report~~monitoring and reporting of operational risk management aspects to the ~~executive the follow-up~~Senior Management, ii) “RPA-Risk Pro Agent" and iii) “Operational Risk Assistants” management and implementation of the ~~topics of~~ Operational Risk ~~at the strategic level of the Executive Board, “RPA-Risk Pro Agent "~~Management Model within its Division and ~~"OR Assist" covering the perimeter of RO and "experts" in cases where the~~“Risk Experts” specifically for “transversal” operational risk ~~is transverse to the organization.~~
management purposes.

e.4) ~~Communication~~ Policy

The Operational Risks & Internal Control area is part of Santander’s governance structure and produces a series of specific monthly reports for management through the Integrated Operational Risk Committee (“~~CIRO”~~FSCIRO”) and the ~~“Forum~~“Reunião de RO”, (Operational Risk Forum detailing events that occurred, the main activities undertaken, corrective, preventive action plans and follow-up, ensuring transparency and knowledge to the governance forums.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-145~~F-143
Table of Contents

* Values expressed in thousands, except when indicated.

f) Reputation Risk

f.1) Reputation Risk

The reputation risk is defined as a risk of a negative economic impact, current and potential, due to a perception unfavorable of the Bank by its employees, clients, shareholders/investors and society in general.
The reputation risk may arise from multiple sources and, in many cases, is derived from other risk events. In general, these sources might be related to the business and other support activities that are realized by the Bank, the economic context, social or politic, or even by other events arising from other competitors that might affect the Bank.

f.2) Compliance

It is defined as legal risk, of regulatory sanctions, financial loss or reputation that an institution may suffer as a result of failures in the compliance with laws, rules, ethics and conduct codes and good bank practices. The compliance risk management has the goal of being preventive and includes the monitoring, educative processes, Consulting, risk evaluation and corporative communication related to the rules and legislation applicable to each business department.

f.3) Directives

a. Compliance principles – Ethics and Conduct in the Securities Markets

The Bank’s ethical principles and conduct parameters are established in internal policies which are made available to all employees. Conduct Code in the Securities Markets and its formal acknowledgement is mandatory to all staff working close to securities markets. Proper communication channels are in place to clarify doubts and complaints from employees, the monitoring and controlling of these information are conducted in a way that adherence to the rules established is secured.

b. ~~Preventing~~ Money Laundering ~~and Combating the Financing of Terrorism~~Prevention

The Bank’s money Laundering Prevention policies and terrorism financing prevention are based on the knowledge and rigorousness of the acceptance of new clients, complemented by the continuous scrutiny of all transactions where the Bank are involved in. The importance given to the theme is reflected on the direct involvement of management, namely the Operational Money Laundering Prevention and Compliance Committee, which meets each month to deliberate on issues regarding the theme and to be directly involved with new ~~clients~~client’s acceptance and suspicious transactions reporting.

c. New products and services and suitability

All new products and services are analyzed internally by different technical areas, ~~until their~~ensuring a multidisciplinary mapping of risks, ~~have been completely mapped,~~ and subsequently ~~resolved~~approved by the Local ~~Marketing~~Comercialization Committee (CLC), composed of Santander executives. After ~~the~~ analysis and approval, ofthe new products and services ~~follow-up is~~are subject to monitoring and tests carried out to mitigate any ~~risks of~~ conduct risk in ~~marketing.~~the sale.
��
g) Compliance with the new regulatory framework

~~The Banco~~ Santander Brazil has ~~assumed a firm commitment~~an integrated management of risks and capital for the decision-making process, respecting the guidelines of Resolution BCB No. 4,557. This process contributes to the ~~principles underlying~~optimization and efficiency in the ~~“Revised Framework~~use of ~~International Convergence of Capital Measurement and Capital Standards” (Basel II). This framework allows entities to make internal estimates~~capital in its operations, considering the objectives of the Institution with respect to capital ~~they are required~~ratios and return to ~~hold~~shareholders.
The Brazilian participation in order to safeguard their solvency against events caused by various types of risk. As a result of this commitment, the Bank has devoted all the human and material resources required to ensure the success of the Basel IICommittee on Banking Supervision (BCBS) encourages the timely implementation ~~plan. For this purpose, a Basel II team was created~~of international prudential standards in the past, consisting of professionals from the Bank’s different departments: mainly Finance, Risks, Technology and Operations, Internal Audit −to verify the whole process, as the last layer of control at the entity−, and Business −particularly as regards the integration of the internal models into management. Additionally, specific work teams have been set up to guarantee the proper management of the most complex aspects of the implementation.
Supplementing the efforts of the Basel II operating team, the Bank management has displayed total involvement from the very beginning. Thus, the progress of the project and the implications of the implementation of the New Capital Accord by the Banco Santander have been reported to the management committee and to the board of directors on a regular basis.
~~In the specific case of credit risk, the implementation of Basel II entails the recognition, for~~Brazilian regulatory ~~capital purposes, of the internal models that have been used for management purposes.~~
~~The institution has applied the internal models based ratings methodology (AIRB) of Basel II in part of its portfolios, in compliance with regulatory requirements.~~
framework.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-146~~F-144
Table of Contents
* Values expressed in thousands, except when indicated.

* Values expressed in thousands, except when indicated.
Aligned with this perspective, Santander Brazil invests in the continuous improvement of capital management processes and practices, in accordance with regulatory and supervisory benchmarks.
The Institution's capital management consists of a continuous process of planning, evaluation, control and monitoring of the capital required to cover the Conglomerate's relevant risks. It considers the capital necessary to support Pillar 1 risks (credit, market and operational); development of methodologies for quantifying additional capital requirements derived from the self-assessment process (Pillar II) should be compensated by the risk profile that characterizes the Bank's business activities (low average risk), due to its focus on Commercial Bank (smallfor Pillar 2 risks; Internal Capital Adequacy Assessment Process (ICAAP); projection and ~~medium-sized enterprises and Individuals) and the diversification~~monitoring of capital ratios; preparation of the ~~business. The Pillar II which considers~~capital plan and contingency plan; preparation of the ~~impact~~recovery plan; stress tests; and preparation of ~~risks not addressed under Pillar I (regulatory capital) and~~ the ~~benefits arising from the diversification among risks, businesses and geographical locations.~~
~~Regarding the other risks addressed under Pillar I of Basel II, Banco Santander was approved for the use of internal models for market~~quarterly risk and will remain using the standardized method for operational risk, since it considers the premature use of advanced models (AMA) for this purpose . Regarding the Market Risk, Banco Santander was approved to the use of Internal Models in February 2018 and started to disclose the capital ~~by this method from May 2018.~~
management report - Pillar II is another significant line of action under the Basel Corporate Framework. In addition to the methodology supporting the economic capital model review and strengthening, the technology was brought into line with the platform supporting Pillar I, so that all the information on credit risk will come from this source.
~~Besides the Basel II implementations, Banco Santander complies with the new regulations of Basel III, according to the standards issued by Bacen.~~
According to the definition proposed by the Basel Committee (Basel III), Credit Valuation Adjustment (CVA) is an adjustment to the fair value of derivative financial instruments in order to measure the credit risk of a counterparty. Thus, the CVA depends on the credit spread of the counterparty, as well as the market risk factors that drives the values of the derivatives and, therefore, their exposure. In an analytical way, the CVA can be defined by the following expression:
~~CVA = EE * PD * DF * LGD~~ ⁽¹⁾
~~(1) EE=Expected Exposure; PD=Probability of Default; DF=Discount Factor; LGD=Loss Given Default~~
Expected Exposure (EE) is the future exposure of the derivative based on the counterparty's market risk. The probability of default (PD) is calculated based on credit spreads and is also marked to market. The discount factor (DF) is the factor that brings to the present value the projected exposure weighted by its respective probability of default. A Loss Given Default (LGD) is the estimated loss in the event of a credit.3.

g.1) Internal validation of risk models

Internal validation is an important stage of model life cycle besides of being a pre-requisite for the supervisory validation process by Basel II implementation. A specialized team of the Entity, with sufficient independence, obtains a technical opinion on the adequacy of the internal models for the intended internal or regulatory purposes, and concludes on their usefulness and effectiveness. This team must also assess whether the risk management and control procedures are adequate for the Entity’s risk strategy and profile.
In addition to the regulatory requirement compliance, the internal validation department provides an essential support to the risk committee and management, since the internal validation area is responsible for providing a qualified and independent opinion so that the responsible authorities decide on the authorization of the use of models (for management purposes as well as regulatory use).
Internal model validation at Banco Santander encompasses credit risk models, market risk models, compliance, operational, ALM, pricing models, stress test models, the economic capital model and other models related to the exercise of ICAAP. The scope of the validation includes not only the more theoretical or methodological aspects, but also the technology systems and the quality of the data they provide, on which their effective operation relies, and, in general, all the relevant aspects of advanced risk management (controls, reporting, uses, involvement of management, etc.). Therefore, the goal of internal validation is to review quantitative, qualitative, technological and corporate governance related to regulatory and risk management ~~aspects concerning the model risk control.~~
~~Among~~processes.Among the main functions of the Internal Model Validation department are the following:

i. Establish general validation principles, conducting an independent evaluation process including (I) data quality, (II) Methodology aspects (III) technological environment, (IV) performance and (V) use and government;
ii. Evaluate the methodology and data used in the development of the model and challenge the model and its use, stating the implications and limitations of the model, as well as the associated risks;
iii. Issue a technical opinion on the adequacy of internal models for the intended internal and regulatory effects, concluding on their usefulness and effectiveness; and
iv. Provide essential support to risk committees and management of the Bank, through a qualified and independent opinion for responsible decision-making on the authorization of the use of models (for management purposes as well as regulatory use).
~~Consolidated Financial Statements | December 31, 2020 | F-147~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

It is important to note that Banco Santander's internal validation function is fully consistent with the independent validation criteria for advanced approach issued by the Basel Committee, the European supervisor 'home regulator' (Banco de España and the European Central Bank) and the Bacen in compliance with the rules Circular 3,648 dated March 4, 2013 (Chapter III), Circular Letter 3,565 of September 6, 2012, Circular 3,547 of July 2011, and Circ. 3648 IRB, 3646 IMA of 4/3/13, and Res. 4.277 of 31/10/13 and 4389 of 18/12/14 fair value, Res. 4557 of 23/02/17 GIR and Circ. 3876 of 31/01/18 IRRBB.
In this case, the Bank maintains a Segregation of functions between internal validation and internal audit, which is the last layer of Bank control validation.
The Internal Audit is responsible for evaluating and reviewing the internal validation methodology and work and issues opinions with an effective level of autonomy. Internal Audit (third line of defense), as the ultimate control function in the Group, should (i) periodically assess the adequacy of policies, methods and procedures and (ii) confirm that they are effectively implemented in the ~~management.~~management .

g.2) Capital ~~management~~Management

Capital management considers the regulatory and economic aspects and its objective is to achieve an efficient capital structure in terms of cost and compliance, meeting the requirements of the regulatory authorities and supporting to accomplish the goals of the classification of rating agencies and investors' expectations. Details regarding the capital management process can be found at www.ri.santander.com.br Corporate Governance -> Risk Management -> Risk and Capital Management Structure.
Consolidated Financial Statements | December 31, 2021 | F-145
Table of Contents

* Values expressed in thousands, except when indicated.

h) Economic capital

h.1) Main objectives

The development of economic capital models in finance aims to solve a fundamental problem of regulatory capital, Sensitivity Risk.
In this context, the economic capital models are essentially designed to generate risk-sensitive estimative, allowing greater precision in risk management, as well as better allocation of economic capital by business units of Banco Santander.
The Banco Santander has directed efforts to build a model of robust and integrated economic capital to the business management.
The main objectives of the structure of economic capital of the Banco Santander are:
1 - Consolidate Pillar I and other risks which affect business in a single quantitative model, and determine estimates of capital by establishing correlations between different risks;
2 - Quantify and monitor different types of variations in risk;
3 - Distribute capital consumption between the different portfolios and manage the efficiency of return on capital (RORAC);
4 - Estimating the Economic Value Added for each business unit. Economic profit must exceed the cost of the Bank's capital;
5 - Accordance with the regulation in locations where the Bank operates in the review process of Pillar II by supervisors.

h.2) The Economic Capital Model

In calculating the economic capital, it is the Bank's definition of losses to be covered. Thus, it is used a confidence interval necessary to ensure business continuity. The risk profile in Brazil is distributed by Credit risk, Market, ALM, Business, Operations and materials assets. However, to successfully anticipate the changes proposed in Basel III, new risks have been incorporated to model: Intangibles, pension funds (defined benefit) and deferred tax assets, which allow the Bank to adopt a position even more conservative and prudent.

% Capital 2020 2019 2018 2021 2020 2019
Risk Type New Methodology
Credit 69 % 72 % 72 % 62% 69% 71%
Market 2 % 2 % 2 % 2%
ALM 2 % 5 % 8 % 6% 2% 5%
Business 3 % 3 % 6 % 7% 3%
Operational 6 % 7 % 5 % 7% 6% 7%
Fixed Assets 2 % 2 % 1 % 1% 2%
Intangible Assets 5 % 1 % 0 % 5% 1%
Pension Funds 2 % 4 % 1 % 1% 2% 4%
Deferred Tax Assets 9 % 5 % 5 % 9% 5%
TOTAL 100 % 100 % 100 % 100%
Even so, as it is a commercial bank, Credit is Banco Santander's main source of risk and the evolution of its portfolio is one of the main factors for its fluctuation.
RoRAC

Banco Santander has used the RORAC, with the following objectives:
1 – Analyze and set a minimum price for operations (admission) and clients (monitoring).
2 – Estimate capital consumption of each client, economic groups, portfolio or business segment, in order to optimize the allocation of economic capital, maximizing the efficiency of the Bank.
~~Consolidated Financial Statements | December 31, 2020 | F-148~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.
3 – Measure and monitor business performance.
To evaluate the operations of global clients, the calculation of economic capital considers some variables used in the calculation of expected and unexpected losses.
Among these variables are:
1 – Counterparty rating;
2 – Maturity;
3 – Guarantees;
4 – Type of financing;

The economic value added is determined by the cost of capital. To create value for shareholders, the minimum return operation must exceed the cost of capital of Banco Santander.

Consolidated Financial Statements | December 31, 2021 | F-146
Table of Contents~~47.~~

* Values expressed in thousands, except when indicated.
47. Subsequent Events
~~Dividend Resolution~~
Acquisition of Equity Interest in Monetus Investimentos Ltda. and Monetus Corretora de Seguros Ltda.
On January 4, 2022, upon compliance with the applicable conditions precedent, Pi Distribuidora de Títulos e Valores Mobiliários SA (“Pi”), Toro Corretora de Títulos e Valores Mobiliários SA (“Toro CTVM”), and Toro Investimentos SA ( “Toro Investimentos” and, together with Toro CTVM, “Toro”) formalized, together with the partners of Monetus Investimentos Ltda., and Monetus Corretora de Seguros Ltda. (together “Monetus”), the closing of the transaction resulting from the investment agreement and other covenants, formalized on June 15, 2021 (“Closing”). As a result of the Closing, Toro Investimentos now holds 100% of Monetus' share capital. Monetus, originally from Belo Horizonte, carries out its activities through an automated objective-based investment application, after considering the client's needs and risk profile, the application automatically creates, executes and monitors a diversified and personalized investment strategy that use the platform to undertake and serve customers in the best way.
Acquisition of Equity Interest in Mobills Labs Soluções em Tecnologia Ltda. and Mob Soluções em Tecnologia Ltda.
On January 4, 2022, upon compliance with the applicable conditions precedent, Pi Distribuidora de Títulos e Valores Mobiliários SA (“Pi”), Toro Corretora de Títulos e Valores Mobiliários SA (“Toro CTVM”), and Toro Investimentos SA ( “Toro Investimentos” and, together with Toro CTVM, “Toro”), formalized, together with the partners of Mobills Labs Soluções em Tecnologia Ltda., and Mob Soluções em Tecnologia Ltda (together “Mobills”), the closing of the transaction resulting from of the investment agreement and other covenants, formalized on June 15, 2021 (“Closing”). As a result of the Closing, Toro Investimentos now holds 100% of the share capital of Mobills. Based in Ceará, Mobills has a variety of financial applications that have a large user base, especially related to financial planning.
Acquisition of Equity Interest in CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A.
On January 21, 2022, Santander Corretora de Seguros, Investimentos e Serviços S.A. ("Santander Corretora"), together with other investors – including Banco BTG Pactual S.A. and CBOE III, LLC – formalized, together with CSD Central de Serviços de Registro e Depósito aos Mercados Financeiro e de Capitais S.A. ("CSD BR ") and their respective shareholders, an investment agreement for the subscription of a minority equity interest in CSD BR ("Transaction "). CSD BR operates as a register of financial assets, derivatives, securities and insurance policies, authorized by the Central Bank of Brazil, the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários) and the Superintendence of Private Insurance (Superintendência de Seguros Privados). The effectiveness of the Transaction will be subject to the conclusion of the definitive instruments and the implementation of certain customary precedent conditions, with the applicable regulatory approvals. After the implementation of these conditions and with the closing of the Transaction, Santander Corretora's equity interest in CSD BR will be 20% (twenty percent).
Deliberation on Interim Dividends and Interest on Equity

The Board of Directors, inat a meeting held on February ~~2, 2021,~~1, 2022, approved the proposal of the Executive ~~Board's proposal,~~ Board, ad referendum of the Annual General ~~Meeting,~~Meetings to be held ~~until April 2021,~~in 2022 and 2023 respectively, for the distribution of ~~dividends,~~Interim Dividends, in the amount of R$ 1,300,000,000.00 (one billion, three hundred million reais), based on the profit for the year calculated until the balance sheet of December 31, 2021 and Interest on Equity, in the gross amount of R$~~512 million.~~1,700,000,000.00 (one billion and seven hundred million reais), based on the balance of the Company's Dividend Equalization Reserve. Shareholders who are registered in the Bank's records onat the end of February ~~3, 2021~~10, 2022 (inclusive) will be entitled to ~~the~~ Dividends ~~Accordingly,~~and Interest on Equity. Thus, as of February ~~16, 2021~~11, 2022 (inclusive), the Bank's shares will be traded ~~“Ex-dividends”~~“Ex-Dividends and Ex-Interest on Equity”. The ~~dividend~~ amount of Dividends and Interest on Equity will be paid as of March ~~3, 2021,~~4, 2022. Dividends will be fully ~~charged~~allocated to the minimum mandatory dividends to be distributed by the Bank, ~~for~~referring to the year ~~2020,~~2021 and Interest on Equity will be imputed in full to the mandatory minimum dividends to be distributed by the Bank, referring to the year 2022, without any monetary ~~restatement.~~restatement for both. The decision was approved by the Fiscal Council, ~~according to~~as per the meeting held on the same ~~date, and is in compliance with the provisions of CMN Resolution No, 4,885/2020.~~date.

~~Getnet Adquirência e Serviços para Meios de Pagamentos S.A.~~
Consolidated Financial Statements | December 31, 2021 | F-147
Table of Contents

* Values expressed in thousands, except when indicated.

Further to the Material Facts disclosed on November 16, 2020 and February 2, 2021, the bank informed its shareholders and the market in general that Santander Brasil’s Board of Directors, in a meeting held on February 25, 2021, their approval of the proposal to segregate Santander Brasil’s equity interest in its wholly-owned subsidiary Getnet Adquirência e Serviços para Meios de Pagamentos S.A. (“Getnet” and, jointly with Santander Brasil, the “Companies”), by means of a spin-off from Santander Brasil (“Spin-off”), to be evaluated by the shareholders of Santander Brasil in an Extraordinary Shareholders’ Meeting.

~~In addition, on February 25, 2021, the Fiscal Board of Santander Brasil opined in favor of the Spin-off proposal.~~
APPENDIX I – RECONCILIATION OF STOCKHOLDERS’ EQUITY AND NET INCOME - BRGAAP vs IFRS

The table below presents a conciliation of stockholders' equity and net income attributed to the parent between standards adopted in Brazil (BRGAAP) and IFRS, with the conceptual description of the main adjustments:

Thousand of Reais Note 2020 2019 2018

Stockholders' equity attributed under to the Parent Brazilian GAAP 78,968,183 69,773,232 65,233,743
IFRS adjustments, net of taxes, when applicable:
Reclassification of financial instruments at fair value through profit or loss i (882 ) 8,767 8,344
Reclassification of fair value through other comprehensive income j (522,107 ) 73,431 72,980
Impairment of financial assets measured at amortized cost a (635,194 ) (23,589 ) (1,483,043 )
Remensurations, Debt instruments, due to reclassifications IFRS 9 907 - 26,274
Category transfers - IFRS 9 b 357,972 (206,984 ) (619 )
Deferral of financial fees, commissions and inherent costs under effective interest rate method c 1,324,853 1,197,325 851,629
Reversal of goodwill amortization d 27,527,699 26,933,892 26,764,529
Realization on purchase price adjustments e 615,953 477,366 631,120
Recognition of fair value in the partial sale in subsidiaries f - 112,052 112,052
Option for Acquisition of Equity Instrument g (1,744,336 ) (1,816,799 ) (1,323,994 )
Goodwill acquisition Santander Services (Santusa) h (209,285 ) (239,182 ) (269,158 )
Tax Credit with realization over 10 years - 184,005 322,539
Others 93,224 177,064 119,074
Stockholders' equity attributed to the parent under IFRS 105,776,987 96,650,580 91,065,470
Non-controlling interest under IFRS 312,885 558,581 529,990
Stockholders' equity (including non-controlling interest) under IFRS 106,089,872 97,209,161 91,595,460
~~Consolidated Financial Statements | December 31, 2020 | F-149~~
Thousand of Reais Note 2021 2020 2019

Stockholders' equity attributed under to the Parent Brazilian GAAP 78,739,563 78,968,183 69,773,232
IFRS adjustments, net of taxes, when applicable:
Reclassification of financial instruments at fair value through profit or loss i (103,386) (882) 8,767
Reclassification of  fair value through other comprehensive income j 182,094 (522,107) 73,431
Impairment of financial assets measured at amortized cost a (1,468,494) (635,194) (23,589)
Remensurations, Debt instruments, due to reclassifications IFRS 9 -    907 -
Category transfers - IFRS 9 b (141,260) 357,972 (206,984)
Deferral of financial fees, commissions and inherent costs under effective interest rate method c 1,549,438 1,324,853 1,197,325
Reversal of goodwill amortization d 26,709,187 27,527,699 26,933,892
Realization on purchase price adjustments e 603,544 615,953 477,366
Recognition of fair value in the partial sale in subsidiaries f -    -    112,052
Option for Acquisition of Equity Instrument g (763,988) (1,744,336) (1,816,799)
Goodwill acquisition Santander Services (Santusa) h (179,387) (209,285) (239,182)
Tax Credit with realization over 10 years -    -    184,005
Others 512,835 93,224 177,064
Stockholders' equity attributed to the parent under IFRS 105,640,146 105,776,987 96,650,580
Non-controlling interest under IFRS 334,349 312,885 558,581
Stockholders' equity (including non-controlling interest) under IFRS 105,974,495 106,089,872 97,209,161

~~Table of Contents~~

Thousand of Reais Note 2021 2020 2019

Net income attributed to the Parent under Brazilian GAAP 14,987,716 13,469,380 14,180,987
IFRS adjustments, net of taxes, when applicable:
Reclassification of financial instruments at fair value through profit or loss i (83,995) (27,428) 422
Reclassification of  fair value through other comprehensive income j 45,826 68,960 451
Impairment of financial assets measured at amortized cost a (1,028,937) (498,778) 1,872,553
Remensurations, Debt instruments, due to reclassifications IFRS 9 -    907 (16,659)
Category transfers - IFRS 9 b 126,520 (78,057) 6,437
Deferral of financial fees, commissions and inherent costs under effective interest rate method c 215,525 185,478 346,298
Reversal of goodwill amortization d 29,658 145,903 175,257
Realization on purchase price adjustments e (17,758) (5,348) (153,752)
Option to Acquire Own Equity Instrument g 1,180,949 318,929 -
Goodwill acquisition Santander Services (Santusa) h 29,898 29,898 29,898
Tax credit with realization over 10 years -    (184,005) (75,995)
Others 42,648 (7,311) 41,035
Net income attributed to the parent under IFRS 15,528,051 13,418,528 16,406,932
Non-controlling interest under IFRS 31,272 32,224 224,518
Net income (including non-controlling interest) under IFRS 15,559,323 13,450,752 16,631,450

* Values expressed in thousands, except when indicated.
Thousand of Reais Note 2020 2019 2018

Net income attributed to the Parent under Brazilian GAAP 13,469,380 14,180,987 12,166,145
IFRS adjustments, net of taxes, when applicable:
Reclassification of financial instruments at fair value through profit or loss i (27,428 ) 422 (11,974 )
Reclassification of fair value through other comprehensive income j 68,960 451 28,419
Impairment of financial assets measured at amortized cost a (498,778 ) 1,872,553 140,557
Remensurations, Debt instruments, due to reclassifications IFRS 9 907 (16,659 ) (5,360 )
Category transfers - IFRS 9 b (78,057 ) 6,437 (16,195 )
Deferral of financial fees, commissions and inherent costs under effective interest rate method c 185,478 346,298 187,425
Reversal of goodwill amortization d 145,903 175,257 171,677
Realization on purchase price adjustments e (5,348 ) (153,752 ) (71,316 )
Option to Acquire Own Equity Instrument g 318,929 - (143,194 )
Goodwill acquisition Santander Services (Santusa) h 29,898 29,898 29,820
Tax credit with realization over 10 years (184,005 ) (75,995 ) 260,000
Others (7,311 ) 41,035 (153,527 )
Net income attributed to the parent under IFRS 13,418,529 16,406,932 12,582,477
Non-controlling interest under IFRS 32,224 224,518 217,441
Net income (including non-controlling interest) under IFRS 13,450,752 16,631,450 12,799,918
a) Impairment on loans and receivables and financial assets measured at amortized cost:

Refers to the adjustment resulting from the estimate of the expected loss on the portfolio of assets subject to impairment, loan commitments to be released and financial guarantee contracts, calculated based on the criteria described in the accounting practice note and in accordance with ~~provided for by IFRS 9 (in 2017 refers to the adjustment resulting from the estimated loss incurred in accordance with IAS 39, the then current norm).~~IFRS. Such criteria differ in certain aspects from those adopted under BRGAAP, which uses the regulatory limits defined by the Central Bank (Bacen), in addition to the difference in ~~the~~ scope of the ~~calculation~~ basis for calculating these losses, which for IFRS purposes considers other assets ~~other than~~in addition to those provided by Bacen.
Consolidated Financial Statements | December 31, 2021 | F-148
Table of Contents

* Values expressed in thousands, except when indicated.

b) Categories of financial assets

As detailed in the accounting practices note, IFRS9 provides for the definition of the business models associated with each portfolio, as well as the performance of the SPPI test - if the returns of that asset are exclusively principal and interest, for classification in the categories of financial assets. BRGAAP provides for certain differences in the categorization of these financial assets, as well as establishing as an indicator the ~~management's~~Management's intention for classification to be made. The criteria for reclassification between categories are also different between the two accounting practices.

c) Deferral of financial fees, commissions and other costs under effective interest rate method:

Under IFRS, financial fees, commissions and other costs that are integral part of effective interest rate of financial instruments measured at amortized cost are recognized in the income statement over the term of the corresponding contracts. Under BRGAAP these fees and expenses are recognized directly as income when received or paid.

d) Reversal of goodwill amortization:

Under BRGAAP, goodwill is systematically amortized over a period of up to 10 years, subject to the impairment test at least once a year or in a shorter period, in the event of any additional evidence. Under IFRS, in accordance with IAS 38 “Intangible Assets”, goodwill is not amortized, but instead, is tested for impairment, at least annually, and whenever there is an indication that the goodwill may be impaired. The tax amortization of goodwill of Banco ABN Amro Real SA represents a difference between book and tax basis of a permanent nature and definitive as the possibility of future use of resources to settle a tax liability is considered remote by management, supported by the opinion of expert external advisors. The tax amortization of goodwill is permanent and definitive, and therefore does not apply to the recognition of a deferred tax liability in accordance with IAS 12, on temporary differences.

e) Realization on purchase price adjustments:

As part of the purchase price allocation in acquisitions of an entity, substantially, in the acquisition of Banco Real, following the requirements of IFRS 3, the Bank has recognized the assets and liabilities of the acquiree to fair value, including identifiable intangible assets with finite lives. Under BRGAAP, in a business combination, the assets and liabilities are kept at their book value. This purchase price adjustment relates substantially to the allocation related to the value of assets in the loan portfolio. The initial recognition of value of the loans at fair value, adjustment to the yield curve of the loan portfolio in comparison to its nominal value, which is recognized by its average realization period.
~~Consolidated Financial Statements | December 31, 2020 | F-150~~
~~Table of Contents~~
* Values expressed in thousands, except when indicated.

f) Recognition of fair value in the partial disposal of investments in subsidiaries

Under IFRS 10 "Consolidated Financial Statements" on partial disposal of a permanent investment when control is lost, the fair value is recognized over the remaining portion is remeasured at its fair value, the effect of this update being recognized in result (Webmotors). Under BRGAAP, this type of operation, ongoing participation is registered by its book value.

g) Option for Acquisition of Equity Instrument

Within the context of transaction, Banco Santander has granted to the members of Getnet S.A. and Banco Olé Consignado a put option over all shares of Getnet S.A. and Banco Olé Consignado held by them. The overall out in IAS 32, a financial liability was recognized for this commitment, with a specific charge in a heading in stockholders' equity in the amount of R$950 million and R$67 million, respectively. Subsequently, the options have been updated and their effect is recognized in income. On December 19, 2018, Banco Santander and the Minority shareholders of Getnet SA entered into an addendum to the Purchase and Sale Agreement for Shares and Other Covenants of Getnet SA, in which Banco Santander committed to acquire all the shares of the Minority Shareholders, corresponding to 11.5% of the share capital of Getnet SA, for the amount of R$1,431,000. The acquisition was approved by BACEN on February 18, 2019 and concluded on February 25, 2019, so that Banco Santander now holds 100% of the shares representing Getnet SA's share capital. On March 14, 2019, the shareholder minority stake in Banco Olé Bonsucesso Consignado SA formalized its interest in exercising the put option provided for in the Investment Agreement, entered into on July 30, 2014, to sell its 40% stake in Olé Consignado to Banco Santander (Brazil) SA On December 20, 2019, the parties entered into a binding agreement for the acquisition, by Banco Santander, of all the shares issued by Bosan Participações SA, for the total amount of R$1.6 billion, to be paid on the closing date of the Operation. On January 30, 2020, the name of Banco Olé from Banco Olé Bonsucesso Consignado SA was changed to Banco Olé Cosignado SA On January 31, 2020, the Bank and the shareholders of Bosan Participações SA concluded the final agreement and signed the purchase and sale of 100% of the shares issued by Bosan, through the transfer of Bosan's shares to the Bank and payment to sellers in the total amount of R$1,608,772,783.47. As a result, the Bank became, directly and indirectly, the holder of 100% of Banco Olé's shares.

On March 31, 2021, the partial spin-off of Santander Brasil was approved, which resulted in the segregation of the shares owned by it issued by Getnet Adquirência e Serviços para Meios de Pagamentos SA (“Getnet”), with the spun-off portion being transferred to Getnet whose the effects are mentioned in note 27.a.
h) Santander Serviços goodwill (Santusa)

According to the IFRS 3 "Business Combination", when the owner acquires more shares or other equity instruments of an entity already controlled, it shall consider such amount as an equity reduction. According to the BRGAAP this amount shall be registered in the asset as goodwill or discount on the acquisition f the investment, which is the difference between the ~~acquision~~acquisition cost and the equity amount of the shares.
Consolidated Financial Statements | December 31, 2021 | F-149
Table of Contents

* Values expressed in thousands, except when indicated.

i) Reclassification of financial instruments at fair value through profit or loss

Under BRGAAP, all loans, financing and deposits are recorded at amortized cost. In IFRS, in accordance with IFRS 9 "Financial Instruments: Recognition and Measurement", financial assets may be measured at fair value and included in the category "Other financial assets at fair value through profit or loss", in order to eliminate or significantly reduce accounting mismatches ( accounting mismatch) of recognition or measurement derived from the measurement of assets or liabilities or from the recognition of gains or losses on these assets / liabilities on a number of bases, which are managed and their performances valued at fair value. Accordingly, the Bank classified loans, financing and deposits that meet these parameters as "fair value through profit or loss", as well as certain debt instruments classified as "available for sale" in BRGAAP. The Bank opted for this classification base in IFRS, since it eliminates an accounting mismatch in the recognition of revenues and expenses.

j) Reclassification of financial assets measured at fair value through other comprehensive income

According to the BRGAAP, the Bank registers some investments, for example, debt instruments initially measured at amortized cost and equity instruments at cost. At the time of this balance sheet, the management reviewed the managing strategy of its investments and according to Bacen Circular 3.068, the debt instruments were reclassified to "trading" measured at fair value with changes in the income statement. According to the IFRS, the Bank is classifying ~~this~~these investments as financial assets measured at fair value through other comprehensive income them at fair value with changes in "other comprehensive income", in line with IAS 9 "Financial Instruments ", which does not allow the reclassification of any financial instrument to fair value with changes in the income statement after the initial recognition.

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-151~~F-150
Table of Contents

* Values expressed in thousands, except when indicated.

~~Table of Contents~~

* Values expressed in thousands, except when indicated.

APPENDIX II – STATEMENTS OF VALUE ADDED

The following Statements of value added is not required under IFRS but being presented as supplementary information as required by Brazilian Corporate Law for publicly-held companies, and has been derived from the Bank´s consolidated financial statements prepared in accordance with IFRS.

2020 2019 2018 2021 2020 2019
Thousand of Reais
Interest and similar income 62,774,940 72,841,060 70,478,393 Interest and similar income 77,987,308 62,774,940 72,841,060
Net fee and commission income 16,228,214 15,713,152 14,132,159 Net fee and commission income 15,273,301 16,228,214 15,713,152
Impairment losses on financial assets (net) (17,450,188 ) (13,369,905 ) (12,713,435 ) Impairment losses on financial assets (net) (17,112,734) (17,450,188) (13,369,905)
Other income and expense (5,012,403 ) (4,025,384 ) (6,861,406 ) Other income and expense (3,843,999) (5,012,403) (4,025,384)
Interest expense and similar charges (18,332,228 ) (28,519,953 ) (28,557,051 ) Interest expense and similar charges (28,885,478) (18,332,228) (28,519,953)
Third-party input (7,946,539 ) (7,544,695 ) (7,219,152 ) (8,078,399) (7,946,539) (7,544,695)
Materials, energy and others (641,831 ) (659,656 ) (544,237 ) Materials, energy and others (713,400) (641,831) (659,656)
Third-party services (6,424,755 ) (6,047,498 ) (5,572,127 ) Third-party services (6,231,129) (6,424,755) (6,047,498)
Impairment of assets (84,908 ) (131,435 ) (508,310 ) Impairment of assets (165,799) (84,908) (131,435)
Other (795,045 ) (706,106 ) (594,478 ) (968,071) (795,045) (706,106)
Gross added value 30,261,796 35,094,275 29,259,508 Gross added value 35,339,999 30,261,796 35,094,275
Retention
Depreciation and amortization (2,579,127 ) (2,391,857 ) (1,739,959 ) Depreciation and amortization (2,433,921) (2,579,127) (2,391,857)
Added value produced 27,682,669 32,702,418 27,519,549 Added value produced 32,906,078 27,682,669 32,702,418
Added value received from transfer
Investments in affiliates and subsidiaries 112,261 149,488 65,958 Investments in affiliates and subsidiaries 144,184 112,261 149,488
Added value to distribute 27,794,930 32,851,906 27,585,507 Added value to distribute 33,050,262 27,794,930 32,851,906
Added value distribution Added value distribution
Employee 7,943,711 28.6 % 8,457,212 25.7 % 8,185,896 29.7 % 8,045,893 24.3% 7,943,711 28.6% 8,457,212 25.7%
Compensation 5,749,699 5,961,765 5,863,584 5,929,439 5,749,669 5,961,765
Benefits 1,514,611 1,637,099 1,534,560 1,593,386 1,514,611 1,637,099
Government severance indemnity funds for employees - FGTS 448,457 502,173 448,699 Government severance indemnity funds for employees - FGTS 431,249 448,457 502,173
Other 230,974 356,175 339,053 91,819 230,974 356,175
Taxes 6,298,717 22.7 % 7,674,704 23.4 % 5,813,381 21.1 % 9,269,368 28.0% 6,298,717 22.7% 7,674,704 23.4%
Federal 10,088,318 6,571,450 4,864,176 8,332,994 10,088,318 6,571,450
State (830,771 ) 54 224 813 (830,771) 54
Municipal (2,958,830 ) 1,103,200 948,981 935,561 (2,958,830) 1,103,200
Compensation of third-party capital - rental 101,749 0.4 % 88,540 0.3 % 786,312 2.9 % Compensation of third-party capital - rental 175,677 0.5% 101,749 0.4% 88,540 0.3%
Remuneration of interest on capital 13,450,753 48.4 % 16,631,450 50.6 % 12,799,918 46.4 % Remuneration of interest on capital 15,559,324 47.1% 13,450,753 48.4% 16,631,450 50.6%
Dividends and interest on capital 3,837,085 10,800,000 6,600,000 Dividends and interest on capital 9,649,000 3,837,085 10,800,000
Profit Reinvestment 9,581,444 5,606,932 5,982,477 Profit Reinvestment 5,879,052 9,581,444 5,606,932
Profit (loss) attributable to non-controlling interests 32,224 224,518 217,441 Profit (loss) attributable to non-controlling interests 31,272 32,224 224,518
Total 27,794,930 100.0 % 32,851,906 100.0 % 27,585,507 100.0 % 33,050,262 100.0% 27,794,930 100.0% 32,851,906 100.0%

Consolidated Financial Statements | December 31, ~~2020~~2021 | ~~F-152~~F-151
Table of Contents
F2A4E6A5-86EA-4413-90D6-619423C4A8DF|3|Oracle.SmartView.EPRCS|{afcc4414-f02e-4a9c-b0ac-40ef51fc9dbe}

Title of each class	Trading ~~Symbol~~Symbols	Name of each exchange on which registered
Units, each composed of 1 common share, no par value, and 1 preferred share, no par value	SANB11	New York Stock Exchange*
Common Shares, no par 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~~3,802,939,826
Preferred shares	~~3,679,836,020~~3,664,080,815

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

~~PRESENTATION OF FINANCIAL AND OTHER INFORMATION~~	7Page

~~FORWARD-LOOKING STATEMENTS~~Presentation of Financial and Other Information	iii
9Forward-Looking Statements	vii
PART I	127
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	127
1A. Directors and Senior Management	127
1B. Advisers	128
1C. Auditors	128
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	128
2A. Offer Statistics	128
2B. Method and Expected Timetable	128
ITEM 3. KEY INFORMATION	128
3A. Selected Financial Data	128
3B. Capitalization and Indebtedness	2117
3C. Reasons for the Offer and Use of Proceeds	2117
3D. Risk Factors	2117
ITEM 4. INFORMATION ON THE COMPANY	6459
4A. History and Development of the Company	6459
4B. Business Overview	71
4C. Organizational Structure	~~147~~146
4D. Property, Plant and Equipment	~~149~~148
ITEM 4A. UNRESOLVED STAFF COMMENTS	~~149~~148
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	~~149~~148
5A. Operating Results	~~149~~148
5B. Liquidity and Capital Resources	~~181~~172
5C. Research and Development, Patents and Licenses, etc.	~~185~~177
5D. Trend Information	~~185~~177
5E. ~~Off-Balance Sheet Arrangements~~Critical Accounting Estimates	~~186~~
~~5F. Contractual Obligations~~	~~187~~
~~5G. Safe Harbor~~	~~187~~178
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	~~187~~178
6A. Board of Directors and Board of Executive Officers	~~185~~178
6B. Compensation	~~201~~192
6C. Board Practices	~~206~~196
6D. Employees	~~214~~203
6E. Share Ownership	~~216~~204
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	~~217~~205
7A. Major Shareholders	~~217~~205

~~ITEM 16B. SANTANDER BRASIL’S CODE OF ETHICAL CONDUCT~~	~~286~~268
~~ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES~~16B. Santander Brasil’s Code of Ethical Conduct	~~286~~268
~~ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES~~16C. Principal Accountant Fees and Services	~~287~~269
~~ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS~~16D. Exemptions from the Listing Standards for Audit Committees	~~287~~269
~~ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT~~16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers	~~288~~270
~~ITEM 16G. CORPORATE GOVERNANCE~~16F. Change in Registrant’s Certifying Accountant	~~288~~270
~~ITEM 16H. MINE SAFETY DISCLOSURE~~16G. Corporate Governance	270
~~291~~16H. Mine Safety Disclosure	273
16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	274
PART III	~~292~~275
ITEM 17. FINANCIAL STATEMENTS	~~292~~275
ITEM 18. FINANCIAL STATEMENTS	~~292~~275
ITEM 19. EXHIBITS	~~292~~275

7B. Related Party Transactions	~~219~~207
7C. Interests of Experts and Counsel	~~220~~209
ITEM 8. FINANCIAL INFORMATION	~~220~~209
8A. Consolidated Statements and Other Financial Information	~~220~~209
8B. Significant Changes	~~230~~218
ITEM 9. THE OFFER AND LISTING	~~230~~218
9A. Offering and Listing Details	~~230~~218
9B. Plan of Distribution	~~237~~222
9C. Markets	~~237~~222
9D. Selling Shareholders	~~237~~224
9E. Dilution	~~237~~225
9F. Expenses of the Issue	~~237~~225
ITEM 10. ADDITIONAL INFORMATION	~~237~~225
10A. Share Capital	~~237~~225
10B. By-Laws	~~237~~225
10C. Material Contracts	~~249~~234
10D. Exchange Controls	~~249~~234
10E. Taxation	~~250~~236
10F. Dividends and Paying Agents	~~258~~243
10G. Statement by Experts	~~259~~243
10H. Documents on Display	~~259~~243
10I. Subsidiary Information	~~259~~243
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	~~259~~243
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	~~282~~265
12A. Debt Securities	265

12B. Warrants and Rights	~~282~~265
12C. Other Securities	~~282~~265
12D. American Depositary Receipts	~~282~~266
PART II	~~284~~267
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	~~284~~267
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	~~284~~267
ITEM 15. CONTROLS AND PROCEDURES	~~284~~267
15A. Disclosure Controls and Procedures	~~284~~267
15B. Management’s Annual Report on Internal Control over Financial Reporting	~~284~~267
15C. ~~Audit~~Attestation Report of the Registered Public Accounting Firm	~~285~~268
15D. Changes in Internal Control over Financial Reporting	~~285~~268
ITEM 16. [RESERVED]	~~285~~268
~~ITEM~~ 16A. ~~AUDIT COMMITTEE FINANCIAL EXPERT~~Audit Committee Financial Expert	~~285~~

	As of and for the Year Ended December 31,
	2021		2020		2019		2018		2017
		(%)
Profitability and performance
Return on average total assets		1.7		1.6		2.3		1.9		1.4
Asset quality
Impaired assets as a percentage of loans and advances to customers (gross)(1)		5.5		5.5		6.7		7.0		6.7
Impaired assets as a percentage of total assets(1)		2.9		2.5		3.1		3.1		3.0
Impairment losses to customers as a percentage of impaired assets(1) (4)		105.9		103.8		87.8		90.3		80.5
Impairment losses to customers as a percentage of loans and advances to customers (gross) (5)		5.8		5.8		5.9		6.3		5.4
Derecognized assets as a percentage of loans and advances to customers (gross)		3.0		3.7		4.3		3.5		4.7
Impaired assets as a percentage of stockholders’ equity(1)		25.5		21.8		24.3		24.5		22.0
Capital adequacy
Basel capital adequacy ratio(2)		14.9		15.3		15.0		15.1		15.8
Efficiency
Efficiency ratio(3)		27.1		35.5		28.8		33.9		33.1

	Period-end		Average(1)		Low		High
	(per U.S. dollar)
Year:
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
2020		5.20		5.16		4.02		5.94
Month Ended:
September 2020		5.64		5.40		5.25		5.65
October 2020		5.77		5.63		5.52		5.78
November 2020		5.33		5.42		5.28		5.69
December 2020		5.20		5.15		5.06		5.28
January 2021		5.48		5.36		5.16		5.51
February 2021 (through February 24, 2021)		5.42		5.41		5.34		5.50

	As of December 31,						Change between 2019			Change between 2018
	2020		2019		2018		and 2020			and 2019
	(R$ millions)
Individuals		174,042		156,177		133,603		11.4	%		16.9	%
Consumer Finance		51,637		48,421		40,964		6.6	%		18.2	%
SMEs		54,525		53,119		49,624		2.6	%		7.0	%
Corporate(1)		137,618		89,539		97,742		53.7	%		-8.4	%
Total Credit Portfolio		417,822		347,257		321,933		20.3	%		7.9	%

	As of December 31,						Change between 2019 and		Change between 2018 and
	2020		2019		2018		2020		2019
Individual consumer finance loan portfolio market share (1) (%)		25.1%		25.0%		25.4%		0.1 p.p		(0.4) p.p

☐ ~~Item 17~~	☐ ~~Item 18~~