| Risk and Capital Management a) Corporate Governance | Note 32 – Risk and Capital Management a) Corporate Governance ITAÚ UNIBANCO HOLDING invests in robust risk management processes and capital management that are the basis for its strategic decisions to ensure business sustainability and maximize shareholder value creation. These processes are aligned with the guidelines of the Board of Directors and Executive which, through collegiate bodies, define the global objectives expressed as targets and limits for the business units that manage risk. Control and capital management units, in turn, support ITAÚ UNIBANCO HOLDING’s management by monitoring and analyzing risk and capital. The Board of Directors is the main body responsible for establishing guidelines, policies and approval levels for risk and capital management. The Capital and Risk Management Committee (CGRC), in turn, is responsible for supporting the Board of Directors in managing capital and risk. At the executive level, collegiate bodies, presided over by the Chief Executive Officer (CEO) of ITAÚ UNIBANCO HOLDING, are responsible for capital and risk management, and their decisions are monitored by the CGRC. Additionally, ITAÚ UNIBANCO HOLDING has collegiate bodies with capital and risk management responsibilities delegated to them, chaired by the Executive Vice-President of the Risk and Finance Department (ARF). To support this structure, ARF has departments to ensure, on an independent and centralized basis, that the institution’s risks and capital are managed in compliance with defined policies and procedures. b) Risk Management Risk Appetite The risk appetite of ITAÚ UNIBANCO HOLDING is based on the Board of Director’s statement: “We are a universal bank, operating mainly in Latin America. Supported by our risk culture, we insist on with strict ethical standards and regulatory compliance, seeking high and increasing returns, with low volatility, through lasting relationships with our customers, accurate risk pricing, widespread funding and proper use of capital.” Based on this statement, five dimensions have been defined, each dimension consists of a set of metrics associated with the main risks involved, combining supplementary measurement methods, to give a comprehensive vision of our exposure. The Board of Directors is responsible for approving guidelines and limits for risk appetite, with the support of CGRC and the CRO (Chief Risk Officer). The limits for risk appetite are monitored regularly and reported to risk committees and to the Board of Directors, which will oversee the preventive measures to be taken to ensure that exposure is aligned with the strategies of ITAÚ UNIBANCO HOLDING. The five dimensions of risk appetite are: • Capitalization: • Liquidity: • Composition of results: • Operational risk: • Reputation: Risk appetite, risk management and guidelines for employees of ITAÚ UNIBANCO HOLDING for routine decision-making purposes are based on: • Sustainability and customer satisfaction: • Risk culture: • Risk pricing: • Diversification: • Operational excellence: • Ethics and respect for regulations: ITAÚ UNIBANCO HOLDING has various ways of disseminating risk culture, based on four principles: conscious risk-taking, discussion of the risks the institution faces, the corresponding action taken, and the responsibility of everyone for managing risk. These principles serve as a basis for ITAÚ UNIBANCO HOLDING guidelines, helping employees to conscientiously understand, identify, measure, manage and mitigate risks. 1. Credit risk The possibility of losses arising from failure by a borrower, issuer or counterparty to meet their financial obligations, the impairment of a loan due to downgrading of the risk rating of the borrower, the issuer or the counterparty, a decrease in earnings or remuneration, advantages conceded on renegotiation or the costs of recovery. There is a credit risk control and management structure, centralized and independent from the business units, that provides for operating limits and risk mitigation mechanisms, and also establishes processes and tools to measure, monitor and control the credit risk inherent in all products, portfolio concentrations and impacts of potential changes in the economic environment. The credit policy of ITAÚ UNIBANCO HOLDING is based on internal criteria such as: classification of customers, portfolio performance and changes, default levels, rate of return and economic capital allocated, and external factors such as interest rates, market default indicators, inflation, changes in consumption, and so on. For personal customers and small and middle-market companies, credit rating is based on statistical application models (at the early stages of the relationship with a customer) and behavior score (used for customers with which ITAÚ UNIBANCO HOLDING already has a relationship). For large companies, the rating is based on information such as economic and financial condition of the counterparty, their cash-generating capability, the economic group to which they belong, and the current and prospective situation of the economic sector in which they operate. Credit proposals are analyzed on a case by case basis, through an approval-level mechanism. ITAÚ UNIBANCO HOLDING strictly controls the credit exposure of customers and counterparties, taking action to address situations in which the current exposure exceeds what is desirable. For this purpose, measures provided for in loan agreements are available, such as accelerated maturity or a requirement for additional collateral. 1.1 Collateral and policies for mitigating credit risk ITAÚ UNIBANCO HOLDING uses guarantees to increase its capacity for recovery in operations exposed to credit risk. The guarantees may be personal, secured, legal structures with mitigating power and offset agreements. For collateral to be considered instruments that mitigate credit risk, they must comply with the requirements and standards that regulate them, both internal and external ones, and they must be legally valid (effective), enforceable, and assessed on a regular basis. ITAÚ UNIBANCO HOLDING also uses credit derivatives, to mitigate credit risk of its portfolios of loans and securities. These instruments are priced based on models that use the fair value of market inputs, such as credit spreads, recovery rates, correlations and interest rates. 1.2 Policy for Provisioning and Economic Scenarios Both the credit risk and the finance areas are responsible for defining the methods used to measure expected loan losses and for periodically assessing changes in the provision amounts. These areas monitor the trends observed in provisions for expected credit losses by segment, in addition to establishing an initial understanding of the variables that may trigger changes in the allowance for loan losses, the probability of default (PD) or the loss given default (LGD). Once the trends have been identified and an initial assessment of the variables has been made at the corporate level, the business areas are responsible for further analyzing these trends in more detail and for each segment, in order to understand the underlying reasons for the trends and to decide whether changes are required in credit policies. Provisions for expected losses take into account the expected risk linked to contracts with similar characteristics and in anticipation of signs of deterioration, over a loss horizon suitable for the remaining period of the contract to maturity. For contracts of products with no determined termination date, average results of deterioration and default are used to determine the loss horizon. Additionally, information on economic scenarios and public data with internal projections are used to determine and adjust the expected credit loss in line with expected macroeconomic realities. Sensitivity analysis ITAÚ UNIBANCO HOLDING prepares studies on the impact of estimates in the calculation of expected credit loss. The expected loss models use three different scenarios: Optimistic, Base and Pessimistic.In Brazil, where operations are substantially carried out, these scenarios are combined by weighting their probabilities: 15%, 40% and 45% (2019 – 10%, 75% and 15%), respectively, which are updated so as to reflect the new economic conditions. For loan portfolios originated in other countries, the scenarios are weighted by different probabilities, considering regional economic aspects and conditions The table below shows the amount of financial assets at amortized cost and at fair value through other comprehensive income, expected loss and the impacts on the calculation of expected credit loss in the adoption of 100% of each scenario: 12/31/2020 12/31/2019 Reduction/(Increase) of Reduction/(Increase) of Financial Assets (1) Expected Loss (2) Expected Loss Financial Assets (1) Expected Loss (2) Expected Loss Pessimistic scenario Base scenario Optimistic scenario Pessimistic scenario Base scenario Optimistic scenario 951,343 (51,480 ) (830 ) 491 1,416 793,610 (40,247 ) (328 ) 13 193 (1) Composed of Loan operations, lease operations and securities. (2) Comprises expected credit loss for Financial Guarantees R$ (907) (R$ (837) at 12/31/2019) and Loan Commitments R$ (3,485) (R$ (3,303) at 12/31/2019). 1.3 Classification of Stages of Credit Impairment ITAÚ UNIBANCO HOLDING uses customers’ internal information, statistic models, days of default and quantitative analysis in order to determine the credit status of portfolio agreements. Rules for changing stages take into account lower and higher internal limits (quantitative criteria), in addition to the relative variation in the rating since the initial recognition. Information on days of delay, used on an absolute basis, is an important factor for the classification of stages, and after a certain credit status has been defined for an agreement, it is classified in one of the three stages of credit deterioration. Based on this classification, rules for measuring expected credit loss in each stage are used, as described in Note 2.4d. For retail and middle market portfolios, ITAÚ UNIBANCO HOLDING classifies loan agreements which are over 30 days overdue in stage 2, except payroll loans for government agency, for which the figure is 45 days, due to the dynamics of payment for transfer of the product. For the Wholesale business portfolio, information on arrears is taken into account when allocating a rating. Default parameters are: 90 days with no payments made (*) (*) For the real estate loans portfolio, the figure is 180 1.4 Maximum Exposure of Financial Assets to Credit Risk 12/31/2020 12/31/2019 Brazil Abroad Total Brazil Abroad Total Financial Assets 1,294,428 466,835 1,761,263 1,073,430 336,803 1,410,233 At Amortized Cost 861,485 324,255 1,185,740 755,773 254,871 1,010,644 Interbank deposits 17,775 37,910 55,685 10,620 23,963 34,583 Securities purchased under agreements to resell 237,528 2,415 239,943 197,157 1,271 198,428 Securities 103,146 26,658 129,804 114,046 19,073 133,119 Loan and lease operations 468,461 245,643 714,104 386,206 199,585 585,791 Other financial assets 67,425 25,830 93,255 75,968 18,784 94,752 (-) Provision for Expected Loss (32,850 ) (14,201 ) (47,051 ) (28,224 ) (7,805 ) (36,029 ) At Fair Value Through Other Comprehensive Income 48,992 60,950 109,942 35,990 40,670 76,660 Securities 48,992 60,950 109,942 35,990 40,670 76,660 At Fair Value Through Profit or Loss 383,951 81,630 465,581 281,667 41,262 322,929 Securities 365,718 23,353 389,071 271,470 9,605 281,075 Derivatives 18,227 58,277 76,504 10,197 31,657 41,854 Other financial assets 6 — 6 — — — Financial liabilities – provision for expected loss 3,655 737 4,392 3,581 559 4,140 Loan Commitments 3,135 350 3,485 2,909 394 3,303 Financial Guarantees 520 387 907 672 165 837 Off balance sheet 372,542 58,773 431,315 338,262 48,893 387,155 Financial Guarantees 51,830 17,103 68,933 52,663 14,057 66,720 Letters of credit to be released 41,477 — 41,477 15,013 — 15,013 Loan commitments 279,235 41,670 320,905 270,586 34,836 305,422 Mortgage loans 6,357 — 6,357 5,536 — 5,536 Overdraft accounts 126,302 — 126,302 124,449 — 124,449 Credit cards 144,386 3,859 148,245 138,014 2,823 140,837 Other pre-approved limits 2,190 37,811 40,001 2,587 32,013 34,600 Total 1,663,315 524,871 2,188,186 1,408,111 385,137 1,793,248 Amounts shown for credit risk exposure are based on gross book value and do not take into account any collateral received or other added credit improvements. The contractual amounts of financial guarantees and letters of credit cards represent the maximum potential of credit risk in the event that a counterparty does not meet the terms of the agreement. The vast majority of loan commitments (mortgage loans, overdraft accounts and other pre-approved limits) mature without being drawn, since they are renewed monthly and can be cancelled unilaterally. As a result, the total contractual amount does not represent our real future exposure to credit risk or the liquidity needs arising from such commitments. 1.4.1. By business sector Loans and lease operations 12/31/2020 % 12/31/2019 % Industry and commerce 163,784 22.9 129,998 22.2 Services 172,322 24.1 126,718 21.6 Other sectors 37,565 5.3 26,693 4.6 Individuals 340,433 47.7 302,382 51.6 Total 714,104 100.0 585,791 100.0 Other financial assets (*) 12/31/2020 % 12/31/2019 % Public sector 713,705 71.2 562,485 73.5 Services 79,788 8.0 59,193 7.7 Other sectors 67,636 6.8 45,744 6.0 Financial 139,820 14.0 98,297 12.8 Total 1,000,949 100.0 765,719 100.0 (*) Includes Financial Assets at Fair Value through Profit and Loss, Financial Assets at Fair Value through Other Comprehensive Income and Financial Assets at Amortized Cost, except for Loan and Lease Operations and Other Financial Assets. The exposure of Off Balance financial instruments (Financial Collaterals and Loan Commitments) is neither categorized nor managed by business sector. 1.4.2 By type and classification of credit risk Loan and lease operations 12/31/2020 Stage 1 Stage 2 Stage 3 Total Consolidated of 3 stages Loans Loan Financial Total Loans Loan Financial Total Loans Loan Financial Total Loans Loan Financial Total Individuals 199,158 190,273 854 390,285 30,793 19,387 — 50,180 25,532 987 — 26,519 255,483 210,647 854 466,984 Corporate 123,665 17,670 43,602 184,937 2,793 16 595 3,404 8,063 93 2,516 10,672 134,521 17,779 46,713 199,013 Micro/Small and medium companies 96,784 50,813 5,434 153,031 15,965 3,884 440 20,289 9,206 307 131 9,644 121,955 55,004 6,005 182,964 Foreign loans - Latin America 167,601 35,960 14,498 218,059 16,692 1,414 676 18,782 17,852 101 187 18,140 202,145 37,475 15,361 254,981 Total 587,208 294,716 64,388 946,312 66,243 24,701 1,711 92,655 60,653 1,488 2,834 64,975 714,104 320,905 68,933 1,103,942 % 62.1 31.1 6.8 100.0 71.5 26.7 1.8 100.0 93.3 2.3 4.4 100.0 64.7 29.1 6.2 100.0 12/31/2019 Stage 1 Stage 2 Stage 3 Total Consolidated of 3 stages Loans Loan Financial Total Loans Loan Financial Total Loans Loan Financial Total Loans Loan Financial Total Individuals 199,907 197,717 861 398,485 19,070 6,437 — 25,507 21,513 763 — 22,276 240,490 204,917 861 446,268 Corporate 91,448 16,411 44,720 152,579 911 22 200 1,133 8,430 102 3,420 11,952 100,789 16,535 48,340 165,664 Micro/Small and medium companies 77,722 50,307 4,817 132,846 7,225 2,378 38 9,641 5,786 190 46 6,022 90,733 52,875 4,901 148,509 Foreign loans - Latin America 132,812 29,842 12,087 174,741 14,714 1,166 424 16,304 6,253 87 107 6,447 153,779 31,095 12,618 197,492 Total 501,889 294,277 62,485 858,651 41,920 10,003 662 52,585 41,982 1,142 3,573 46,697 585,791 305,422 66,720 957,933 % 58.5 34.3 7.2 100.0 79.7 19.0 1.3 100.0 89.9 2.4 7.7 100.0 61.1 31.9 7.0 100.0 Internal Rating 12/31/2020 12/31/2019 Stage 1 Stage 2 Stage 3 Total loans Stage 1 Stage 2 Stage 3 Total loans Low 501,463 13,172 — 514,635 420,936 4,204 — 425,140 Medium 84,193 37,249 — 121,442 80,106 17,871 — 97,977 High 1,552 15,822 — 17,374 847 19,845 — 20,692 Credit-Impaired — — 60,653 60,653 — — 41,982 41,982 Total 587,208 66,243 60,653 714,104 501,889 41,920 41,982 585,791 % 82.2 9.3 8.5 100.0 85.6 7.2 7.2 100.0 Other financial assets 12/31/2020 Stage 1 Stage 2 Stage 3 Fair Value Cost Fair Value Cost Fair Value Cost Fair Value Investment funds 14,204 3,232 2,997 10,943 10,943 1,232 264 Government securities 483,791 479,477 483,791 — — — — Brazilian government 422,098 417,782 422,098 — — — — Other Public — 36 — — — — — Other countries 61,693 61,659 61,693 — — — — Argentina 1,498 1,480 1,498 — — — — United States 5,835 5,847 5,835 — — — — Mexico 10,222 10,227 10,222 — — — — Italy 130 133 130 — — — — Spain 4,844 4,847 4,844 — — — — Korea 3,947 3,951 3,947 — — — — Chile 23,195 23,183 23,195 — — — — Paraguay 2,950 3,011 2,950 — — — — Uruguay 978 964 978 — — — — Colombia 8,089 8,012 8,089 — — — — Peru 5 4 5 — — — — Corporate securities 127,757 122,695 122,326 3,485 2,738 5,873 2,693 Rural product note 5,823 5,717 5,723 38 36 115 64 Real estate receivables certificates 5,342 5,290 5,268 77 73 — 1 Bank deposit certificate 1,066 1,064 1,066 — — — — Debentures 62,723 57,963 58,365 2,402 1,779 5,462 2,579 Eurobonds and other 7,604 7,445 7,604 — — — — Financial bills 15,783 15,784 15,783 — — — — Promissory notes 7,629 7,611 7,629 — — — — Other 21,787 21,821 20,888 968 850 296 49 Total 625,752 605,404 609,114 14,428 13,681 7,105 2,957 12/31/2019 Stage 1 Stage 2 Stage 3 Fair Value Cost Fair Value Cost Fair Value Cost Fair Value Investment funds 8,267 8,322 8,062 — — 955 205 Government securities 366,998 364,078 366,998 — — — — Brazilian government 327,681 324,637 327,681 — — — — Other Public — 36 — — — — — Other countries 39,317 39,405 39,317 — — — — Argentina 318 349 318 — — — — United States 2,977 2,979 2,977 — — — — Mexico 7,820 7,820 7,820 — — — — Italy 329 328 329 — — — — Spain 4,984 4,984 4,984 — — — — Korea 3,427 3,427 3,427 — — — — Chile 12,317 12,227 12,317 — — — — Paraguay 1,782 1,959 1,782 — — — — Uruguay 710 716 710 — — — — Colombia 4,622 4,585 4,622 — — — — Peru 8 8 8 — — — — Germany 23 23 23 — — — — Corporate securities 112,936 109,169 108,685 637 402 6,784 3,849 Rural product note 5,341 5,122 5,114 62 58 204 169 Real estate receivables certificates 7,312 7,253 7,280 10 11 20 21 Bank deposit certificate 3,217 3,217 3,217 — — — — Debentures 51,510 47,751 47,607 336 283 6,311 3,620 Eurobonds and other 5,732 5,671 5,704 29 28 — — Financial bills 18,514 18,517 18,514 — — — — Promissory notes 5,311 5,314 5,311 — — — — Other 15,999 16,324 15,938 200 22 249 39 Total 488,201 481,569 483,745 637 402 7,739 4,054 Other Financial Assets—Internal Classification by Level of Risk 12/31/2020 Financial Assets - Internal rating Interbank deposits and Securities Financial assets at fair value Financial Assets at fair value Total Low 295,334 123,553 463,168 109,942 991,997 Medium — 4,396 2,192 — 6,588 High 294 1,855 215 — 2,364 Total 295,628 129,804 465,575 109,942 1,000,949 % 29.5 13.0 46.5 11.0 100.0 (*) Includes Derivatives in the amount of R$ 76,504 at 12/31/2020. 12/31/2019 Financial Assets - At Amortized Cost Internal rating Interbank deposits and Securities Financial assets at fair value Financial Assets at fair value Total Low 233,011 127,251 321,595 76,660 758,517 Medium — 3,721 952 — 4,673 High — 2,147 382 — 2,529 Total 233,011 133,119 322,929 76,660 765,719 % 30.4 17.4 42.2 10.0 100.0 (*) Includes Derivatives in the amount of R$ 41,854 at 12/31/2019. 1.4.3 Collateral for loans and lease operations 12/31/2020 12/31/2019 Over-collateralized assets Under-collateralized assets Over-collateralized assets Under-collateralized assets Carrying Fair value of Carrying Fair value Carrying Fair value Carrying Fair value Individuals 80,907 202,819 1,746 1,621 65,921 170,045 1,997 1,867 Personal (1) 1,960 6,759 737 698 978 2,982 857 819 Vehicles (2) 21,595 44,673 999 918 17,720 37,355 1,102 1,020 Mortgage loans (3) 57,352 151,387 10 5 47,223 129,708 38 28 Micro, small and medium companies and corporates (4) 151,129 444,696 31,582 27,011 115,608 311,043 11,097 6,142 Foreign loans – Latin America (4) 161,987 309,489 15,381 9,050 123,367 222,300 7,348 2,841 Total 394,023 957,004 48,709 37,682 304,896 703,388 20,442 10,850 (1) In general requires financial collaterals. (2) Vehicles themselves are pledged as collateral, as well as assets leased in lease operations. (3) Properties themselves are pledged as collateral. (4) Any collateral set forth in the credit policy of ITAÚ UNIBANCO HOLDING (chattel mortgage, surety/joint debtor, mortgage and others). Of total loans and lease operations R$ 271,372 (R$ 260,453 at 12/31/2019), represented unsecured loans. 1.4.4 Repossessed assets Assets received from the foreclosure of loans, including real estate, are initially recorded at the lower of: (i) the fair value of the asset less the estimated selling expenses, or (ii) the carrying amount of the loan. Further impairment of assets is recorded as a provision, with a corresponding charge to income. The maintenance costs of these assets are expensed as incurred. The policy for sales of these assets includes periodic auctions that are announced to the market in advance, and provides that the assets cannot be held for more than one year, as stipulated by BACEN. Total repossessed assets in the period were R$ 224 (R$ 390 from 01/01 to 12/31/2019), mainly composed of real estate. 2. Market risk The possibility of incurring financial losses from changes in the market value of positions held by a financial institution, including the risks of transactions subject to fluctuations in currency rates, interest rates, share prices, price indexes and commodity prices, as set forth by CMN. Price Indexes are also treated as a risk factor group. Market risk is controlled by an area independent from the business areas, which is responsible for the daily activities of (i) risk measurement and assessment, (ii) monitoring of stress scenarios, limits and alerts, (iii) application, analysis and testing of stress scenarios, (iv) risk reporting to those responsible within the business areas, in compliance with the governance of ITAÚ UNIBANCO HOLDING, (v) monitoring of actions required to adjust positions and risk levels to make them realistic, and (vi) providing support for the safe launch of new financial products. The market risk structure categorizes transactions as part of either the banking portfolio or the trading portfolio, in accordance with general criteria established by CMN Resolution 4,557, of February 23, 2017, and BACEN Circular 3,354, of June 27, 2007. The trading portfolio consists of all transactions involving financial instruments and commodities, including derivatives, which are held for trading. The banking portfolio is basically characterized by transactions for the banking business, and transactions related to the management of the balance sheet of the institution, where there is no intention of sale and time horizons are medium and long term. Market risk management is based on the following metrics: • Value at risk (VaR): a statistical measure that estimates the expected maximum potential economic loss under normal market conditions, considering a certain time horizon and confidence level; • Losses in stress scenarios (Stress Test): simulation technique to assess the behavior of assets, liabilities and derivatives of a portfolio when several risk factors are taken to extreme market situations (based on prospective and historical scenarios); • Stop loss: metrics used to revise positions, should losses accumulated in a fixed period reach a certain level; • Concentration: cumulative exposure of a certain financial instrument or risk factor, calculated at market value (MtM – Mark to Market); and • Stressed VaR: statistical metric derived from the VaR calculation, with the purpose is of simulating higher risk in the trading portfolio, taking returns that can be seen in past scenarios of extreme volatility. Management of interest rate risk in the Banking Book (IRRBB) is based on the following metrics: • D • D In addition, sensitivity and loss control measures are also analyzed. They include: • Mismatching analysis (GAPS): accumulated exposure by risk factor of cash flows expressed at market value, allocated at the maturity dates; • Sensitivity (DV01- Delta Variation): impact on the market value of cash flows, when submitted to an one annual basis point increase in the current interest rates or index rate; • Sensitivity to Sundry Risk Factors (Greeks): partial derivatives of an option portfolio in relation to the prices of underlying assets, implied volatilities, interest rates and time. In order to operate within the defined limits, ITAÚ UNIBANCO HOLDING hedges transactions with customers and proprietary positions, including its foreign investments. Derivatives are commonly used for these hedging activities, which can be either accounting or economic hedges, both governed by the institutional polices of ITAÚ UNIBANCO HOLDING. The structure of limits and alerts obeys the Board of Directors’ guidelines, and it is reviewed and approved on an annual basis. This structure has specific limits aimed at improving the process of monitoring and understanding risk, and at avoiding concentration. These limits are quantified by assessing the forecast balance sheet results, the size of stockholders’ equity, market liquidity, complexity and volatility, and ITAU UNIBANCO HOLDING’s appetite for risk. The consumption of market risk limits is monitored and disclosed daily through exposure and sensitivity maps. The market risk area analyzes and controls the adherence of these exposures to limits and alerts and reports them timely to the Treasury desks and other structures foreseen in the governance. ITAÚ UNIBANCO HOLDING uses proprietary systems to measure the consolidated market risk. The processing of these systems occurs in a high-availability access -controlled environment, which has data storage and recovery processes and an infrastructure that ensures business continuity in contingency (disaster recovery) situations. 2.1 VaR – Consolidated ITAÚ UNIBANCO HOLDING Is calculated by Historical Simulation, i.e. the expected distribution for profits and losses (P&L) of a portfolio over time can be estimated from past behavior of returns of market risk factors for this portfolio. VaR is calculated at a confidence level of 99%, historical period of 4 years (1000 business days) and a holding period of one day. In addition, in a conservative approach, VaR is calculated daily, with and without volatility weighting, and the final VaR is the more restrictive of the values given by the two methods. From 01/01 to 12/31/2020, the average total VaR in Historical Simulation was R$ 282 or 0.2% of total stockholders’ equity (R$ 334 from 01/01 to 12/31/2019 or 0.2% of total stockholders’ equity). VaR Total (Historical Simulation) (Reais million) 12/31/2020 (*) 12/31/2019 (*) Average Minimum Maximum Var Total Average Minimum Maximum Var Total VaR by risk factor group 614 292 1,961 431 816 652 960 813 Interest rates Currencies 29 9 71 24 28 11 59 11 Shares 23 9 49 30 30 14 57 29 Commodities 2 1 4 1 2 1 5 1 Effect of diversification — — — (263 ) — — — (576 ) Total risk 282 166 763 223 334 209 472 278 (*) VaR by Group of Risk Factors considers information from foreign units. 2.1.1 Interest rate risk The table below shows the accounting position of financial assets and liabilities exposed to interest rate risk, distributed by maturity (remaining contractual terms). This table is not used directly to manage interest rate risks; it is mostly used to permit the assessment of mismatching between accounts and products associated thereto and to identify possible risk concentration. 12/31/2020 12/31/2019 0-30 31-180 181-365 1-5 Over 5 Total 0-30 31-180 181-365 1-5 Over 5 Total Financial assets 478,065 335,803 185,587 568,219 227,397 1,795,071 264,750 382,751 141,277 443,579 203,328 1,435,685 At amortized cost 406,497 251,388 121,432 314,949 125,282 1,219,548 222,026 354,893 102,649 244,862 111,666 1,036,096 Compulsory deposits in the Central Bank of Brazil 83,133 — — — — 83,133 86,836 — — — — 86,836 Interbank deposits 34,998 5,410 8,178 6,864 187 55,637 23,337 4,448 3,290 3,474 32 34,581 Securities purchased under agreements to resell 196,053 43,625 170 10 77 239,935 22,617 175,643 — — 162 198,422 Securities 9,325 16,907 11,440 55,070 33,997 126,739 1,290 13,659 14,817 56,178 44,522 130,466 Loan and lease operations 82,988 185,446 101,644 253,005 91,021 714,104 87,946 161,143 84,542 185,210 66,950 585,791 At fair value through other comprehensive income 13,357 12,557 6,958 54,452 22,618 109,942 2,464 4,524 3,284 46,456 19,932 76,660 At fair value through profit and loss 58,211 71,858 57,197 198,818 79,497 465,581 40,260 23,334 35,344 152,261 71,730 322,929 Securities 40,577 63,455 48,092 178,565 58,382 389,071 33,262 15,420 32,299 137,612 62,482 281,075 Derivatives 17,634 8,403 9,099 20,253 21,115 76,504 6,998 7,914 3,045 14,649 9,248 41,854 Other financial assets — — 6 — — 6 — — — — — — Financial liabilities 624,542 141,647 122,233 452,797 118,616 1,459,835 508,064 115,876 74,582 309,571 86,135 1,094,228 At amortized cost 607,741 134,640 109,560 426,488 101,753 1,380,182 501,401 106,763 71,460 288,584 77,991 1,046,199 Deposits 370,604 80,456 59,955 277,055 20,940 809,010 272,447 38,873 22,877 154,032 18,831 507,060 Securities sold under repurchase agreements 220,219 3,001 1,962 23,811 24,371 273,364 218,055 4,121 1,700 13,309 19,398 256,583 Interbank market funds 9,542 48,407 36,972 56,482 4,632 156,035 9,845 54,141 41,253 66,818 2,805 174,862 Institutional market funds 6,950 2,247 10,142 67,159 51,810 138,308 600 8,472 4,763 53,452 36,957 104,244 Premium bonds plans 426 529 529 1,981 — 3,465 454 1,156 867 973 — 3,450 At fair value through profit and loss 16,801 7,007 12,673 26,309 16,863 79,653 6,663 9,113 3,122 20,987 8,144 48,029 Derivatives 16,791 7,002 12,672 26,252 16,788 79,505 6,653 9,100 3,096 20,906 8,073 47,828 Structured notes 10 — 1 57 75 143 10 13 26 81 71 201 Other financial liabilities — 5 — — — 5 — — — — — — Difference assets / liabilities (*) (146,477 ) 194,156 63,354 115,422 108,781 335,236 (243,314 ) 266,875 66,695 134,008 117,193 341,457 Cumulative difference (146,477 ) 47,679 111,033 226,455 335,236 (243,314 ) 23,561 90,256 224,264 341,457 Ratio of cumulative difference to total interest-bearing assets (8.2 %) 2.7 % 6.2 % 12.6 % 18.7 % (16.9 %) 1.6 % 6.3 % 15.6 % 23.8 % (*) The difference arises from the mismatch between the maturities of all remunerated assets and liabilities, at the respective period-end date, considering the contractually agreed terms. 2.1.2 Currency risk The purpose of ITAÚ UNIBANCO HOLDING’s management of foreign exchange exposure is to mitigate the effects arising from variation in foreign exchange rates, which may present high- volatility periods. The currency (or foreign exchange) risk arises from positions that are sensitive to oscillations in foreign exchange rates. These positions may be originated by financial instruments that are denominated in a currency other than the functional currency in which the balance sheet is measured or through positions in derivative instruments (for negotiation or hedge). Sensitivity to currency risk is disclosed in the table VaR Total (Historical Simulation) described in item 2.1 – VaR Consolidated – ITAÚ UNIBANCO HOLDING. 2.1.3 Share Price Risk The exposure to share price risk is disclosed in Note 5, related to Financial Assets Through Profit or Loss - Securities, and Note 8, related to Financial Assets at Fair Value Through Other Comprehensive Income - Securities. 3. Liquidity risk The possibility that the institution may be unable to efficiently meet its expected and unexpected obligations, both current and future, including those arising from guarantees issued, without affecting its daily operations and without incurring significant losses. Liquidity risk is controlled by an area independent from the business area and responsible for establishing the reserve composition, estimating the cash flow and exposure to liquidity risk in different time horizons, and for monitoring the minimum limits to absorb losses in stress scenarios for each country where ITAÚ UNIBANCO HOLDING operates. All activities are subject to verification by independent validation, internal control and audit areas. Liquidity management policies and limits are based on prospective scenarios and senior management’s guidelines. These scenarios are reviewed on a periodic basis, by analyzing the need for cash due to atypical market conditions or strategic decisions by ITAÚ UNIBANCO HOLDING. ITAÚ UNIBANCO HOLDING manages and controls liquid |
