| 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, under the responsibility of CRO (Chief Risk Officer). To support this structure, the Risk Department has departments to ensure, on an independent and centralized basis, that the institution’s risks and capital are managed in compliance with the 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: non-negotiable, 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, including the assessment of Social and Environmental Risk, in accordance with the guidelines of the Sustainability and Social and Environmental Responsibility Policy (PRSA) and specific manuals and procedures of ITAÚ UNIBANCO HOLDING. 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: 5%, 45% and 50%, 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:
12/31/2021 12/31/2020
Reduction/(Increase) of Reduction/(Increase) of
Financial (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
1,078,891 (46,348 ) (340 ) 163 1,788 951,343 (51,480 ) (830 ) 491 1,416
(1) Composed of Loan operations, lease operations and securities.
(2) Comprises expected credit loss for Financial Guarantees R$ (767) (R$ (907) at 12/31/2020) and Loan Commitments R$ (4,433) (R$ (3,485) at 12/31/2020). 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:
• Stage 1 to stage 2: For retail 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 assessing the counterparty rating. The absolute trigger considers the lower (minimum PD) and upper (maximum PD) limits of ratings assigned internally to products. Transactions with PD lower than the minimum PD remain classified in stage 1, whereas operations in which the PD is higher than the maximum PD migrate to stage 2. The relative PD is analyzed if the current PD is between the minimum and maximum PD limits and it is used to verify the significant increase in credit risk, through the relative PD variation since the initial recognition of the financial instrument. If this relative variation is greater than that defined for each portfolio, the financial instrument migrates to stage 2.
• Stage 3: 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. 1.4 Maximum Exposure of Financial Assets to Credit Risk
12/31/2021 12/31/2020
Brazil Abroad Total Brazil Abroad Total
Financial Assets 1,325,332 485,649 1,810,981 1,294,428 466,835 1,761,263
At Amortized Cost 920,576 350,614 1,271,190 861,485 324,255 1,185,740
Interbank deposits 17,795 52,147 69,942 17,775 37,910 55,685
Securities purchased under agreements to resell 159,974 9,744 169,718 237,528 2,415 239,943
Voluntary investments with the Central Bank of Brazil 5,800 — 5,800 — — —
Securities 125,875 21,871 147,746 103,146 26,658 129,804
Loan and lease operations 562,646 259,944 822,590 468,461 245,643 714,104
Other financial assets 81,398 15,075 96,473 67,425 25,830 93,255
(-) Provision for Expected Loss (32,912 ) (8,167 ) (41,079 ) (32,850 ) (14,201 ) (47,051 )
At Fair Value Through Other Comprehensive Income 44,648 60,974 105,622 48,992 60,950 109,942
Securities 44,648 60,974 105,622 48,992 60,950 109,942
At Fair Value Through Profit or Loss 360,108 74,061 434,169 383,951 81,630 465,581
Securities 343,339 21,628 364,967 365,718 23,353 389,071
Derivatives 16,612 52,433 69,045 18,227 58,277 76,504
Other financial assets 157 — 157 6 — 6
Financial liabilities – provision for expected loss 4,543 657 5,200 3,655 737 4,392
Loan Commitments 4,115 318 4,433 3,135 350 3,485
Financial Guarantees 428 339 767 520 387 907
Off balance sheet 446,267 73,431 519,698 372,542 58,773 431,315
Financial guarantees 62,548 20,362 82,910 51,830 17,103 68,933
Letters of credit to be released 45,773 — 45,773 41,477 — 41,477
Loan commitments 337,946 53,069 391,015 279,235 41,670 320,905
Mortgage loans 10,709 — 10,709 6,357 — 6,357
Overdraft accounts 147,878 — 147,878 126,302 — 126,302
Credit cards 176,384 3,840 180,224 144,386 3,859 148,245
Other pre-approved 2,975 49,229 52,204 2,190 37,811 40,001
Total 1,767,056 558,423 2,325,479 1,663,315 524,871 2,188,186
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 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 Loan and lease operations
12/31/2021 % 12/31/2020 %
Industry and commerce 190,491 23.1 163,784 22.9
Services 173,332 21.1 172,322 24.1
Other sectors 37,652 4.6 37,565 5.3
Individuals 421,115 51.2 340,433 47.7
Total 822,590 100.0 714,104 100.0
Other financial assets (*)
12/31/2021 % 12/31/2020 %
Public sector 580,619 62.2 713,705 71.2
Services 150,831 16.2 79,788 8.0
Other sectors 83,521 9.0 67,636 6.8
Financial 117,869 12.6 139,820 14.0
Total 932,840 100.0 1,000,949 100.0
(*) 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
12/31/2021
Stage 1 Stage 2 Stage 3 Total Consolidated of 3 stages
Loan Loan Financial Total Loan Loan Financial Total Loan Loan Financial Total Loan Loan Financial Total
Individuals 270,371 220,961 944 492,276 38,168 20,723 — 58,891 23,997 686 — 24,683 332,536 242,370 944 575,850
Corporate 128,519 23,882 52,429 204,830 1,600 200 535 2,335 4,915 23 2,478 7,416 135,034 24,105 55,442 214,581
Micro/Small and medium companies 124,555 71,158 7,605 203,318 16,749 4,823 130 21,702 8,666 222 141 9,029 149,970 76,203 7,876 234,049
Foreign loans - Latin America 178,719 46,629 17,776 243,124 13,389 1,621 713 15,723 12,942 87 159 13,188 205,050 48,337 18,648 272,035
Total 702,164 362,630 78,754 1,143,548 69,906 27,367 1,378 98,651 50,520 1,018 2,778 54,316 822,590 391,015 82,910 1,296,515
% 61.4 31.7 6.9 100.0 70.9 27.7 1.4 100.0 93.0 1.9 5.1 100.0 63.4 30.2 6.4 100.0
12/31/2020
Stage 1 Stage 2 Stage 3 Total Consolidated of 3 stages
Loan Loan Financial Total Loan Loan Financial Total Loan Loan Financial Total Loan 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
12/31/2021 12/31/2020
Internal Rating Stage 1 Stage 2 Stage 3 Total loan Stage 1 Stage 2 Stage 3 Total loan
Low 662,839 42,028 — 704,867 501,463 13,172 — 514,635
Medium 38,980 19,239 — 58,219 84,193 37,249 — 121,442
High 345 8,639 — 8,984 1,552 15,822 — 17,374
Credit-Impaired — — 50,520 50,520 — — 60,653 60,653
Total 702,164 69,906 50,520 822,590 587,208 66,243 60,653 714,104
% 85.4 8.5 6.1 100.0 82.2 9.3 8.5 100.0
Other financial assets
12/31/2021
Stage 1 Stage 2 Stage 3
Fair Value Cost Fair Value Cost Fair Value Cost Fair Value
Investment funds 20,139 4,906 4,914 15,224 15,225 — —
Government securities 423,085 426,959 423,085 — — — —
Brazilian government 362,449 365,947 362,449 — — — —
Other Public — 36 — — — — —
Abroad 60,636 60,976 60,636 — — — —
Argentina 1,335 1,310 1,335 — — — —
United States 7,189 7,226 7,189 — — — —
Mexico 12,413 12,424 12,413 — — — —
Spain 6,131 6,132 6,131 — — — —
Korea 5,604 5,604 5,604 — — — —
Chile 21,399 21,552 21,399 — — — —
Paraguay 1,469 1,526 1,469 — — — —
Uruguay 1,258 1,256 1,258 — — — —
Colombia 3,830 3,938 3,830 — — — —
Peru 8 8 8 — — — —
Corporate securities 173,163 169,489 167,457 3,391 2,789 4,993 2,917
Rural product note 12,744 12,474 12,597 146 121 38 26
Real estate receivables certificates 4,999 5,063 4,999 — — — —
Bank deposit certificate 390 392 390 — — — —
Debentures 103,659 99,438 98,867 2,383 1,923 4,704 2,869
Eurobonds and other 10,206 10,236 10,194 12 12 — —
Financial bills 10,168 10,185 10,168 — — — —
Promissory and commercial notes 8,901 8,874 8,901 — — — —
Other 22,096 22,827 21,341 850 733 251 22
Total 616,387 601,354 595,456 18,615 18,014 4,993 2,917
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 — — — — —
Abroad 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 and commercial 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
Other Financial Assets—Internal Classification by Level of Risk
12/31/2021
Financial Assets -
Internal rating Interbank deposits and securities purchased under agreements to resell Securities Financial assets at fair value through profit or loss (*) Financial Assets at fair value through other comprehensive income Total
Low 245,442 142,416 430,729 105,622 924,209
Medium — 4,399 3,219 — 7,618
High 18 931 64 — 1,013
Total 245,460 147,746 434,012 105,622 932,840
% 26.4 15.8 46.5 11.3 100.0
(*) Includes Derivatives in the amount of R$ 69,045 at 12/31/2021.
12/31/2020
Financial Assets -Amortized Cost
Internal rating Interbank deposits and securities purchased under agreements to resell Securities Financial assets at fair value through profit or loss (*) 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. 1.4.3 Collateral for loans and lease operations
12/31/2021 12/31/2020
Over-collateralized assets Under-collateralized assets Over-collateralized assets Under-collateralized assets
Carrying value of the assets Fair value of collateral Carrying value of the assets Fair value of collateral Carrying value of the assets Fair value of collateral Carrying value of the assets Fair value of collateral
Individuals 113,194 282,131 1,014 907 80,907 202,819 1,746 1,621
Personal (1) 2,436 8,338 639 583 1,960 6,759 737 698
Vehicles (2) 26,941 68,275 368 318 21,595 44,673 999 918
Mortgage loans (3) 83,817 205,518 7 6 57,352 151,387 10 5
Micro, small and medium companies and corporates (4) 170,334 634,871 32,436 26,933 151,129 444,696 31,582 27,011
Foreign loans – Latin America (4) 168,968 330,020 9,782 4,152 161,987 309,489 15,381 9,050
Total 452,496 1,247,022 43,232 31,992 394,023 957,004 48,709 37,682
(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 loan and lease operations, R$ 326,862 (R$ 271,372 at 12/31/2020) 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$ 258 (R$ 224 from 01/01 to 12/31/2020), 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:
• ΔEVE (Delta Economic Value of Equity): difference between the present value of the sum of repricing flows of instruments subject to IRRBB in a base scenario and the present value of the sum of repricing flows of these instruments in a scenario of shock in interest rates;
• ΔNII (Delta Net Interest Income): difference between the result of financial intermediation of instruments subject to IRRBB in a base scenario and the result of financial intermediation of these instruments in a scenario of shock in interest rates. 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 fair value of cash flows when a 1 basis point change is applied to current interest rates or on the index rates; and
• 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 It 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 12/31/2021, the average total VaR in Historical Simulation was R$ 441 or 0.3% of total stockholders’ equity (R$ 282 from 01/01 to 12/31/2020 or 0.2% of total stockholders’ equity).
VaR Total (Historical Simulation) (in millions of Reais)
12/31/2021 (*) 12/31/2020 (*)
Average Maximum Minimum Var Total Average Minimum Minimum Var Total
VaR by Risk Factor Group
Interest rates 937 425 1,411 1,257 614 292 1,961 431
Currencies 18 10 37 13 20 9 71 24
Shares 42 17 98 24 23 9 49 30
Commodities 4 1 8 4 2 1 4 1
Effect of diversification — — — (602 ) — — — (263 )
Total risk 441 198 707 696 282 166 763 223
(*) 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.
12/31/2021 12/31/2020
0-30 days 31-180 days 181-365 days 1-5 years Over 5 years Total 0-30 days 31-180 days 181-365 days 1-5 years Over 5 years Total
Financial assets 463,079 294,051 193,279 642,495 253,300 1,846,204 478,065 335,803 185,587 568,219 227,397 1,795,071
At amortized cost 401,056 258,580 152,270 345,538 148,969 1,306,413 406,497 251,388 121,432 314,949 125,282 1,219,548
Compulsory deposits in the Central Bank of Brazil 92,580 — — — — 92,580 83,133 — — — — 83,133
Interbank deposits 51,138 7,050 5,861 5,669 216 69,934 34,998 5,410 8,178 6,864 187 55,637
Securities purchased under agreements to resell 142,405 26,532 — 403 371 169,711 196,053 43,625 170 10 77 239,935
Voluntary investments with the Central Bank of Brazil 5,800 — — — — 5,800 — — — — — —
Securities 4,427 12,884 27,858 69,965 30,664 145,798 9,325 16,907 11,440 55,070 33,997 126,739
Loan and lease operations 104,706 212,114 118,551 269,501 117,718 822,590 82,988 185,446 101,644 253,005 91,021 714,104
At fair value through other comprehensive income 10,420 9,286 6,722 63,256 15,938 105,622 13,357 12,557 6,958 54,452 22,618 109,942
At fair value through profit and loss 51,603 26,185 34,287 233,701 88,393 434,169 58,211 71,858 57,197 198,818 79,497 465,581
Securities 36,111 13,872 28,532 212,911 73,541 364,967 40,577 63,455 48,092 178,565 58,382 389,071
Derivatives 15,492 12,292 5,632 20,777 14,852 69,045 17,634 8,403 9,099 20,253 21,115 76,504
Other financial assets — 21 123 13 — 157 — — 6 — — 6
Financial liabilities 660,751 127,205 107,515 361,399 228,857 1,485,727 624,542 141,647 122,233 452,797 118,616 1,459,835
At amortized cost 653,598 110,994 99,753 340,944 216,959 1,422,248 607,741 134,640 109,560 426,488 101,753 1,380,182
Deposits 402,930 52,259 38,563 220,822 135,798 850,372 370,604 80,456 59,955 277,055 20,940 809,010
Securities sold under repurchase agreements 239,843 2,627 725 5,659 3,994 252,848 220,219 3,001 1,962 23,811 24,371 273,364
Interbank market funds 9,976 46,610 41,520 69,043 9,996 177,145 9,542 48,407 36,972 56,482 4,632 156,035
Institutional market funds 439 9,045 18,422 43,559 67,171 138,636 6,950 2,247 10,142 67,159 51,810 138,308
Premium bonds plans 410 453 523 1,861 — 3,247 426 529 529 1,981 — 3,465
At fair value through profit and loss 7,153 16,211 7,762 20,455 11,898 63,479 16,801 7,007 12,673 26,309 16,863 79,653
Derivatives 7,153 16,174 7,625 20,404 11,848 63,204 16,791 7,002 12,672 26,252 16,788 79,505
Structured notes — — 16 48 50 114 10 — 1 57 75 143
Other financial liabilities — 37 121 3 — 161 — 5 — — — 5
Difference assets / liabilities (*) (197,672 ) 166,846 85,764 281,096 24,443 360,477 (146,477 ) 194,156 63,354 115,422 108,781 335,236
Cumulative difference (197,672 ) (30,826 ) 54,938 336,034 360,477 (146,477 ) 47,679 111,033 226,455 335,236
Ratio of cumulative difference to total interest-bearing assets (10.7 )% (1.7 )% 3.0 % 18.2 % 19.5 % (8.2 )% 2.7 % 6.2 % 12.6 % 18.7 %
(*) The difference arises from the mismatch between the maturities of all remunerated assets and liabilities, at the respective period-end 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 c |
