Banco Bradesco (BBD) 20-F2022 FY Annual report (foreign)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

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

OR

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

For the fiscal year ended December 31, 2022

OR

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

OR

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

Commission File Number: 1 15250

BANCO BRADESCO S.A.

(Exact name of Registrant as specified in its charter)

BANK BRADESCO

(Translation of Registrant’s name into English)

Federative Republic of Brazil

(Jurisdiction of incorporation or organization)

Cidade de Deus S/N – Vila Yara 06029-900 – Osasco – SP, Brazil

(Address of principal executive offices)

Carlos Wagner Firetti (Investor Relations and Controllership Officer)

E-mail: carlos.firetti@bradesco.com.br

Telephone: +55 11 2194-0922

Cidade de Deus S/N – Vila Yara, 06029-900 – Osasco – SP, Brazil

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

*Not for trading, but only in connection with the registration of ADSs pursuant to the requirements of the SEC.

Securities registered or to be registered pursuant to Section 12(g) of the Act: None.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.

Number of outstanding shares of each of the issuer’s classes of capital or common stock as of December 31, 2022:

Indicate by check mark if the registrant is a well known seasoned issuer, as defined in Rule 405 of the Securities Act.☒ Yes ☐ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

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

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.☒ Yes ☐ No

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

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act).☐ Yes ☒ No

TABLE OF CONTENTS

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

In this annual report, the terms “Bradesco”, the “Company”, the “Bank”, the “Bradesco Group”, “we”, the “Organization”, “our” and “us” refer to Banco Bradesco S.A. and, unless otherwise indicated, we are referring to its consolidated subsidiaries.

All references herein to “real”, “reais” or “R$” refer to the Brazilian Real, the official currency of Brazil. References herein to “U.S. dollars”, “dollar” and “US$” refer to United States dollars, the official currency of the United States of America (USA).

Our audited consolidated statement of financial position as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes, which are included under “Item 18. Financial Statements” of this annual report, were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

We use accounting practices adopted in Brazil for financial institutions authorized to operate by the Central Bank of Brazil (Banco Central do Brasil, or the “Central Bank of Brazil” or BCB) for certain purposes, such as performance assessment, decision-making, preparation of reports for Brazilian shareholders, filings with the Brazilian Securities and Exchange Commission (CVM), attendance and observation of limits and requirements of local regulators and determining dividend and federal income tax payments.

Some data related to economic sectors presented in this annual report was obtained from the following sources: B3 S.A. – Brazilian Exchange & OTC; Brazilian Association of Credit Card Companies and Services (Associação Brasileira das Empresas de Cartão de Crédito e Serviços), or (ABECS); Brazilian Association of Leasing Companies (Associação Brasileira de Empresas de Leasing), or (ABEL); Brazilian Association of Financial and Capital Markets Entities (Associação Brasileira das Entidades dos Mercados Financeiros e de Capitais), or (ANBIMA); Brazilian Health Insurance Authority (Agência Nacional de Saúde Suplementar), or (ANS); Central Bank of Brazil; Brazilian Bank of Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social), or (BNDES); National Association of Private Pension Plans and Life (Federação Nacional de Previdência Privada e Vida), or (FENAPREVI); Getulio Vargas Foundation (Fundação Getulio Vargas), or (FGV); and Private Insurance Superintendence (Superintendência de Seguros Privados), or (SUSEP).

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.

References in this annual report to the “common shares” and “preferred shares” are to our common shares and our preferred shares, respectively, and together, our “shares”. References to “preferred share ADSs” in this annual report are to preferred share American Depositary Shares, each representing one preferred share. The preferred share ADSs are evidenced by preferred share American Depositary Receipts, or preferred share ADRs, issued pursuant to an Amended and Restated Deposit Agreement, dated as of December 11, 2015, by and among us, The Bank of New York Mellon, as depositary, and the holders and beneficial owners of preferred share ADSs evidenced by preferred share ADRs issued thereunder (the Preferred Share ADS Deposit Agreement).

References to “common share ADSs” in this annual report are related to our common share American Depositary Shares, with each common share ADS representing one common share. The common share ADSs are evidenced by common share American Depositary Receipts, or common share ADRs, issued pursuant to an Amended and Restated Deposit Agreement dated as of December 11, 2015, by and among us, The Bank of New York Mellon, as depositary, and the holders and beneficial owners of common share ADSs evidenced by common share ADRs issued thereunder (the Common Share ADS Deposit Agreement and, together with the Preferred Share ADS Deposit Agreement, the Deposit Agreements).

References throughout this annual report to “ADSs” are to our preferred share ADSs and common share ADSs, together.

Throughout this annual report, we may indicate that certain information is available at different websites operated by us. None of the information on the websites referred to or mentioned in this annual report is part of or is incorporated by reference herein.

FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended, or the “Securities Act”, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”. These statements are based mainly on our current expectations and projections of future events and financial trends that affect or might affect our business. In addition to the items discussed in other sections of this annual report, many significant factors that could cause our financial condition and operating results to differ materially from those set out in our forward-looking statements, including, but not limited to, the following:

Words such as “believe”, “expect”, “continue”, “understand”, “estimate”, “will”, “may”, “anticipate”, “should”, “intend”, and other similar expressions identify forward-looking statements. These statements refer only to the date on which they were made, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or any other event.

In light of these risks and uncertainties, the forward-looking statements, events and circumstances discussed in this annual report may not be accurate, and our actual results and performance could differ materially from those anticipated in our forward-looking statements. Investors should not make investment decisions based solely on the forward-looking statements in this annual report.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT, AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

3.A. [Reserved]

3.B. Capitalization and Indebtedness

Not applicable.

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

Not applicable.

3.D. Risk Factors

In light of the complexity of our business and the range of products and services offered to our clients in all segments of the market, we are exposed to various types of risks. In this section, we present the material risks that may affect our activities or our shares and ADSs.

Summary of risk factors

This section is intended to be a summary of more detailed discussions contained elsewhere in this annual report. The risks described below are not the only ones we face. Our business, operating results or financial condition could be harmed if any of these risks materialize.

Summary of risks relating to Brazil

Summary of risks relating to us and the Brazilian banking industry

Summary of risks relating to our risk management and other risks

Summary of risks relating to our shares and ADSs

Risks relating to Brazil

3.D.10 Macroeconomic risks

We continually monitor the macroeconomic risks that may materially impact our business, financial condition and operating results. These risks are assessed by processes carried out in line with our governance structure.

3.D.10.01 Domestic environment

3.D.10.01-01 The Brazilian government exercises influence over the Brazilian economy, and Brazilian political and economic conditions have a direct impact on our business.

Investing in emerging market countries such as Brazil carries economic risks. Volatility in Latin American and other emerging market economies has been caused by many different factors, including high interest rates, changes in currency values, high levels of inflation, exchange controls, wage and price controls, changes in economic or tax policies, the imposition of trade barriers, and internal security issues. Any of these factors may adversely affect the value of our shares and ADSs.

Abrupt changes in monetary or fiscal policies, which are not justified by changes in the economic scenario, can generate uncertainties about economic policy, leading to the deterioration of expectations, amplifying volatility and negatively impacting the prices of domestic assets. Accordingly, economic policies and signals that are credible and transparent tend to keep macroeconomic volatility at low levels.

Historically, Brazil’s political scenario has influenced the performance of the Brazilian economy and political crises have affected the confidence of investors and the general public, which has resulted in a deceleration in the economy and greater volatility in the securities of Brazilian companies issued abroad. Uncertainties about economic policies, especially fiscal policies, can generate negative impacts on the prices of domestic assets, such as currency depreciation, increase in long-term interest rates and inflation and volatility of stock exchanges. In addition, uncertainties about the economic policies that the Brazilian government may adopt may influence market perception of risk of foreign investment in Brazil, which in turn may adversely affect the market value of our shares and ADSs.

Furthermore, legislative changes may have an adverse impact on our operations and performance, including any changes to tax legislation. Changes in tax-related laws and regulations, and interpretations thereof, can affect tax burdens by increasing tax rates and fees, creating new taxes, limiting tax deductions, and eliminating tax-based incentives and non-taxed income. In addition, tax authorities or courts may interpret tax regulations differently than we do, which could result in tax litigation, associated costs and penalties. Such legislative changes may have an adverse impact on our business, financial condition and operating results.

Uncertainty regarding economic and fiscal policies and the legal framework can harm the Brazilian economy and, consequently, our business, operating results and financial condition.

3.D.10.01-02 Persistent high inflation can affect our revenues and our ability to access foreign financial markets.

Brazil has, in the past, experienced extremely high rates of inflation. Inflation and governmental measures to combat inflation have had significant negative effects on the Brazilian economy and have contributed to increased economic uncertainty and increased volatility in the Brazilian securities markets, which may have an adverse effect on us.

Current economic policy in Brazil is premised on a monetary regime under the supervision of the Central Bank of Brazil in order to ensure that the effective rate of inflation stays in line with a predetermined and previously announced target. Nonetheless, Brazil’s rates of inflation reached 5.79% during 2022, 10.06% during 2021 and 4.5% during 2020, as measured by the Extended Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo – IPCA).

Inflation and government measures to combat inflation, along with speculation about possible future governmental measures, have had, and are expected to continue to have, significant negative effects on the Brazilian economy, including heightened volatility in the Brazilian securities market. In addition, measures to control inflation have often included maintaining a tight monetary policy with high interest rates, thereby restricting the availability of credit and limiting economic growth. On the other hand, these policies may be incapable of preventing increases in the inflation rate. Further, the absence of such policies may trigger increases in inflation and thereby adversely affect economic stability. In the event of an increase in inflation, we may not be able to adjust the prices we charge our clients to offset the effects of inflation on our cost structure, which may adversely affect us and our operating results.

The shocks on inflation and the strong recovery of demand during 2021 led the Central Bank of Brazil to initiate a monetary tightening process, which led to an increase in the SELIC rate (Sistema Especial de Liquidação e Custódia – Special System for Settlement and Custody), which was 13.75% on March 31, 2023. Inflation in Brazil has been showing signs of a gradual reduction, which, according to our forecasts, should lead the Central Bank of Brazil to start a process of cutting interest rates at the end of 2023.

The effects of persistent high inflation and policies to contain it can affect our costs and net margins and if investor confidence falls, the price of our shares and ADSs may decrease. Inflationary pressures may also affect our ability to access foreign financial markets, while public policies to reduce inflation may have an adverse effect on our business, financial condition, operating results and the market price of our shares and ADSs.

3.D.10.01-03 Changes in the base interest rate (SELIC) by the Central Bank of Brazil may materially adversely affect our margins and operating results.

The economic impacts of the Covid-19 pandemic created conditions for the Central Bank of Brazil to reduce the SELIC rate in 2020 to its lowest level in history, leveraging other actions of stimulus, tax and credit. This movement was possible due to a combination of risks including severe recession, anchoring of inflation expectations and the adoption of monetary stimulus, in Brazil and in the world, in view of the expectations of an unprecedented crisis. The SELIC rate closed in 2019 at 4.5% and was reduced to 2.0% in August 2020.

This process of reducing the SELIC rate to the lowest historical level was influenced by the high level of inactivity in the goods and labor markets, despite the initial strong exchange rate depreciation between April and May 2020, reflecting the risk aversion of investors in the most recent critical period of the Covid-19 pandemic. We have no control over the base interest rates established by the Central Bank of Brazil or the frequency with which they are adjusted.

As a result of inflationary pressures and macroeconomic instability, the Brazilian government has historically adopted monetary policies that have resulted in Brazil’s interest rates being among the highest in the world. The Central Bank of Brazil sets the base interest rates generally available to the Brazilian banking system, based on the expansion or contraction of the Brazilian economy, inflation rates and other economic indicators. During recent years there has been significant volatility in the SELIC rate, which ranged from 14.25% on December 31, 2015, to 2.00% on August 20, 2020. As of December 31, 2021, the SELIC rate was 9.25%. Subsequently, the rate was gradually increased to 13.75%, where it remains as of the date of this annual report.

Increases in the SELIC rate set by the COPOM (Monetary Policy Committee) may have an adverse effect on us by reducing the demand for our credit and increasing our funding costs, internal debt expenses and the risk of default by clients. Reductions in the SELIC rate may also have an adverse effect on us by reducing the interest income we earn on our interest-earning assets and reducing our revenues and margins.

3.D.10.01-04 The low growth rate of the Brazilian economy may adversely affect us.

Brazil showed signs of incipient recovery from a recent prolonged economic recession at the beginning of 2020, when the serious economic consequences of the Covid-19 pandemic pushed the economy back into recession, with weaknesses and material imbalances continuing to threaten the macroeconomic stability and the future prospects of the Brazilian economy. The persistence or intensification of the economic crisis in Brazil and the uncertainty about whether the Brazilian government is prepared and willing to implement changes to policies or regulations to address the current economic challenges may affect us adversely. The uncertainty about whether the Brazilian government will implement changes in policies and regulations may be aggravated by uncertainty regarding the prospects for the economic policy.

After suffering the severe effects of the Covid-19 pandemic in 2020, the Brazilian economy showed a strong recovery in 2021, in response to fiscal, monetary and credit stimuli promoted by the Brazilian government. However, we expect uncertainties related to the trajectory of public accounts and the delayed effects of monetary tightening carried out over the last year could negatively impact pace of the growth of economic activity. Accordingly, the persistence of low Brazilian economic growth and the risks of new recessive cycles may negatively affect our operations and revenues.

3.D.10.01-05 Developments and the perception of risk in Brazil and other countries, especially emerging market countries, may adversely affect the market price of Brazilian securities, including our shares and ADSs.

The market value of securities of Brazilian companies is affected to varying degrees, by economic and market conditions in other countries, including other Latin American and emerging market countries. Although economic conditions in these countries may differ significantly from economic conditions in Brazil, investors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. Crises in other emerging market countries may diminish investor interest in securities of Brazilian issuers, including ours, which could adversely affect the market price of our shares and ADSs.

3.D.10.01-06 Our investments in debt securities issued by the Brazilian government expose us to additional risks associated with Brazil.

We invest in debt securities issued by the Brazilian government. The trading price of these securities is affected by, among other things, market conditions in Brazil, the perception of Brazil and the related perception of the Brazilian government’s ability to repay principal and/or make interest payments. Accordingly, adverse developments or trends in any of these areas could have a knock-on adverse effect on the value of our securities portfolio, thereby affecting our financial condition and the results of our operations, which may affect the market value of our shares and ADSs.

3.D.10.01-07 Changes in taxes and other fiscal assessments may adversely affect us.

The government regularly enacts reforms to the tax and other assessment regimes to which we and our clients are subject. Such reforms include changes in the tax rates and, occasionally, the enactment of temporary taxes, the proceeds of which are earmarked for designated governmental purposes. The effects of these possible changes and any other changes that may result from the enactment of additional tax reforms have not been, and cannot be, quantified. There can be no assurance that, once implemented, any of these reforms will 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 portfolio of loans and advances.

In times of constantly changing fiscal trends, with increased public spending and public debt increasing as a proportion of GDP, effective tax rates may rise at a pace higher than expected, affecting the growth of our portfolio and increasing volatility. Moreover, the risk of changes in taxes and fiscal assessments may materialize as the government may target taxation towards certain sectors, such as the financial markets, with negative impacts on the results and investments of businesses operating in the segment.

Moreover, in February 2023, the STF issued a decision recognizing that final and unappealable decisions with respect to a certain taxpayer cannot prevail over subsequent decisions made by the STF that apply to all taxpayers. As of the date of this annual report, the above decision has not had any impact on us.

We cannot guarantee that the Brazilian government will not implement a tax reform or changes in the applicable laws and regulations, changing the tax system to which we are currently subject, nor that any tax incentives will be maintained or renewed under favorable conditions for us. If these changes, directly or indirectly, increase the tax burden owed by us, our gross margin may decrease and, consequently, adversely impact our business and operating results.

The Brazilian Congress is currently discussing a proposal for the reform of the Brazilian tax system, which proposes, among other matters, the taxation of dividend distributions and the termination of interest on equity, for example. The approval of this tax reform may result in an increased tax burden and directly impact our results and business.

3.D.10.01-08 Our financial and operating performance may be adversely affected by epidemics, natural disasters and other catastrophes, such as the Covid-19 pandemic, which had a significant impact on our 2021 and 2020 results.

The outbreak of communicable diseases, such as the outbreak of the Covid-19 pandemic on a global scale, which began in December 2019 and was declared a pandemic by the World Health Organization on March 11, 2020, may affect investment decisions and may result in sporadic volatility in the international and/or Brazilian markets. Such outbreaks may result in, and, in the case of the Covid-19 pandemic, has resulted in, at different levels, the adoption of governmental and private measures, including restrictions, as a whole or in part, on the circulation and transportation of persons, goods and services and consequently, in the closure of private establishments and public offices, interruptions to the supply chain, reduction of consumption in general by the population and volatility in the price of raw materials and other inputs.

In addition, governments have acted on a global scale with increased intervention in their economies, including through regulations and public spending, in order to mitigate the economic impacts caused by the Covid-19 pandemic.

The outbreak of epidemics, natural disasters and other catastrophes may have, or, in the case of the Covid-19 pandemic, has had, a negative and significant effect on the global and Brazilian economy, resulting in the following factors:

The occurrence of any of these events and their duration may have a materially adverse effect on the global and/or Brazilian economy, as well as impact the liquidity and market value of our shares and ADSs. In addition, they may also lead to long-term socioeconomic impacts, including a possible decrease in Brazilian GDP and an increase in demand for public spending in fundamental sectors, a scenario in which legislative amendments may be used in order to impose, even if only temporarily, a more onerous tax treatment of our business activities, which may adversely affect our business and operating results.

As of the date of this annual report, we cannot guarantee the duration, future impacts or measures of the Covid-19 pandemic or other communicable diseases, nor the accuracy of our evaluation of the actual and potential impacts of, or of the extent of losses resulting from, the Covid-19 or other communicable diseases. This could impact our operations and financial condition. Further, our operations may be adversely impacted by the emergence of novel strains of Covid-19 and setbacks in the rollout of vaccination programs or measures necessary to contain it or other communicable diseases.

In addition, we cannot guarantee that other regional and/or global outbreaks of communicable diseases will not occur, and if they do occur, we cannot assure that we will be able to prevent a negative impact on our business and financial results.

3.D.10.02 External Environment

3.D.10.02-01 Currency exchange variations may have an adverse effect on the Brazilian economy and on our results and financial condition.

Fluctuations in the value of the real may impact our business. After an extended period of appreciation, interrupted only in late 2008 as a reflection of the global crisis, the Brazilian real started to weaken in mid-2011, a trend which continued until mid-2016. After a brief period of stable exchange rates, the real once again devalued against the U.S. dollar, which was intensified in 2020 and 2021 because of the increased global aversion to risk, due to the Covid-19 pandemic. Weaker currency periods make certain local manufacturers (particularly exporters) more competitive, but also make managing economic policy, particularly inflation, increasingly difficult, even with a decelerated growth. A weaker real also adversely impacts companies based in Brazil with debt indexed to and / or denominated in U.S. dollars.

If the Brazilian currency devalues or depreciates, we may incur losses on our monetary liabilities denominated in, or indexed to, foreign currencies, such as our long-term debt denominated in U.S. dollars and loans in foreign currency, and experience gains on our monetary assets denominated in or indexed to foreign currencies, since these liabilities and assets are converted into reais using the foreign exchange rate at the reporting date. Consequently, if our monetary liabilities denominated in, or indexed to, foreign currencies significantly exceed our monetary assets denominated in or indexed to foreign currencies, including any financial instruments entered into for hedging purposes, a large devaluation or depreciation of the Brazilian currency could significantly and adversely affect our operating results, and the market value of our shares and ADSs, even if the value of the liabilities has not changed in their original currency. In addition, our loan operations depend significantly on our ability to match the cost of funds indexed to the U.S. dollar with the rates charged to our clients. A significant devaluation or depreciation of the U.S. dollar may affect our ability to attract clients on these terms or to charge rates pegged to the U.S. dollar.

The Brazilian currency recovered part of the losses of the previous years in the first months of 2022, mainly because of rising domestic interest rates and higher international commodity prices. However, in the second quarter of 2022, there was a strong depreciation in the real /U.S. dollar exchange rate due to the deterioration in the fiscal debate and the approval of PEC 1/2022, which approved the incurrence of certain new expenses by the Brazilian government. As of 2023, the real/ U.S. dollar exchange rate has been fluctuating around US$5.25.

If the Brazilian currency appreciates, we may incur losses on our monetary assets denominated in, or indexed to, foreign currencies, such as the U.S. dollar, and we may experience reductions in our liabilities denominated in or indexed to foreign currencies, as these liabilities and assets are converted into reais using the foreign exchange rate at the reporting date. Therefore, if our monetary assets denominated in or indexed to foreign currencies significantly exceed our monetary liabilities denominated in or indexed in foreign currencies, including any financial instruments entered into for hedge purposes, a large appreciation of the Brazilian currency may materially and adversely affect our operating results, even if the value of monetary assets has not changed in their original currency.

3.D.10.02-02 The increase in international interest rates could adversely impact global economic or market conditions.

The speed of recovery of the global economy and the rise in inflation in several developed economies have led the authorities of these countries to begin reversing the strong stimulating policies implemented during the Covid-19 pandemic.

The Bank of England has already started a cycle of interest rate hikes, and, as expected by the market, the United States Federal Reserve (Fed) started to increase interest rates in 2022. Inflation is higher than the target of 2% (consumer inflation measured by the CPI of the U.S. closed at 7.0% in 2021 – the highest level since 1982 – and 6.5% in 2022), and unemployment is close to pre-pandemic levels in the U.S.

Persistence of global inflation at high levels, adverse financial events in the US and Europe, such as the closing of regional banks in the U.S. and the merger of the two largest Swiss banks, may lead the monetary authorities in the U.S. and Switzerland to interrupt their interest rate tightening cycles. If the monetary tightening cycle ends due to a potential crisis in the banking system of these countries, the consequent deterioration in financial conditions increases the risk of a more intense deceleration of economic activity.

Historically, periods of increase in international interest rates are associated with increased risk aversion among investors. The increase in the cost of capital globally, changes in financial conditions or a faster-than-expected economic slowdown - consequences of interest rate increases - may adversely affect our business, results of our operations, our financial condition, the market value of our shares and ADSs.

3.D.10.02-03 Certain reference rates, including EURIBOR, may be discontinued or reformed in the future, and there may be risks associated with this discontinuation.

The Euro Interbank Offered Rate (EURIBOR) and other interest rates or other types of rates and indices which are deemed to be benchmarks, are the subject of ongoing national and international regulatory discussions and proposals for reform. Some of these reforms are already effective whilst others are still to be implemented.

Regulation (EU) No. 2016/1011 (the EU Benchmarks Regulation) applies, subject to certain transitional provisions, to the provision of benchmarks, the contribution of input data to a benchmark and the use of a benchmark, within the EU. Regulation (EU) No. 2016/1011, as it forms part of domestic law of the United Kingdom’s by virtue of the European Union (Withdrawal) Act 2018 (the UK Benchmarks Regulation), applies to the provision of benchmarks, the contribution of input data to a benchmark and the use of a benchmark within the UK. The EU Benchmarks Regulation or the UK Benchmarks Regulation, as applicable, could have a material impact on any debt instruments linked to EURIBOR or another benchmark rate or index, in particular, if the methodology or other terms of the benchmark are changed in order to comply with the terms of the EU Benchmarks Regulation or UK Benchmarks Regulation, and such changes could (amongst other things) have the effect of reducing or increasing the rate or level, or affecting the volatility of the published rate or level, of the benchmark. More broadly, any of the international, national or other proposals for reform, or the general increased regulatory scrutiny of benchmarks, could increase the costs and risks of administering or otherwise participating in the setting of a benchmark and complying with any such regulations or requirements. 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 discontinuance or unavailability of quotes of certain “benchmarks”.

As an example of such benchmark reforms, on September 21, 2017, the European Central Bank announced that it would be part of a new working group tasked with the identification and adoption of a “risk-free overnight rate” which can serve as a basis for an alternative to current benchmarks used in a variety of financial instruments and contracts in the Euro area. On September 13, 2018, the working group on Euro risk-free rates recommended the new Euro short-term rate (€STR) as the new risk-free rate for the Euro area. The €STR was published for the first time on October 2, 2019. Although EURIBOR has subsequently been reformed in order to comply with the terms of the Benchmarks Regulation, it remains uncertain as to how long it will continue in its current form, or whether it will be further reformed or replaced with €STR or an alternative benchmark.

The elimination of EURIBOR or any other reference rate, or changes in the form of management of any reference rate, may require or result in these benchmarks performing differently than in the past, or disappearing entirely, or having other consequences, which cannot be fully anticipated. Any of these developments and any future initiatives to regulate, reform or change the administration of reference rates may result in adverse consequences for the return, value and market of loans, mortgages, bonds, derivatives and other financial instruments whose returns are linked to any reference rate, including those issued, financed or held by us. In addition, we incur costs related to any future transition to new benchmarks.

3.D.10.02.04 Conflicts and other geopolitical developments may affect risk appetite and commodity prices, and constitute an important risk for the global economic scenario.

Conflicts and geopolitical events can generate widespread uncertainties, significantly impacting commercial relationships, investor risk appetite and the price of certain assets, especially commodities. This scenario may lead to lower or negative growth in many economies, as well as trigger an expansion of global inflation, with an impact on interest rate policies practiced by central banks, and a greater aversion to risk and currencies of emerging countries, with potential effects on international liquidity and global economic growth. Any consequences resulting from these events may have adverse effects on the political, economic and business environment in Brazil, with an impact on the perception and confidence of economic agents, which in turn could have a negative effect on our operations.

The recent conflict between Russia and Ukraine has prompted the U.S. government, the European Union, the U.K. and other governments to impose economic sanctions and export controls against Russia and Russian interests in addition to threatening further additional sanctions and controls. These measures, as well as potential responses by Russia, have impacted the price of energy, oil and other commodities and, consequently, caused instability and volatility in economies and markets in general. If this continues simultaneously with a possible appreciation of the U.S. dollar, it would put additional pressure on inflation and could hinder the Brazilian economic recovery. The global supply of agricultural commodities has also been impacted, and if there is an increase in the price of such commodities, the demand for Brazilian production is likely to increase, thus raising the price of exported goods and domestic prices for these goods.

The conflict has also intensified the search for alternative energy sources, such as solar and wind energy, as Europe’s energy dependence on Russian gas has become evident. The increase in demand raised the prices of the main components for the development of these energy sources (e.g., solar panels and wind turbines) and, since it is a global production chain, the increase in these prices may affect the Brazilian development of these energy sources.

Although our direct exposure to Ukraine and Russia is limited, any of these factors may have an impact on the Brazilian economy and inflation levels, and on the global credit and capital markets, which may, in turn, adversely affect our business, financial condition and results of operations.

3.D.20 Risks relating to us and the Brazilian banking industry

As a result of the complexity of our business and the range of products and services offered to our clients in all segments of the market, we are exposed to various types of risks, either due to internal or external factors. Among the main types of risks, we highlight:

3.D.20.01 Market risk

This relates to the possibility of financial loss due to changes in prices and interest rates of our financial assets, as our asset and liability portfolios may have mismatches in amounts, maturities, currency and indexes.

3.D.20.01-01 Losses on our investments in financial assets at fair value through profit or loss and at fair value through other comprehensive income may have a significant impact on our results of operations and are not predictable.

The fair value of certain of our investments in financial assets may decrease significantly due to volatile financial markets and may fluctuate over short periods of time. As of December 31, 2022, investments classified as “fair value through profit or loss” and as “fair value through other comprehensive income” represented 28.8% of our assets, and realized and unrealized gains and losses originating from these investments have had, and may continue to have, a significant impact on our results of operations.

Eventually, investment prices in financial assets, which are supported by models, may not predict more sharp fluctuations in market movements, meaning that the profitability of these operations may at times cause negative effects on our operating results, despite the fact that they reflect our investment policies, asset and liability management and risk appetite.

3.D.20.01-02 Our trading activities and derivatives transactions may cause material financial losses.

We are engaged in the trading of securities, buying debt and equity securities principally to sell them in the short term with the objective of generating profits on short-term differences in price. These investments could expose us to the possibility of material financial losses in the future, as securities are subject to fluctuations in value. In addition, we enter into derivatives transactions, mainly to manage our exposure to interest rate and exchange rate risks. Such derivatives transactions are designed to protect us against increases or decreases in exchange rates or interest rates. However, these investments and transactions may also expose us to the possibility of significant financial losses in the future, since they are subject to fluctuations in value.

3.D.20.02 Credit risk

Credit risk represents the possible losses resulting from a borrower or counterparty's non-compliance with its financial obligations under any agreement, as well as the decrease in fair value of a credit agreement due to the deterioration in the borrower’s credit rating, the reduction in gains or remuneration, benefits granted during renegotiation, recovery costs and other amounts related to the non-compliance with the counterparty’s financial obligations. In addition, it includes Country/Transfer Risk, represented by the possibility of losses related to non-compliance with obligations by a counterparty or to a mitigating instrument located outside the country, including sovereign risk and the possibility of losses due to currency conversion of amounts received outside the country and associated with the operation subject to credit risk. Counterparty credit risk represents the possibility of loss due to non-compliance by a given counterparty with settlement obligations related to transactions involving the trading of financial assets or derivative financial instruments. Concentration risk represents the possibility of losses due to significant exposure to a counterparty, risk factor, product, economic sector or geographic region.

3.D.20.02-01 We may experience increases in our level of past due loans as our portfolio of loans and advances becomes more seasoned.

Our portfolio of loans and advances to clients grew in 2022. Any corresponding rise in our level of past due loans and advances may lag behind the rate of loan growth, as loans typically do not have due payments for a short time after their origination. Levels of past due loans are normally higher among our individual clients than our corporate clients.

Our delinquency ratio, which is defined as total loans overdue for over 90 days divided by the total portfolio of loans and advances, increased to 4.3% as of December 31, 2022 compared to 2.8% as of December 31, 2022. December 2021. This increase in our delinquency ratio is related to higher delinquency in the Retail segment (individuals and companies), given the scenario of inflation and high interest rates and the impact of a provision for a specific Large Corporate client. For more information on loan renegotiations, see “Item 5.B. Liquidity and Capital Resources – 5.B.50 Capital Management”.

However, the occurrence of adverse economic conditions or rapid loan growth before the portfolio becomes more mature could result in increases in our impairment of loans and advances and a higher delinquency ratio, which may have an adverse effect on our business, financial condition and operating results.

3.D.20.02-02 We may incur losses associated with counterparty risk exposure.

We face the possibility that a counterparty will be unable to honor its contractual obligations. Counterparties may default on their obligations due to bankruptcy, lack of liquidity, operational failure or other reasons. This risk may arise, for example, as a result of entering into a swap or other derivative contracts under which counterparties have obligations to make payments to us, executing currency or other trades that fail to settle at the required time due to non-delivery by the counterparty or systems failure by clearing agents, exchanges, clearing houses or other financial intermediaries. Such counterparty risk is more acute in complex markets where the risk of default by counterparties is higher.

3.D.20.02-03 We may face significant challenges in gaining possession of, 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 borrower. Depending on the type of collateral provided, we either have to seize such transfer of the collateral through the courts or through extrajudicial measures. However, even where the enforcement mechanism is duly established by 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. 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.

3.D.20.02-04 We may incur losses due to impairment of goodwill from acquired businesses.

We record the value of goodwill from acquisitions of subsidiaries as the difference between the fair value of the consideration paid and the fair value of the assets acquired and liabilities assumed. Annually, we assess the basis and estimates of profitability of the Cash-Generating Units (CGUs) in respect of which goodwill is allocated. These evaluations are made through cash flow projections based on growth rates and discount rates, with those projections then being compared to the carrying value of the CGU in order to determine whether there is a basis to record impairments in relation to these assets. However, given the inherent uncertainty in relation to predictions of future cash flow projections, we cannot provide assurances that impairment will not be recorded in the future, which may negatively affect our results of operations, financial condition and the market value of our shares and ADSs.

3.D.20.02-05 A downgrade of our ratings may adversely affect our funding cost, our access to capital and debt markets, our liquidity and, as a result, our competitive position.

Credit ratings represent the opinions of independent rating agencies regarding our ability to repay our indebtedness and affect the cost and other terms upon which we are able to obtain funding. Each of the rating agencies reviews its ratings and rating methodologies on a periodic basis and may decide on a grade change at any time, based on factors that affect our financial strength, such as liquidity, capitalization, asset quality and profitability or due to a downgrade of the Brazilian sovereign rating.

Under the criteria utilized by the rating agencies, ratings assigned to Brazilian financial institutions, including us, are constrained by the grades assigned to the Brazilian sovereign. Events that are not subject to our control, such as economic or political crises, may lead to a downgrade of the Brazilian sovereign rating and a corresponding downgrade of the ratings assigned to us.

The latest update regarding Brazil’s sovereign risk ratings made by global rating agencies are: (i) Moody's reaffirmed Brazil's sovereign rating at Ba2 and maintained a stable outlook, according to the latest report published on April 12, 2022; (ii) Fitch maintained the rating at BB-, changing the outlook from negative to stable, as per the report published on July 15, 2022 and reinforced this outlook in the report published on December 20, 2022; and (iii) S&P Global reaffirmed its rating at BB- with a stable outlook, as per a report published on June 15, 2022.

Credit ratings are essential to our ability to raise capital and funding through the issuance of debt, and they impact the cost of such financings. A downgrade or a potential downgrade in our credit ratings could have an adverse impact on our operations, income and risk weighting. This may affect net income, capital requirements and return on capital levels, causing a negative impact on our competitive position. Additionally, if our credit ratings were to be downgraded, rating trigger clauses that may be part of our financing agreements with other institutions could result in an immediate requirement to deliver additional collateral to counterparties or take other actions under some of our derivative contracts, adversely affecting our interest margins and operating results. Thus, a failure to maintain favorable ratings and outlooks may affect the cost and availability of financings through the capital markets and other sources, affecting our interest margins and capacity to operate.

3.D.20.03 Liquidity risk

Liquidity Risk represents the possibility of being unable to fully meet our obligations, without affecting our daily operations and incurring significant losses, as well as the possibility of being unable to trade a position at market price due to our significant size when compared to the usually traded volume or due to some market discontinuation.

3.D.20.03-01 Adverse conditions in the global credit and capital markets, as well as the value and/or perception of the value of Brazilian government securities, may adversely affect our ability to access funding in a cost-effective and/or timely manner.

Volatility and uncertainties in global credit and capital markets have generally decreased liquidity, with higher costs of funding for financial institutions. These conditions may impact our ability to replace, in a cost-effective and/or timely manner, maturing liabilities and/or access funding to execute our growth strategy.

Part of our funding originates from sales with repurchase agreements (repos), which are largely guaranteed by Brazilian government securities. These types of transactions 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 the value of Brazilian government securities may be a significant factor affecting the availability of funds. For example, if the quality of the Brazilian government securities used as collateral is adversely affected, due to the worsening of the credit risk of the Brazilian Treasury (Tesouro Nacional), the cost of these transactions may increase, making this source of funding inefficient for us. For further information about obligations for repurchase agreements, see “Item 5.B. Liquidity and Capital Resources – 5.B.20. Liquidity and Funding”.

If the market conditions deteriorate, such a deterioration could cause a reduction in the volume of transactions, or if there is increased collateral credit risk and we are forced to take and/or pay unattractive interest rates, our financial condition and the results of operations may be adversely affected.

3.D.20.03-02 Changes in regulations regarding reserve and compulsory deposit requirements may reduce operating margins.

The Central Bank of Brazil has periodically changed the level of compulsory deposits that financial institutions in Brazil, including us, are required to maintain.

Compulsory deposits generally yield lower returns than our other investments and deposits because:

The Central Bank of Brazil has changed the rules related to compulsory deposits from time to time, as described in “Item 4.B. Business Overview – 4.B.70.02 Banking Regulations – 4.B.70.02-05 – Compulsory Deposits”.

As of December 31, 2022, our compulsory deposits in connection with demand, savings and time deposits and additional compulsory deposits were R$93 billion. Compulsory deposit requirements have been used by the Central Bank of Brazil to control liquidity as part of monetary policy in the past, and we have no control over their imposition. Any increase in the compulsory deposit requirements may reduce our ability to lend funds and to make other investments and, as a result, may adversely affect our financial condition and the results of operations.

3.D.20.03-03 Adverse developments affecting the financial services industry, such as events or concerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our ability to finance our assets.

Events involving reduced or limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver. Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. Such events increase investor concerns regarding the U.S. or international financial systems, which can affect commercial financing terms. If other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets. A significant decline in available funding could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, or result in breaches of our financial and/or contractual obligations. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have a material adverse effect on our liquidity.

3.D.20.04 Insurance risk

Insurance risk is the risk arising from an adverse economic situation which was not expected by us at the time of underwriting our insurance policies, and the uncertainties that exist when estimating provisions. It includes the risk of having to make emergency contributions to cover shortfalls in pension funds for which we became responsible following certain business acquisitions.

3.D.20.04-01 Our losses in connection with insurance claims may vary from time to time. Differences between the losses from actual claims and underwriting and reserving assumptions and the related provisions may have an adverse effect on us.

The results of our operations depend significantly upon the extent to which our actual claims are consistent with the assumptions we used to assess our potential future policy and claim liabilities and to price our insurance products. We seek to limit our responsibility and price our insurance products based on the expected payout of benefits, calculated using several factors, such as assumptions for investment returns, mortality and morbidity rates, cancellations, conversion of pensions income, administrative, operational, brokerage and claims expenses, persistency, and certain macroeconomic factors, such as inflation and interest rates. These assumptions may deviate from our prior experience, due to factors beyond our control such as natural disasters (floods, explosions and fires), man-made disasters (riots, gang and or terrorist attacks), changes in mortality and morbidity rates as a result of advances in medicine and increased longevity, pandemics such as the Covid-19 pandemic, which may have a systemic effect on the business (particularly health products), or related and economic effects (other insurance products), among others. Therefore, we cannot precisely determine the amounts that we will ultimately pay to settle these liabilities, when these payments will need to be made, or whether the assets supporting our policy liabilities, together with future premiums and contributions, will be sufficient for payment of these liabilities. These amounts may vary from the estimated amounts, particularly when those payments do not occur until well in the future, which is the case with certain of our life insurance products. Accordingly, the establishment of the related provisions is inherently uncertain and our actual losses usually deviate, sometimes substantially, from such estimated amounts. To the extent that incurred losses are less favorable than the underlying assumptions used in establishing such liabilities, we may be required to increase our provisions, which may have an adverse effect on our financial condition and the results of operations.

3.D.20.04-02 We are responsible for claims of our clients if our reinsurers fail to meet their obligations under the reinsurance contracts.

The purchase of reinsurance does not hold us harmless against our liability towards our clients if the reinsurer fails to meet its obligations under the reinsurance contracts. As a result, reinsurers’ insolvency or failure to make timely payments under these contracts could have an adverse effect on our financial condition and the results of operations, given that we remain liable to our policyholders.

3.D.20.05 Operational risk

Operational risk is represented by the possibility of losses arising from faulty, deficient or inadequate internal processes, human and system error, or external events. This definition includes legal risk associated with our activities.

3.D.20.05-01 A failure in, or breach of, our operational, security or technological infrastructure and systems, or those of our suppliers, could temporarily interrupt our businesses and cause losses.

Our operations depend on the efficient and uninterrupted operation of our information technology systems. Any unavailability of infrastructure, software or telecommunications networks may impact the processing of transactions carried out by our clients, which may lead to financial losses, regulatory fines, sanctions, interventions, reimbursements and other costs with damages. These factors could have a material adverse effect on our business, reputation and results of operations.

Due to the nature of our operations, the wide range of products and services we offer, the significant volume of activities and operations performed, and the global context of digital transformation, where there is an ever-increasing integration among platforms, a growing use of cloud computing, an intensification of relationships with external technology providers, and an extensive use of the internet and connectivity solutions, the technological environment is exposed to various types of risks, whether arising from internal or external factors. We face certain additional risks, relating to:

Considering the use of new technologies, the increasing dependence on the internet and the changing and sophisticated nature of cybersecurity attacks, it is not possible to predict all the means that will be used by ill-intentioned individuals or organizations, which could impact our capacity to effectively foresee and/or avoid cyberattacks. Any of these events or any new factors may cause interruption, increased costs, delays in processing information and/or losses in the transmission of essential data, which may affect our business, reputation and operating and financial conditions.

3.D.20.05-02 The loss of senior management, or our ability to attract and maintain key personnel, could have a material adverse effect on us.

Our ability to maintain our competitive position and implement our strategy depends on our senior management. The loss of some of the members of our senior management, or our inability to maintain and attract additional personnel, could have a material adverse effect on our operations and our ability to implement our strategy.

Our performance and success are largely dependent on the talents and efforts of highly skilled individuals. Talent attraction and retention is one of the key pillars for supporting the results of our organization, which is focused on client satisfaction and sustainable performance. Our ability to attract, develop, motivate and retain the right number of appropriately qualified people is critical to our performance and ability to thrive globally. Concurrently, we face the challenge of providing a new experience to employees, so that we are able to attract and retain highly-qualified professionals who value environments offering equal opportunities and who wish to build up their careers in dynamic, cooperative workplaces, that encourage diversity and meritocracy and are up to date with new work models. Also, our current business scenario demands not only a careful look at traditional careers, but also at new career paths that are indispensable for our future.

Our performance could be adversely affected if we are unable to attract, retain and motivate key talent. As we are highly dependent on the technical skills of our personnel, including successors to crucial leadership positions, as well as their relationships with clients, the loss of key components of our workforce (particularly to emerging competitors, such as start-ups and fintechs), could make it difficult to compete, grow and manage the business. A loss of such expertise could adversely affect our financial performance, future prospects and competitive position.

This loss can further affect our businesses if we lose any key employee who is difficult to replace due to a booming talent market (such as data scientists, product managers, designers and others) or to diversity profiles (such as women in leadership roles).

3.D.20.06 Compliance risk

Compliance risk is the risk arising from legal or administrative sanctions, financial losses, reputational or other damages due to a breach of, or a failure to comply with, the legal framework, regulations, recommendations of regulators and self-regulated entities and/or codes of conduct and ethics applicable to our activities.

3.D.20.06-01 We may be subject to negative consequences in the event of an adverse judgment in the judicial proceedings related to Operation Zelotes.

As part of “Operação Zelotes” (Operation Zelotes), an investigation into alleged improper conduct by members of the Federal Administrative Council of Tax Appeals (Conselho Administrativo de Recursos Fiscais, or CARF), a criminal proceeding was opened against two former members of our Board of Executive Officers and received by the 10th Federal Court of Judicial Section of the Federal District. The court of first instance acquitted the two former members of our Board of Executive Officers and, so far the Public Officer Prosecutor has not appealed this decision.

Although we are not a party to this proceeding, any progress in Operation Zealots and other ongoing investigations or investigations that may be initiated in the future, any consequent events and the possibility of new accusations may negatively affect our reputation and our financial condition.

3.D.20.06-02 Financial institutions, such as us, may be subject to legal proceedings arising due to certain actions by third parties related to corruption, money laundering and terrorism financing (ML/TF).

We are subject to Brazilian anti-corruption and anti-money laundering and terrorism financing (AML/TF) legislation, and similarly-focused legislation of other countries where we have branches and operations, as well as other anti-corruption and AML/TF laws and regulatory regimes with a transnational scope. These laws require the adoption of integrity procedures to mitigate the risk of (i) any person acting on our behalf offering an improper advantage to a public agent in order to obtain benefits of any kind; and (ii) officers, employees and third parties inappropriately using financial systems for any ML/TF related acts. Legislation with transnational reach, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, as well as the Brazilian anti-corruption legislation, require us, among other things, to maintain policies and procedures aimed at preventing any illegal or improper activities related to AML/TF and the corruption of government entities and officials in order to secure any business advantage, and require us to maintain accurate books and a system of internal controls to ensure the accuracy of our books and prevent illegal activities. Despite our efforts, we cannot guarantee that such measures will be sufficient to fully prevent or detect illegal or improper activities.

If our policies and procedures designed to prevent ML/TF, bribery, and other corrupt practices are not capable of preventing voluntary or inadvertent actions by our officers, employees or third parties that amount to corruption, the governmental regulatory agencies to which we are accountable have the power and authority to impose fines and other penalties.

Involvement in these actions, a risk inherent in the activities of financial institutions, may result in negative publicity for us, and any adverse decision in an administrative or judicial proceeding may negatively affect our financial condition, operating results and the market value of our shares and ADSs. Further, the perception or allegation that we, our employees, our affiliates or other persons or entities associated with us have engaged in any such improper conduct, even if unsubstantiated, may cause significant reputational harm and other adverse effects.

In 2019, as part of Operation “Câmbio Desligo”, a follow on from Operation “Lava-Jato”, two of our former managers were investigated and indicted by the Public Prosecutor’s Office for alleged involvement in the opening and maintenance of checking accounts for companies with irregularities. We subsequently conducted a thorough internal investigation and adopted the required governance measures as well as making ourselves available to the authorities to contribute to the verification of the facts. Until March 31, 2023, no proceeding had been initiated against us.

3.D.20.06-03 Third parties may use us for criminal activities without our knowledge, which could expose us to additional liability and could have a material adverse effect on us.

We are required to comply with applicable AML/TF legislation, anti-bribery and anti-corruption legislation, as well as sanctions and other laws and regulations applicable to us. The laws and AML/TF regulations require us, among other things, to conduct full client due diligence (including sanctions and politically exposed person screening) and keep our client, account and transaction information up to date. We have implemented financial crime policies and procedures detailing our requirements and who, within our Organization, is responsible for these. We are also required to conduct AML/TF training for our employees and to report suspicious transactions and activity to appropriate law enforcement agencies following assessment by the Corporate Security area.

Financial crime has become the subject of enhanced regulatory scrutiny and supervision by regulators globally. AML/TF, anti-bribery, anti-corruption and sanctions laws and regulations are increasingly complex and detailed. The Basel Committee is now introducing guidelines to strengthen the interaction and cooperation between prudential and AML/TF 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, such policies and procedures may not prevent third parties from using us (and our relevant counterparties) as a conduit for illegal activities, without our knowledge. 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 the implementation and embedding, within our business, of effective controls and monitoring, which in turn requires ongoing changes to systems and operational activities. Financial crime is continually evolving and 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 without our knowledge. In addition, we rely heavily on our employees and systems to assist us by identifying 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 client due diligence, client screening or anti-financial crime operations, we remain responsible and accountable for full compliance and any breaches. If the necessary scrutiny and oversight of third parties to whom we outsource certain tasks and processes are not effectively applied, 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 Central Bank of Brazil requiring the implementation of this resolution in Brazil, additional compliance requirements were imposed on us and 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 have a process in place for continuous review of our control and compliance procedures.

If a financial institution, including us, is unable to fully comply with applicable laws, regulations and expectations, the regulatory agencies and bodies to which we are subject have the ability and authority to impose significant fines and other penalties, including requiring a complete review of its 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/TF, anti-bribery, anti-corruption or sanctions requirements. Our reputation could also suffer if we are unable to protect our clients’ data and bank products and services from being accessed or used for illegal or improper purposes.

In addition, we rely heavily on our relevant counterparties such as suppliers and commercial partners, 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 without our (or our relevant counterparties’) knowledge. If a financial institution, like us, is associated with, or even accused of being associated with, breaches of AML/TF, anti-terrorism, or sanctions requirements, its reputation could suffer and/or it could become subject to fines, sanctions and/or legal enforcement (including being added to “blocked lists” that would prohibit certain parties from engaging in transactions with such financial institution), any one of which could have a material adverse effect on our operating results, financial condition and prospects.

3.D.20.06-04 We may suffer losses due to employee misconduct.

Our business is exposed to risk from potential non-compliance with our policies, including our Code of Ethical Conduct, and related behaviors and executive and employee misconduct such as fraud, negligence or non-financial misconduct, which could result in regulatory sanctions and/or reputational or financial harm. It is not always possible to deter executive and employee misconduct, despite all the precautions we take to prevent and detect this activity. Executive and employee misconduct could have a material adverse effect on our business, financial condition, operating results, prospects and reputation.

3.D.20.06-05 The Brazilian government regulates the operations of Brazilian financial institutions and insurance companies. Changes in existing laws and regulations or the imposition of new laws and regulations may negatively affect our operations and revenues.

Brazilian banks and insurance companies are subject to extensive and continuous regulatory review by the Brazilian government. We have no control over government regulations, which govern all facets of our operations, including the imposition of:

The regulatory structure governing banks and insurance companies based in Brazil is continuously evolving. Existing laws and regulations could be amended, the manner in which laws and regulations are enforced or interpreted could change, and new laws or regulations could be adopted. Such changes could have a materially adverse effect on our operations and our revenues.

In particular, the government has historically enacted regulations affecting financial institutions in an effort to implement its economic policies. These regulations are intended to control the availability of credit and reduce or increase consumption in Brazil. These changes may adversely affect us because our returns on compulsory deposits are lower than those we obtain on our other investments. Regulations issued by the Central Bank of Brazil are not subject to a legislative process. Therefore, these regulations can be enacted and implemented in a very short period of time, which may affect our activities.

3.D.20.06-06 We are subject to regulation on an individual and a consolidated basis and may be subject to liquidation or intervention on a consolidated basis.

We operate in a number of credit and financial services related sectors through entities under our control. For purposes of regulation and supervision, the Central Bank of Brazil treats us and our subsidiaries as a single financial institution. While our consolidated capital base provides financial strength and flexibility to our subsidiaries, their individual activities could indirectly put our capital base at risk. Any investigation or intervention by the Central Bank of Brazil, particularly in the activities carried out by any of our subsidiaries, could have a material adverse impact on our other subsidiaries and, ultimately, on us. If we, or any of our financial subsidiaries, become insolvent, the Central Bank of Brazil 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 on 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 Central Bank of Brazil 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 Central Bank of Brazil also has the authority to carry out other corporate reorganizations or transfers of control under an intervention or liquidation process.

3.D.20.06-07 The Brazilian Constitution previously established a ceiling on loan interest rates and if the government enacts new legislation with a similar effect in the future, our operating results may be adversely affected.

Article 192 of the Brazilian Constitution, enacted in 1988, established a 12.0% p.a. ceiling on bank loan interest rates. However, since the enactment of the Brazilian Constitution, this rate has not been enforced, as the regulation regarding the ceiling had not been approved. The understanding that this ceiling is not yet in force has been confirmed by Binding Precedent (Súmula Vinculante) No. 7, a final binding decision enacted in 2008 by the STF, in accordance with such Court’s prior understanding on this matter. Since 1988, several attempts have been made to regulate the limitation on loan interest rates, and especially bank loan interest rates, but none of them have been implemented nor confirmed by Brazilian superior courts.

On May 29, 2003, Constitutional Amendment No. 40 (EC 40/03) was enacted and revoked all subsections and paragraphs of Article 192 of the Brazilian Constitution. This amendment allows the Brazilian Financial System to be regulated by specific laws for each sector of the system rather than by a single law relating to the system as a whole.

With the enactment of Law No. 10,406/02, as amended (or the Civil Code), unless the parties to a loan have agreed to use a different rate, the interest rate ceiling is pegged to the base rate charged by the National Treasury Office (Tesouro Nacional). There is currently uncertainty as to whether the base rate which is referred to in the Civil Code is: (i) the SELIC rate, which was 13.75% per annum as of the date of this annual report or (ii) the 12% per annum rate established in Article 161, paragraph 1, of Law No. 5,172/66, as amended (Brazilian Tax Code), which is the default interest rate applied when taxes are not paid on time.

The majority of our income, expenses, assets and liabilities is directly linked to interest rates. Accordingly, the imposition of a limitation or ceiling on loan interest rates could materially and adversely affect our results of operations and financial condition, our loan portfolios, our cost of funding and our income from credit operations.

3.D.20.06-08 Any substantial increase or decrease in the interest rate ceiling could have a material effect on our financial condition, our results of operations or on the prospects of financial institutions based in Brazil, including us.

On November 27, 2019, Resolution No. 4,765/19 was enacted by the CMN, as amended. It regulates overdraft facilities granted by financial institutions for a demand deposit account, providing, among other matters, a limit for the interest rates on the amount of the overdraft used. For further information, see “Item 4.B. Business Overview – 4.B.70 Regulation and Supervision – 4.B.70.02 Banking Regulations – 4.B.70.02-14 Use of the overdraft”.

Additionally, certain Brazilian courts have, for the same reason, issued decisions in the past, limiting interest rates on consumer financing transactions that are considered abusive or excessively onerous in comparison to market practice. Future Brazilian court decisions as well as changes in legislation and regulations restricting interest rates charged by financial institutions could have an adverse effect on our business.

3.D.20.06-09 We may incur penalties in case of non-compliance with data protection laws.

In August 2018, Law No. 13,709/18 – General Data Protection Law (LGPD) was enacted, which creates a set of rules for the use, protection and transfer of personal data in Brazil, in the private and public spheres, and establishes responsibilities and penalties in the civil sphere. In addition to including existing rules on the subject, the LGPD followed the global trend of strengthening the protection of personal data, restricting its unjustified use, and guaranteeing a series of rights to holders of data, as well as imposing important obligations on so-called “treatment agents”. In particular, the LGPD was inspired by recent European legislation on the subject, reproducing central points of Directive No. 95/46/EC and Regulation (EU) 2016/679 – General Data Protection Regulation (GDPR).

The impact of this law has been significant, as any processing of personal data is subject to the new rules, whether physical or digital, by any entity that is established in Brazil or that has collected personal data in Brazil or from any individual located in Brazil – even if not residents – or that offers goods and services to Brazilian consumers. In short, the adaptation to the LGPD required structural changes in our relationships with clients, business partners, service providers and employees, and in virtually all areas of Brazilian society. The LGPD of December 28, 2018, is in full force. The ANPD, the public administration body responsible for overseeing, implementing and supervising compliance with the LGPD, which has the power to apply sanctions in case of non-compliance since the publication of the CD/ANPD Resolution No. 4 on February 27, 2023.The National Council for the Protection of Personal Data and Privacy, created by provisional measure converted into Law No. 13,583/19, is an additional enforcement body tasked with ensuring compliance with the LGPD.

We operate in a preventive, detective and corrective manner in order to protect our own and our clients’ information. As a result, we have developed our security framework in light of the new digital environment, with a focus on cybersecurity being a key pillar of our technology processes to establish data protection for our clients. These changes have strengthened the resilience of our systems, our structure for threat identification and detection, and our response and recovery procedures in cases of cyberattacks.

However, possible failures or attacks on our systems and processes of prevention, detection and/or correction in the fight against fraud and in providing information security, may lead to non-compliance with applicable legislation, including the LGPD, which may in turn negatively affect our reputation, our financial condition, the result of our operations and the market value of our shares and ADSs. See item 3.D.20.05-01 “A failure in, or breach of, our operational, security or technological infrastructure and systems, or those of our suppliers, could temporarily interrupt our businesses and cause losses.”

3.D.20.06-10 The Brazilian Supreme Court (STF) and Brazilian Superior Court of Justice (STJ) are currently deciding cases relating to the application of inflation adjustments during periods of hyperinflation in Brazil, which may increase our costs and result in losses.

The STF, which is the highest court in Brazil, has responsibility for judging constitutional matters, and is currently deciding whether savings account holders have the right to obtain adjustments for inflation related to their deposits due to the Bresser, Verão (part of), Collor I and Collor II economic plans, implemented in the 1980s and 1990s, before the Plano Real, in 1994. The trial began in November 2013 but was interrupted without any pronouncement on the merits of the subject under discussion by its members. According to the associations representing the savings account holders, banks misapplied the monetary adjustments when those economic plans were implemented and should be required to indemnify the savings account holders for the non-adjustment of those amounts.

The STF decided that the judgments for class actions proposed by associations questioning the inflationary adjustments only benefit consumers who: (i) were associated with the associations at the time of filing of the class actions; and (ii) had authorized the filing of the class action. This reduced the number of beneficiaries in class actions because, until then, it was understood that these decisions should benefit all consumers affected by the practices (i.e., all consumers who are account holders and who had suffered losses related to inflationary purges, irrespective of whether those losses were associated with the association, plaintiff of the class action).

In connection with a related decision, the STJ decided, in May 2014, that the starting date for counting default interest for compensating savings account holders must be the date of summons of the related lawsuit (rather than the date of settlement of the judgment), therefore increasing the amount of possible losses for the affected banks in the event of an unfavorable decision by the STF.

In December 2017, with the mediation of the Executive branch’s attorney (Advocacia Geral da União or AGU) and the intervention of the Central Bank of Brazil, the representatives of the banks and the savings account holders entered into an agreement related to the economic plans aiming to finalize the claims, establishing a timeline and conditions for the savings account holders to accede to such agreement. The STF affirmed the agreement on March 1, 2018. This approval determined the suspension of legal actions in progress for the duration of the collective bargaining agreement (24 months). On March 11, 2020, the signatories to the Collective Bargaining Agreement agreed to an amendment extending the agreement for a further 60 months. The amendment was taken to the Supreme Court for approval, its extension was approved by the plenary of the court on May 29, 2020, for a period of 30 months (renewable for a further 30 months) from March 12, 2020 in order to adhere to the terms of the agreement by means of a digital platform specially created for this purpose. As this is a voluntary settlement, which does not oblige the savings account holder to join, we are unable to predict how many savings account holders will accede to it.

The STF is currently deciding cases relating to the application of inflation adjustments which may increase our costs and result in losses. This, in turn, may negatively affect our financial condition, the result of our operations and the market value of our shares and ADSs.

3.D.20.06-11 As the regulatory framework for artificial intelligence and machine learning technology evolves, our business, financial condition and results of operations may be adversely affected.

The regulatory framework for artificial intelligence and machine learning technology is evolving and remains uncertain. It is possible that new laws and regulations will be adopted, or existing regulations, notably those relating to data and copyright protection, may be interpreted in new ways that would affect our operations and the way in which we use artificial intelligence and machine learning technology, including with respect to provide lending, in light of legislative discussions regarding the right to contestability, explainability and review of decisions obtained through the use of artificial intelligence systems. Further, the cost of complying with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.

3.D.20.06-12 We may be unable to collect payments due from payroll deductible loans.

A portion of our income is derived from payroll deductible loans, where our clients’ loan payments are deducted directly from their pensions, annuities, or other earnings. Our ability to make payroll deductions is governed by various federal, state and local laws and/or regulations that establish limits on such deductions, and requires certain licenses issued by public entities and agreements with private sector employers. The enactment of any new law, regulation or amendment, or the repeal or emergence of a new interpretation of existing laws or regulations that result in a ban or restriction on our ability to make these direct deductions could increase the risk profile of our credit portfolio, resulting in a higher percentage of loan-related losses.

Our capacity to receive payments due on personal loans paid directly from payroll or from social security benefits also depends on the effectiveness and validity of the agreements we entered into with entities of the public sector, including the Brazilian Institute of Social Security (Instituto Nacional da Seguridade Social - INSS) and employers of the public and/or private sector, as well as on the continued employment or status as beneficiary of the borrowers.

Part of our loans are derived from lending through loans deducted directly from payroll, including the payroll card model, a credit card for which monthly bills are deducted from payroll (only the expenses that are within the limit to be deducted from the payroll, the expenses that exceed this limit will be charged through credit card billing). Repayments are deducted directly from the borrowers’ pensions, annuities, or salaries, and may be interrupted if the borrower (a retired person, pensioner, employee or official of the private or public sector) loses his or her job, if other deductions, such as alimony, take priority over the loan, or if the borrower dies. In the event of a borrower’s termination or leave of absence from his or her employer, the payment of the loan may depend exclusively on the borrower’s financial capacity. There can be no assurance that we will be able to recover loan amounts in these circumstances.

Our payroll deductible loans are also subject to risks relating to the employer or payee. Any events that affect payments to employees, such as an employer’s financial condition, and any failures or changes in the internal controls, may delay, reduce or prevent deductions from the employees’ earnings, and therefore, result in losses on our payroll loans portfolio, which may materially adversely affect us.

3.D.20.07 Strategy risk

Strategy risk is represented by the possibility of the deterioration of results, capital and/or strategic indicators (in relation to what was planned) resulting from business decisions not aligned with strategy, inadequate implementation of decisions, as well as lack and/or insufficiency of reaction to changes in the business environment.

3.D.20.07-01 The increasingly competitive environment in the Brazilian banking and insurance segments may have a negative impact on our business prospects.

The markets for financial, banking and insurance services in Brazil are highly competitive. We face significant competition in all of our main areas of operation from other large banks and insurance companies, both public and private, based in Brazil and abroad, in addition to new players, such as fintechs and startups that operate with differentiated and reduced levels of regulation. It should be noted that major technology companies, bigtechs, are also strong competitors, seeking to invest in online payment systems and financial transaction tools by means of various types of applications. In addition, the implementation of Open Finance in Brazil may further intensify this competition through the possibility of sharing information between institutions.

This competitive environment, combined with the accelerated process of digital innovation observed in the sector, may impact our speed of adaptation to this ecosystem and consequently the performance of certain lines of business, which may negatively affect our financial condition, the result of our operations and the market value of our shares and ADSs.

3.D.20.08 Step-in risk

Step-in risk is represented by the possibility of financial loss, resulting from our relationships (contractual or not) with subsidiaries, associates, investment funds, foundations, suppliers, partners and other entities beyond, or in the absence of, our contractual obligations with such entities which are not consolidated in the Prudential Conglomerate.

3.D.20.08-01 Potential need for financial support for related entities, either due to insufficient capital and/or liquidity, relevant operational problems and dependence on services rendered by suppliers/partners may negatively impact our business performance.

As a result of our relationship with companies that are not included in our regulated group (the Prudential Financial Conglomerate, or Conglomerado Prudencial) and our activities related to investment funds, we may have to provide financial support for these entities if they run into financial difficulties, equity imbalances, reduction in financial income, or insufficient liquid assets, among other situations. In addition, our reputation may be adversely affected as a result of any adverse situation occurring in entities in which we have invested.

Due to the complexity of some of our services, we may be dependent on relationships with suppliers/partners or have difficulty replacing some suppliers/partners. We are also subject to operational risks that are beyond our control and may negatively impact our operations, as well as cause difficulty in our delivery of products and services to our clients. Possible interruptions in the provision of our services and difficulties in replacing certain suppliers/partners or other issues beyond our control arising from outsourced companies may adversely affect our reputation, result of operations, financial condition and/or the market value of our shares and ADSs.

3.D.20.09 Cybersecurity risk

Cybersecurity risk is represented by the possibility of cyber incidents, including attacks, intrusions and leakages, that could compromise the confidentiality, integrity and/or availability of our critical processes, assets and/or infrastructure.

3.D.20.09-01 Failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us.

We are exposed to failures, deficiencies or inadequacies in our internal processes, human error or misconduct and cyberattacks. Although we have procedures and controls to safeguard our information technology systems and platforms, we are subject to cybersecurity risks that could materially and adversely affect us in case of failures to adequately protect our assets and people.

Like other large corporations, we are heavily dependent on technology and information, which exposes us to internal and external events that may affect the availability of our systems and information technology infrastructure. Those events can also occur at our third-party service providers, which form part of our supply chain and have the potential to materially adversely affect our business and activities.

The risks that may, directly or indirectly, impact us or our third party service providers, include, but are not limited to: intrusion into information technology systems and platforms by malicious individuals, infiltration of malware (such as computer viruses) into our systems, intentional or accidental contamination of our networks and systems or those of our third party service providers with whom we exchange data, unauthorized access to confidential client data and/or organizational data and cyberattacks with the potential to cause service degradation and/or outages that can result in business losses.

Cybersecurity and its risks are treated at the highest strategic level within our Organization. We consider the possibility of loss, theft or alteration of data processed and stored by us, or our third-party service providers a relevant factor in our risk analysis due to the potential exploitation of vulnerabilities and weaknesses in systems, devices, networks or other digital media in our information technology environment and in our third-party service providers’ information technology environment (e.g., ransomware attacks).

Our corporate security department carries out a prior and periodic analysis of the security controls in the environment of our service providers. New contracts and/or the renewal of relevant data processing and storage and cloud computing services contain specific cybersecurity clauses aimed at protecting the information, even after termination of the contract.

Brazilian regulatory bodies have also intensified regulations, including through the LGPD, CVM Resolution No. 35/21, as amended and CMN Resolution No. 4,893/21, improving controls, policies and requirements for cloud services.

The LGPD imposes large fines in the event of data leakages as a result of non-compliance with the terms and conditions of the LGPD. Accordingly, any failure to protect personal information could adversely affect us, our operating results and financial condition and reputation. Although we have procedures and controls to safeguard personal information in our possession, unauthorized disclosures or security breaches could subject us to legal action and administrative sanctions as well as damage that could materially and adversely affect our operating results, financial condition, prospects and reputation. In addition, we may be required to report to the regulatory authorities material events related to cybersecurity issues, events where client information may be compromised, incidents of unauthorized access and other security breaches.

In 2022, we experienced a significant security incident exclusively involving our subsidiary Banco Bradesco Financiamentos (BBF), which offers specialized solutions for the commercialization of payroll loans and vehicle financing. During the incident response and forensic analysis, we discovered that a systemic vulnerability had been exploited, resulting in unauthorized access to the data of certain BBF clients from part of the database relating to vehicle financing contracts. Measures were adopted to solve the incident and we contacted the clients whose data was unduly accessed, as well as informing the competent authorities (Central Bank of Brazil and National Data Protection Agency (ANPD) - National Agency for Data Protection).

However, any future failure to adequately protect ourselves against risks relating to cybersecurity could materially and adversely affect us.

3.D.20.10 Social, environmental and climate risks

This is represented by the potential damage that we may cause to society and to the environment. The social and environmental risks associated with financial institutions are mostly indirect and stem from business relationships, including those with the supply chain and with clients, through financing and investment activities.

3.D.20.10-01 Funding for large projects carried out by clients may result in negative socio-environmental impacts which, in turn, could negatively affect our results and reputation.

Across several sectors, we promote and finance projects, which may significantly affect ecosystems, communities and the local flora and fauna. If a client in the development of its project causes environmental damage, such as the contamination of soil and water pollution above the legally acceptable limit, and/or is responsible for environmental disasters, it has a direct obligation to repair the damage caused. Consequently, depending on the magnitude of the socio-environmental impact, a client may have its financial structure compromised. Such events could adversely affect our reputation, financial condition, results of operations and the market value of our shares and ADSs.

3.D.20.10-02 Climate change may have adverse effects on our business.

The risks associated with climate change are gaining increasing social, regulatory, economic and political relevance, both nationally and internationally. New regulations related to climate change may affect our operations and business strategy, causing us to incur financial costs arising from physical climate risks and risks arising from the transition to a low carbon economy.

Physical climate risks are related to the projection that the global climate will continue to worsen further, which is expected to result in an increase in the severity and frequency of chronic and acute weather events. These events could potentially affect the global economy, resulting in significant changes in asset prices and industry profitability. Damage to borrowers’ properties and operations can impair asset values and the credit quality of clients, leading to higher delinquencies, write-offs and impairment charges in our portfolios. In addition, our facilities may also suffer physical damage due to weather events, which may represent an increase in our expenses.

Regarding transition risks, we recognize that economic shifts towards a low-carbon future are needed. The global market may face significant and rapid developments in market dynamics, technologies and legal and regulatory risks, which are capable of impacting our business. In addition, we expect to face greater scrutiny of the business we conduct from regulators, investors, civil society and the public.

The effects of physical and transition risks may also represent losses for our clients, affecting the profitability of companies and their ability to repay loans. Thus, if we do not adequately incorporate the risks associated with climate change into our risk framework to adequately measure, manage and disclose the various financial and operational risks that could result from climate change, or if we do not adapt our strategy and business model to regulatory and market changes, we may experience a material adverse impact on our growth rates, competitiveness, profitability, capital requirements, cost of financing and level of compliance.

3.D.20.11 Reputational risk

Reputational risk is represented by the loss of credibility before clients, counterparts, government agencies, the market or the community, as a result of undue acts and improper actions and behavior.

3.D.20.11-01 Damage to our reputation could harm our business and outlook.

We are highly dependent on our image and credibility to generate business. A number of factors may tarnish our reputation and generate a negative perception of us in the eyes of our clients, counterparties, stockholders, investors, regulators, commercial partners and other stakeholders. Such factors include noncompliance with legal obligations, making irregular sales to clients, dealing with suppliers with questionable ethics, unauthorized disclosure of client data, inappropriate behavior on the part of our employees, third-party failures in risk management, and relationships with stakeholders whose practices are not aligned with ESG principals, among others. In addition, certain significant actions taken by third parties, such as competitors or other market participants, may indirectly damage our reputation with clients, investors and the market in general. If we are unable, or are perceived to be unable, to properly address these issues, we may be subject to penalties, fines, class actions and regulatory investigations, among other things. Reputational damage before clients, investors and other stakeholders may have a material adverse effect on our business, financial performance and prospects.

3.D.20.12 Model risk

Model risk is represented by the possibility of loss due to models with failures or deficiencies, or due to inadequacies in the process of model development or implementation.

3.D.20.12-01 We may make non-optimal business decisions due to flawed/deficient models, or inappropriate use.

The use of models to support business decision making is an increasingly widespread practice in financial institutions. These tools enable the synthesis of complex subjects, the standardization and automation of the decision-making process and the possibility of reuse of internal and external information, resulting in improved efficiency by reducing the costs associated with analysis and manual decision-making. However, flaws in the model’s foundation (examples: simplifications, approximations, insufficient data, development sample design, etc.) or inappropriate use of a model different from the use that was envisaged during its development, may lead to financial losses and therefore, negatively affect the result of our operations, our financial condition and the market value of our shares.

3.D.30 Risk management

3.D.30.01 Our risk management structure may not be fully effective.

Our objective is to fully incorporate the risk management process into all of our activities, developing and implementing methodologies, models and other tools for the measurement and control of risks, and looking to continuously improve them in order to mitigate the risks that we identify. However, there may be limitations to this risk management framework in foreseeing and mitigating all the risks to which we are subject, or those to which we may, in the future, become subject. If our risk management structure is not completely effective in adequately preventing or mitigating risks, we could suffer material unexpected losses, adversely affecting our financial condition and operating results. For more information on our risk management structure, see “Item 4.B. – Business Overview – 4.B.20.01 Risk Management”.

3.D.40 Other risks

3.D.40.01 A majority of our common shares are held, directly and indirectly, by one shareholder and our Board of Directors is composed of 11 members, including four independent members; accordingly, the interests of non-independent members may conflict with those of our other investors.

As of March 10, 2023, Fundação Bradesco directly and indirectly held a30.53% of our total capital, with 8.59% held directly and 21.94% held indirectly. Under the terms of Fundação Bradesco’s by-laws, members of our Board of Executive Officers who have been working with us for more than ten years serve as members of the board of trustees of Fundação Bradesco. The board of trustees has no other members.

Our Board of Directors has 11 members, and four of them are independent. In other words, they are not associated with Fundação Bradesco, in accordance with the criteria of Law No. 6,404/76 and the regulations issued by the CVM. Brazilian Corporate Law provides that only individuals may be appointed to a company’s Board of Directors. According to our by-laws, there is no legal or statutory provision requiring us to have independent directors. However, with the goal of enhancing corporate governance, our Board of Directors has four independent directors. Since the majority of members are not independent, the interests of our Board of Directors may not always be aligned with the interests of our common shareholders, and the shareholders do not have the same protections as they would if all the directors were independent. Furthermore, our directors (excluding our independent directors) are associated with Fundação Bradesco and decisions in relation to our policy towards acquisitions, divestitures, financings or other transactions could be made by Fundação Bradesco and our Board of Directors which may be contrary to the interests of our other investors, including holders of shares and ADSs, and which may have a negative impact on the interests of the holders of our shares and ADSs. , see “Item 7.A. Major Shareholders”.

3.D.50 Risks relating to our shares and ADSs

3.D.50.01 The Deposit Agreements governing the ADSs provide that holders of such ADSs will only receive voting instructions if we authorize the depositary bank to contact those holders to obtain voting instructions; and there are also practical limitations on any ability to vote we may give such holders.

The voting rights of ADS holders are governed by the Deposit Agreements. These Deposit Agreements provide that the depositary bank shall mail voting instructions to holders only if we authorize and direct the depositary bank to do so. If we do not provide that authorization and direction to the depositary bank, the ADS holders will not be able to vote at our meetings, unless they surrender their ADSs and receive the underlying preferred shares or common shares, as applicable, in accordance with the terms of the applicable Deposit Agreement.

In addition, there are practical limits to the ability of the ADS holders to exercise any vote due to the additional procedural steps involved in communicating with such holders. For example, our shareholders will either be notified directly or by a notification published in Brazilian newspapers, and they will be able to exercise their voting rights by either attending the meeting in person or voting by proxy. In contrast, ADS holders will not receive notice directly from us and cannot vote in person at the meeting. Instead, in accordance with the Deposit Agreements, the depositary bank will, if authorized and directed by us, send any notice of meetings to ADS holders, together with a statement as to the manner in which voting instructions may be given by holders. To exercise any such ability to vote, ADS holders must then instruct the depositary bank how to vote with the shares represented by their ADSs. Because of this extra step involving the depositary bank, if and when we authorize and direct the depositary bank to mail voting information to ADS holders, the process of voting will take longer for ADS holders than for holders of our shares. Holders of ADSs from whom the depositary bank does not receive voting instructions in good time will not be able to vote at a meeting.

3.D.50.02 Under Brazilian Corporate Law, preferred shareholders have limited voting rights, accordingly, preferred share ADS holders will have similar limitations on their ability to vote.

Under the Brazilian Corporate Law (Law No. 6,404/76, as amended, the “Brazilian Corporate Law”) and our Bylaws, our preferred shareholders are not entitled to vote at our shareholders’ meetings, except in limited circumstances (see “Item 10.B. Memorandum and Articles of Association – 10.B.10 Organization – 10.B.10.04 Voting Rights”, for further information on voting rights of our shares). As such, in contrast to common shareholders, preferred shareholders are not entitled to vote on corporate transactions, including any proposed merger or consolidation with other companies, among other things.

As discussed above in “3.D.50.01 The Deposit Agreements governing the ADSs provide that holders of such ADSs will only receive voting instructions if we authorize the depositary bank to contact those holders to obtain voting instructions; and there are also practical limitations on any ability to vote we may give such holders”, preferred share ADS holders will only be able to vote if we authorize and direct the depositary bank accordingly. As a result of the fact that preferred shareholders have limited voting rights, any ability to vote that we may extend to preferred share ADS holders corresponding to the preferred shares pursuant to the applicable Deposit Agreement, would be similarly limited.

3.D.50.03 The relative volatility and low liquidity of the Brazilian securities markets may substantially limit your ability to sell shares underlying the ADSs at the price and time you desire.

Investing in securities that trade in emerging markets, such as Brazil, often involves greater risk than investing in securities of issuers in more developed countries, and these investments are generally considered more speculative in nature. The Brazilian securities market is substantially smaller and less liquid than major securities markets, such as the United States, and may be more volatile. Although you are entitled to withdraw the shares underlying the ADSs from the depositary bank at any time, your ability to sell the shares underlying the ADSs at a price and time acceptable to you may be substantially limited. There is also significantly greater concentration in the Brazilian securities market than in major securities markets such as the United States or other countries. The ten largest companies in terms of market capitalization, according to B3, accounted for 46.3% of the aggregate market capitalization as of December 31, 2022.

3.D.50.04 If we do not pay dividends to holders of our common shares and preferred shares, no dividends will be paid to holders of ADSs.

Pursuant to the Deposit Agreements, if the depositary (as holder of the shares underlying the ADSs) receives any cash dividend or distribution from us, it shall distribute a corresponding U.S. dollar amount, net of depositary fees and certain withholding tax adjustments as described in the Deposit Agreements, to holders of our ADSs.

Pursuant to our Bylaws, our preferred shares are entitled to dividends 10.0% higher than those of our common shares. Although under our current Bylaws, we are obligated to pay our shareholders at least 30.0% of our annual adjusted net income, the shareholders attending our Annual Shareholders’ Meeting may decide to suspend this mandatory distribution of dividends if the Board of Directors advises that payment of dividends is not compatible with our financial condition. Neither our Bylaws nor Brazilian law specifies the circumstances in which a distribution would not be compatible with our financial condition, and we have never failed to pay the mandatory dividend. However, Brazilian law provides that a company need not pay dividends if such payment would endanger the existence of the company or harm its normal course of operations.

Further, pursuant to CMN Resolution No. 4,958/21, as amended, the Central Bank of Brazil may impose restrictions on the payment of dividends and interest on capital in the event of non-compliance with the additional capital requirements established by the Central Bank of Brazil, as further described in “Item 4.B. Business Overview – 4.B.70 Regulation and Supervision – 4.B.70.02 Banking Regulations – 4.B.70.02-03 Capital adequacy and leverage”.

3.D.50.05 As an ADS holder you will have fewer and less well-defined shareholders’ rights than in the United States and certain other jurisdictions.

Our corporate affairs are governed by our Bylaws and 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, you and the holders of our shares may have fewer and less well-defined rights to protect your interests relative to actions taken by our Board of Directors or the holders of our common shares than under the laws of other jurisdictions outside Brazil.

Although Brazilian Corporate Law imposes restrictions on insider trading and price manipulation, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or markets in certain other jurisdictions. In addition, self-dealing and the preservation of shareholder interests may be less heavily regulated and the regulations that are in place may not be as strictly enforced in Brazil as in the United States, which could potentially disadvantage you as a holder of our shares underlying ADSs. For example, compared to Delaware general corporation law, Brazilian Corporate Law and practices have less detailed and well-established rules and judicial precedents relating to the review of management decisions under duty of care and duty of loyalty standards in the context of corporate restructurings, transactions with related parties, and sale-of-business transactions. In addition, shareholders in Delaware companies must hold 5.0% of the outstanding share capital of a corporation to have valid standing to bring shareholder derivative suits, while shareholders in companies based in Brazil do not normally have valid standing to bring a class action.

3.D.50.06 It may be difficult to bring civil liability causes against us or our directors and executive officers outside of Brazil.

We are organized under the laws of Brazil, and all of our directors and executive officers reside outside the United States. In addition, a substantial portion of our assets and most or all of the assets of our directors and executive officers are located in Brazil. As a result, it may be difficult for investors to effect service of process within the United States or other jurisdictions outside of Brazil on such persons or to enforce judgments against them, including any based on civil liabilities under the U.S. federal securities laws.

3.D.50.07 If we issue new shares or our shareholders sell shares in the future, the market price of your ADSs may be reduced.

Sales of a substantial number of shares, or the belief that this may occur, could reduce the market price of our shares and ADSs by diluting their value. If we issue new shares or our existing shareholders sell the shares they hold, the market price of our shares, and therefore the market price of our ADSs, may decrease significantly.

3.D.50.08 The payments on the ADSs may be subject to U.S. withholding under the Foreign Account Tax Compliance Act (FATCA).

The United States has enacted rules, commonly referred to as FATCA, that generally impose a reporting and withholding regime with respect to certain U.S. source payments (including interest and dividends), 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. The United States has entered into an Intergovernmental Agreement regarding the implementation of FATCA with Brazil (the IGA). Under the current terms and conditions of the IGA, we do not expect payments made on or with respect to the ADSs 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 ADSs in the future. Similar to the FATCA, the Common Reporting Standard (CRS) is the instrument developed by the Convention on Mutual Assistance in Tax Matters of the Organization for Economic Co-operation and Development (OECD) and the Multilateral Competent Authority Agreement, applicable to the signatory countries of the standard. The financial institutions and entities subject to it should ensure the identification, investigation and reporting of information to the competent bodies. Prospective investors should consult their own tax advisors regarding the potential impact of FATCA and CRS. For more information about FATCA and CRS, see “Item 4.B. Business Overview – 4.B.70 Regulation and Supervision”.

3.D.50.09 You may be unable to exercise preemptive rights relating to our shares.

You will not be able to exercise preemptive rights relating to the shares underlying your ADSs unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. Similarly, we may from time to time distribute rights to our shareholders. The depositary bank will not offer rights to you as a holder of the ADSs unless the rights are either registered under the Securities Act or are subject to an exemption from the registration requirements. We are not obligated to file a registration statement with respect to the shares or other securities relating to these rights, and we cannot assure you that we will file any such registration statement. Accordingly, you may receive only the net proceeds received from the sale by the depositary bank of the rights in respect of the shares represented by your ADSs or, if the preemptive rights cannot be sold, they will be allowed to lapse. You may also be unable to participate in rights offerings by us, and your holdings may be diluted as a result.

3.D.50.10 If you exchange your ADSs for their underlying shares, you risk losing Brazilian tax advantages and the ability to remit foreign currency abroad.

Brazilian law requires the parties to obtain a registration certificate from the Central Bank of Brazil in order to remit foreign currencies, including U.S. dollars, abroad. The Brazilian custodian for the shares must obtain the necessary registration certificate from the Central Bank of Brazil for payment of dividends or other cash distributions relating to the shares or following disposal of the shares. If you exchange your ADSs for the underlying shares, 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 certificate in accordance with the rules of the Central Bank of Brazil, in order to obtain and remit U.S. dollars abroad after the disposal of the shares or the receipt of distributions relating to the shares. 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 relating to the shares. For more information, see “Item 10.D. Exchange Controls”.

If you attempt to obtain your own registration certificate, you may incur expenses or suffer delays in the application process, which could delay the receipt of dividends, distributions relating to the shares or the return of your capital. The custodian’s registration certificate 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 shares or to the repatriation of the proceeds resulting from disposal, may be imposed in the future.

ITEM 4. INFORMATION ON THE COMPANY

4.A. History and Development of the Company

We are a sociedade anônima organized under the laws of Brazil. Our headquarters are in Cidade de Deus, Vila Yara, 06029-900, Osasco, São Paulo, Brazil, and our telephone number is +55 11 3684-4011. Our investor relations website is located at bradescori.com.br. Our New York Branch is located at 450 Park Avenue, 32nd and 33rd floors, New York 10022.

We were founded in 1943 as a commercial bank under the name “Banco Brasileiro de Descontos S.A.”. In 1948, we began a period of aggressive expansion, which led to our becoming the largest private sector (non-government controlled) commercial bank in Brazil by the end of the 1960s. We expanded our activities nationwide during the 1970s and became well established in both urban and rural markets in Brazil. In 1988, we merged with our real estate financing, investment bank and consumer credit subsidiaries to become a multiple service bank and changed our name to “Banco Bradesco S.A.”.

With a national and international presence, our extensive banking network enables us to be closer to our clients, thereby enabling our managers to develop knowledge regarding economically active regions and other important conditions for our business. This knowledge helps us assess and mitigate risks in loans, among other risks, as well as meet the specific needs of our clients.

Currently, we are one of the largest banks in Brazil in terms of total assets. We offer a wide range of banking and financial products and services in Brazil and abroad to individuals, large, mid-sized, small and micro enterprises and major local and international corporations and institutions. Our products and services consist of banking operations such as: loans and advances, deposit-taking, credit card issuance, purchasing consortiums, insurance, capitalization, leasing, payment collection and processing, pension plans, asset management and brokerage services.

4.A.10 Acquisitions, divestitures and other strategic alliances

4.A.10-01 Recent Acquisitions

In May 2019, we entered into a Share Purchase Agreement with the controlling shareholders of Bradesco Bank, a bank that has offered various financial services in the United States of America (USA) for over 45 years, especially to non-resident high net worth Individuals.

In October 2020, we completed the acquisition, taking control of Bradesco Bank’s operations, with the objective of expanding our investment offering in the USA to our high net worth (Prime) and Private Bank clients, in addition to providing other banking services, such as checking accounts, credit card and mortgages. The acquisition also provided an opportunity to expand business related to corporate and institutional clients.

Ø  Banco Digio S.A.

On October 8, 2021, we signed a contract with BB Elo Cartões Participações S.A., a subsidiary of Banco do Brasil S.A., through our subsidiary Bradescard Elo Participações S.A., for the acquisition of its 49.99% shareholding in Banco Digio (Digio). On February 25, 2022, after obtaining approvals from the Central Bank of Brazil and the Administrative Council for Economic Defense (CADE), we completed the acquisition. We paid R$645 million to BB Elo Cartões and, following the acquisition, we now hold 100% of Digio’s share capital. Digio offers credit cards, checking accounts and personal loans to its clients. This transaction is aligned with our strategy of investing in digital companies, diversifying our operations and reaching diverse audiences.

On August 24, 2022, we signed a contract with Banco Votorantim S.A. to set up an independent investment manager (BV DTVM), which will have its own brand. Through our indirect subsidiary Kartra Participações Ltda, we acquired 51% of the capital of BV DTVM. Banco Votorantim S.A. remains a shareholder, holding 49% of BV DTVM. On February 28, 2023, after compliance with necessary legal and regulatory conditions, the acquisition was completed.

4.A.10-02 Recent divestitures

Ø  Chain Serviços e Contact Center S.A. (formerly Fidelity Serviços S.A.)

In September 2019, we signed a contract for the sale of 100% of our shares held in Chain Serviços e Contact Center S.A. (Chain) to Almaviva do Brasil Telemarketing e Informática S.A. The operation was approved by the competent authorities, and the transaction closed on January 14, 2020, discontinuing our association with the Fidelity Group.

4.A.10-03 Other strategic alliances

Ø  Bradesco Asset Management S.A (Bradesco Asset)

Our subsidiary, Bradesco Asset, has developed important alliances, and continues to focus its strategy on internationalization. Through personal management and agreements with partners, we offer Brazilian investors the opportunity to invest in fixed and non-fixed equity funds, balanced and alternative, with global, regional and thematic exposure, as well as global ESG (Environmental, Social and Governance) strategies. In Europe, Bradesco Asset has been offering “Bradesco Global Funds” UCITS (domiciled in Luxembourg) to overseas investors since 2009. These funds have different strategies and incorporate ESG aspects in accordance with Luxembourg law. In Japan, Mitsubishi UFJ Kokusai Asset Management (MUKAM), our partner since 2008, offers a fund managed by Bradesco Asset to retail investors wishing to invest in the Brazilian markets.

4.B. Business Overview

We operate and manage our business through two segments: (i) the banking segment; and (ii) the insurance, pension plans and capitalization bond segment.

4.B.10 Strategy

4.B.10.01 Business strategy

Our business strategy focuses on meeting the expectations of clients, understanding their needs and life cycle, and increasing their satisfaction by providing an excellent customer experience in all their interactions with us. In line with this strategy, our operations are based on four main pillars, which support the corporate purpose of creating opportunities for people to progress and for the sustainable development of companies and society: (i) Client – our inspiration; (ii) Digital Transformation – how we do what it; (iii) People – our team; and (iv) Sustainability – made to last.

Ø  Client – our inspiration

Our main goal is to provide the support our clients need to fulfill their objectives through top-tier service focused on their needs and goals, promoting an optimal experience and a relationship of trust and respect.

Placing the client at the heart of our strategy, we have developed several actions to improve our understanding of client behavior, habits, needs and objectives, valuing each moment and interaction. Through the use of data intelligence and seamless business solutions, we provide tailor-made services in accordance with a client's profile and stage in life. We believe that this creates a high-quality and smooth experience, integrating client journeys and processes supported by new real-time decision technologies.

We have an organizational structure that is designed to provide a seamless customer experience and we seek to constantly improve our activities and our operational efficiency. The Bradesco Experience (be.) area works with professionals focused on promoting superior customer experience regardless of the interaction channel. This work involves end-to-end vision and agile methodology to create intuitive and personalized journeys, both in financial and non-financial services.

By gaining in-depth knowledge of our clients, we aim to bring about significant improvements to our user experience. The use of digital channels is already significant in our operations. One example of this is digital credit origination, which in 2022 represented 34% of our credit originations and has the potential to grow even more.

We want to be where our clients are, serve them in a way that works for them, and provide each of them with efficient service and a fluid, omnichannel experience. That is why we are increasingly advancing the integration of our physical and digital channels. We are now phygital, a marketing term that refers to a mix of both digital and physical experiences.

Ø  Digital Transformation – how we do it

We have a digital mindset and aim to be simple, efficient, agile, connected and innovative. In a context of solid digital transformation, we want to make our customer experience even more fluid, practical and secure. Our strategy also highlights the importance of cost management, developing actions and projects aimed at optimizing the use of channels, reducing the costs of service and constantly improving efficiency.

We are committed to maximizing value for our clients by developing a culture focused on continuous improvement and excellence and using data for decision making. This digital and cultural transformation has brought about changes in our operations. Today, the majority of our process development is focused on an agile methodology. Through the use of squads (small multifunctional teams), we aim to accelerate deliveries.

With the advancement of Cloud Computing, we believe we improved our customer service to make it faster and more efficient, offering digital scalability to facilitate the development of innovations, supporting the growing volume of digital businesses, promoting innovative business models and partnerships to generate value, and promoting further studies in innovation surrounding new technologies, such as artificial intelligence, Metaverse and 5G.

An example of an artificial intelligence-based solution we developed is Bradesco Artificial Intelligence (BIA), which has progressively evolved, now reaching enhanced communication capacity and promoting an increasingly improved, more intuitive and intelligent user experience. BIA has recorded 1.5 billion customer interactions since its implementation.

Ø  People – our team

We want to be the employer of choice for high-performing professionals to live their present and build their future, because we believe that people are the basis of our strategy. We seek to continuously improve our ability to attract, train and retain appropriate talent in each of our business areas to make our corporate strategy feasible.

We have an organizational culture based on ethics, transparency and respect for others, and we have made significant investments to foster an innovative, challenging and diverse working environment.

Between 2021 and 2022 we were recognized for our excellence in people management and employer branding through the Top Employers Brazil 2022 Certification (from the Top Employer Institute). For the fourth consecutive year, we were included in the Bloomberg Gender Equality Index. We were ranked second in the LinkedIn Top Companies 2022 Brazil ranking and achieved first place in the category Financial and Insurance Services of the CIEE Award – Best Internship Program 2022.

We focus on the development of our people and aim to attract talent corresponding with global trends in new skills. UniBrad, our corporate university, is directly linked to this focus, offering training on knowledge management, re-qualification and technical and behavioral training for our staff, reinforcing our culture and promoting awareness, ethical values, and highly committed employees. There are more than 2,900 learning solutions available on our Online Platform, recognized nationally and internationally (Global CCU, Cubic Awards, Micropower Top of Mind of HR and ABTD – Brazilian Association of Training and Development).

Ø  Sustainability – made to last

Our focus is to be agents of positive transformation, delivering shared value to society, clients, employees, investors and partners. As such, in order to grow in a diversified and sustainable way, we strive for the best balance between risk and return through robust capital and liquidity structures. We are committed to managing the socio-environmental and climate risks related to our business and to supporting sectors, activities, projects and assets that have positive socio-environmental impacts. The commitments made and the results of our performance in diversity and inclusion reinforce our belief in the transformative potential of people, respecting individuality and diversity.

Inclusion and financial education are important drivers for us, as through these, we impact and transform the lives of thousands of Brazilians. Ethical and transparent performance permeates our values. It is part of our purpose to contribute to the sustainable development of society, and we endeavor to ensure that we are prepared for the challenges that a low-carbon and inclusive economy will entail.

Our sustainability strategy is aligned with the Sustainable Development Goals (SDGs) of the United Nations (UN) and we are committed to the positive impact agenda, contributing towards the transition to a low-carbon economy, adhering to various voluntary commitments.

We were the only Brazilian bank involved in the creation of the UN’s Principles for Sustainable Banking and the first Brazilian bank to adhere to Net Zero (the Net-Zero Banking Alliance). We joined the delegation of the Brazilian Business Council for Sustainable Development (CEBDS) at the 27th UN Climate Change Conference (COP27). We have operations in the Amazon region, seeking to boost sustainable development in the area. We have committed to allocating R$250 billion to sustainable business by 2025, having allocated R$172.7 billion by December 2022, 69.1% of the proposed goal.

Through Fundação Bradesco, we contribute to the development of children in need, providing them with a high-quality education in Fundação Bradesco’s schools, which are located in every state of Brazil and in the Federal District, and assisting students in Basic Education, Youth and Adult Education and Initial and Continuing Education. In total, in 2022 more than 60 thousand students attended these 40 schools, in addition to the more than 1.7 million people who benefitted through attending the Virtual School.

4.B.10.02 Corporate Sustainability

Sustainability is one of our strategic drivers, as we understand that the management of ESG issues has become key to our survival and growth in an environment that is increasingly dynamic and challenging. As we seek to generate shared and long-term value for investors, employees, suppliers, clients and society, we also contribute to the sustainable development of the country.

4.B.10.02-01 Guidelines and governance

Our actions are guided by a set of policies and standards which incorporate the best practices in sustainability management and which also govern our voluntary commitments.

Our Corporate Sustainability Policy aims to promote our sustainability goals and provide guidance on the actions related to the socio-environmental aspects of our business. Other policies and rules incorporate these guidelines, consolidating the practices of socio-environmental responsibility, including from a risk management perspective.

The Socio-environmental Responsibility Standard defines the main compliance procedures for the socio-environmental criteria in business, stakeholder relations and subject governance. Our Socio-environmental Risk Standard establishes the scope and approach to managing these risks, and is discussed in more detail in section “4.B.10.02-04 Social, environmental and governance criteria for business decisions”.

The main governing body presiding over the area is the Sustainability and Diversity Committee, which includes members of the Board of Directors and the Board of Executive Officers, including the Chief Executive Officer. The Committee is advised by the Sustainability Committee, an executive body consisting of officers and managers of various areas, ensuring the implementation of the strategy and monitoring the execution of projects and their impact on our performance. From the perspective of socio-environmental risk, the main decision-making forums are the Executive Risk Management Committee and the Integrated Risk Management and Capital Allocation Committee.

4.B.10.02-02 Sustainability Strategy

Sustainability is one of the pillars of our corporate strategy and is integrated into the way we do business and manage operations. In light of the main global challenges and trends on the subject, we have chosen three main themes to enhance our performance and purpose:

These strategic objectives are aligned with the 2030 Agenda of the United Nations and incorporate the commitment to contribute to the SDGs, with an emphasis on six goals that we prioritize:

4 – Quality education

5 – Gender equality

8 – Decent work and economic growth

9 – Industry, innovation and infrastructure

10 – Reduce inequalities

13 – Climate action

4.B.10.02-03 Voluntary commitments

Our practices and strategies are reinforced by dialogue with various stakeholders and the incorporation of internationally recognized initiatives and voluntary commitments, such as: Global Compact Initiatives, Equator Principles, Principles for Responsible Investment (PRI), Principles for Sustainable Insurance (PSI), Principles for Banking Responsibility (PRB), Women’s Empowerment Principles (WEPs), Task force on Climate-related Financial Disclosures (TCFD), Investors for the Climate, Partnership for Carbon Accounting Financials (PCAF), Brazilian Coalition on Climate, Forests and Agriculture, among others. In addition, in 2021, we joined the Net-Zero Banking Alliance (NZBA), committing to decarbonize our loan and investment portfolios to achieve zero net emissions by 2050.

4.B.10.02-04 Social, environmental and governance criteria for business decisions

We seek to incorporate and constantly improve our analysis of the social, environmental and governance criteria relevant to business decisions and the offer of credit, investments and insurance.

Ø  Credit

We have a governance structure, consisting of committees, policies, standards and procedures, which is intended to identify, measure, mitigate, monitor and report risks. This structure complies with the Central Bank of Brazil’s Resolutions and observes the principles of relevance and proportionality, which are necessary given the complexity of financial products and the profile of our activities.

Following the guidelines in our Corporate Policies for Sustainability, the area of Analysis and Control of Socio-environmental Risk conducts assessments of operations and clients, rating formulations of socio-environmental risk, and monitoring activities, in accordance with the scope and criteria set out in the Socio-environmental Risk Standard, in addition to the requirements and obligations established by Brazilian legislation and regulations.

Part of the Socio-environmental Risk Standard's scope is to assess the funding of large projects and loans of clients who are linked to work typically associated with slave labor and/or who work in sectors with a greater potential for socio-environmental impact, and to assess the financial exposure of the activity.

Since 2004, we have been signatories of the Equator Principles, and we ensure that the projects advised upon and funded by us, along with those that are included in these Principles, are developed in compliance with the legislation in force and also adhere to supra-legal environmental practices outlined in the International Finance Corporation’s (IFC) Performance Standards and the World Bank’s Health, Safety and Environmental Guidelines, including: climate change, biodiversity, human rights and indigenous peoples.

Project financing operations covered by the Equator Principles and also those with identified environmental risks are monitored periodically, in order to ensure compliance with the applicable standards and guidelines. The monitoring of these projects also covers aspects such as human rights, impacts on indigenous peoples, biodiversity and climate change.

Additionally, when necessary, we establish action plans and audit procedures in order to assist with the management and evaluation of the socio-environmental compliance of the projects.

The decision made by the Credit Executive Committee takes into account the socio-environmental risks, in addition to the other economic and financial aspects and, once the granting of credit is approved, the contracting of the operations is carried out through negotiation and the insertion of socio-environmental conditions in the financing contracts. From then on, projects that present potential socio-environmental risks are monitored periodically, to check that these contractual obligations are being fulfilled.

Ø  Investments

Bradesco Asset has developed a method of analyzing ESG factors for all types of assets under management, including private and public securities. In the case of private securities, the methodology considers the material aspects of each sector to identify the risks and opportunities that companies face. For public securities, the methodology considers indicators that measure the regulatory quality and the public policies regarding the provision of basic services to the population, including environmental conservation and reduction of social inequality. As a result, socio-environmental aspects are incorporated into Bradesco Asset’s business, whose mission is to provide superior and sustainable returns in managing the investments of clients.

As of December 31, 2022, BRAM had R$569.2 billion of fund assets under management, of which we estimate that R$568.5 billion take account of ESG issues, representing 99.9% of total assets.

Bradesco Asset also conducts engagement activities for companies and business partners to adopt best practices in their fields of business and annually discloses the results in the Transparency Report of the Principles for Responsible Investment (PRI), of which it is a signatory. Application of the PRI, which takes place alongside investment activities and interaction with Bradesco Asset’s stakeholders, has the following scope and results in the following practices:

Bradesco Asset has funds with dedicated ESG strategies involving different investments, such as: variable income, fixed income and fund of funds. We highlight the local funds, FIA Corporate Sustainability variable income fund and the fixed income fund Private Credit Performance SRI 20. In addition, Bradesco Asset has other funds with different active management strategies, containing a mix of local and global actions, for example, FIC FIA ESG Global BDR Level I and FIC MM ESG Global.

Ø  Insurance

Grupo Bradesco Seguros integrates ESG aspects into its business by offering widely diversified and accessible solutions, products and services, seeking to further our commitment to contribute towards the country’s sustainable development. Since 2012, Grupo Bradesco Seguros has integrated the Principles for Sustainable Insurance (PSI) and its voluntary commitment to the United Nations Environment Programme Finance Initiative (UNEP-FI) into its business, which seeks to continuously evaluate the demand for financial and insurance products that offer adequate solutions to clients, both in order to boost a low-carbon economy and to protect clients from the impacts of, or adapt them to, the transformations originating from climate change. Grupo Bradesco Seguros is also a member of the UNEP-FI Global Steering Committee.

In May 2022, Grupo Bradesco Seguros signed up to the Task Force on Climate Related Financial Disclosures (TCFD) initiative that seeks to develop and implement recommendations for the dissemination and analysis of risks and opportunities related to climate issues and the way they are managed.

In addition, the Group has its own Sustainability Committee, subject to the Steering Committee of Bradseg Participações S.A., which relies on the participation of its Executive Officers and Superintendents, and aims to develop business strategy and propose solutions fostering the implementation of the best sustainability practices into the activities and business. Grupo Bradesco Seguros also has its own Socio-environmental Risk Management area, which reports to its Risk Committee and, via the latter, to the boards of the business units on the evolution of socio-environmental risks.

Grupo Bradesco Seguros is also governed by internal rules on Socio-environmental Responsibility and Socio-environmental Risk, which adopt environmental, social and governance criteria for monitoring the processes and operations of Grupo Bradesco Seguros and BSP Empreendimentos Imobiliários.

4.B.10.02-05 Socio-environmental management of operating activities

The management of our operations also incorporates socio-environmental criteria and related best practices. Among them, we highlight:

4.B.10.02-06 Climate Change

Climate change generates significant short, medium and long-term changes in our society and economy. Its impacts are physical and environmental – such as rising global temperatures and increasingly extreme weather events, each day more severe and frequent – as well as political and economic, as new public policies and changes in consumption and production patterns arise.

In this context, we seek to ensure that our operations and businesses are prepared for climate challenges, strengthening governance related to the subject and implementing relevant risk management strategies and processes. Our main objectives are stated below:

Governance on Climate Change, integrated into the structures for risk management and sustainability, consists of three levels:

More information on our actions in line with the recommendations of the PCAF and the TCFD are available in our Integrated Report.

4.B.10.02-07 Performance and highlights of 2022

Maintaining our trajectory of improving ESG performance, we ended 2022 with important recognitions, such as:

4.B.10.02-08 Transparency

Our Integrated Report (not incorporated by reference in this report) describes the main financial and non-financial actions and results of the year based on topics considered most relevant to us and our stakeholders.

In addition, specific content is disclosed, including the ESG presentation, the positioning of Climatic Change and the paper on incorporating ESG aspects into our business. The content is available on our Investor Relations and Sustainability websites (not incorporated by reference in this report).

To prepare the Integrated Report we follow the Global Reporting Initiative (GRI) and International Integrated Reporting Council (IIRC) methodologies. We also consider the transparency guidelines of the Sustainability Accounting Standards Board (SASB) and the Abrasca Code for Self-Regulation and Good Practices of Publicly Traded Companies. We seek to meet the transparency requirements used by B3’s Corporate Sustainability Index (ISE) and the Dow Jones Sustainability Index (DJSI); and the disclosure of climate information follows, where possible, the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

The prioritization of themes and related materials follows our Framework of Relevance, the result of a joint collaboration between the Board of Directors, Presidency and various stakeholders, including employees. The Matrix presents the strategic themes most relevant to our business which are to be addressed in the disclosure of information to the market.

4.B.20 Business management

To ensure our operational activities are aligned with our strategies, we have developed management processes that are aligned with best market practices and business models, among which we highlight:

4.B.20.01 Risk management

Our risk management is highly strategic due to the increasing complexity of products and services and the globalization of our business. The dynamic nature of the markets means that we are constantly improving our risk management strategies.

We carry out corporate risk control in an integrated and independent manner, maintaining and encouraging a collective decision-making environment and developing and implementing methodologies, models and tools for measurement and control. We promote the dissemination of a risk culture to all employees, at all hierarchical levels, from the business areas to the Board of Directors.

Ø  Scope of Risk Management

The scope of our risk management policies is broad and intended to support our consolidated group to ensure the sustainable development of its activities. For this purpose, we are structured according to the three lines model, in which all lines contribute to achieve the objectives within a reasonable margin of security:

4.B.20.01-01 Risk and capital management structure

The risk and capital management structures are composed of several committees, commissions and departments that support the Board of Directors, the Chief Executive Officer, the Chief Risk Officer (CRO) and the Board of Executive Officers in their decision-making.

We have the Integrated Risk Management and Capital Allocation Committee (COGIRAC), whose objective is to advise the Chief Executive Officer on the performance of his duties related to the management and control of all risks and capital.

The risk management structure also relies on Executive Committees for: (i) Risk Monitoring; (ii) Risk Management; and (iii) AML/TF/Sanctions and Information Security/Cybersecurity. Duties of the Executive Committee for Products and Services and the Executive Committees of the business areas include, among others, proposing the limits of exposure to their respective risks and preparing plans of mitigation to be submitted for evaluation by the Risk Committee, subject to a resolution of the Board of Directors.

Additionally, the Risk Committee is responsible for evaluating the management framework of our risks and proposing improvements. The Risk Committee advises the Board of Directors in the performance of its management duties and the control of risks and capital.

4.B.20.01-02 Credit risk

Credit risk represents the possible losses resulting from a borrower or counterparty's non-compliance with its financial obligations under any agreement, as well as the decrease in fair value of a credit agreement due to the deterioration in the borrower’s credit rating, the reduction in gains or remuneration, benefits granted during renegotiation, recovery costs and other amounts related to the non-compliance with the counterparty’s financial obligations. In addition, it includes Country/Transfer Risk, represented by the possibility of losses related to non-compliance with obligations by a counterparty or to a mitigating instrument located outside the country, including sovereign risk and the possibility of losses due to currency conversion of amounts received outside the country and associated with the operation subject to credit risk.

Credit risk management is a continuous and evolving process of mapping, developing, assessing and diagnosing risk through the use of models, instruments and procedures, thus requiring a high degree of judgment, discipline and control during the analysis of operations to preserve the integrity and independence of the processes.

We seek to control our exposure to credit risk, which mainly derives from the granting of loans, credit commitments, financial guarantees, securities and derivative financial instruments.

To avoid compromising the quality expected from the portfolio, committees monitor relevant aspects of the lending process, such as concentration, collateral requirements, maturities, and other aspects.

We continually outline the activities that can potentially generate exposure to credit risk, considering credit classification, size and probability of default, as well as establishing measurement and mitigation plans for those activities.

4.B.20.01-02.01 Lending

The diversity of our business model enables us to reach various audiences through directed and convenient channels in the various regions of Brazil. Segmentation strategies, both for individuals and legal entities, allow for good relationships with clients and the assertive offering of products and services.

This positioning has a positive impact on our credit profile, which is reflected in a diversified portfolio, both in terms of products and segments. This is balanced with the risks undertaken and appropriate levels of provisioning and concentration.

The Credit Department is responsible for the lending procedures which are guided by our credit policy. The policy ensures security, quality and liquidity for lending. The process is guided by risk management governance and complies with the rules of the Central Bank of Brazil.

The methodologies adopted value business agility and profitability, with targeted and appropriate procedures aimed at granting credit transactions and establishing operating limits.

When we evaluate and classify clients or economic groups, the quantitative (economic and financial indicators) and qualitative (personal, behavioral and transactional data) aspects associated with the client’s capacity to honor their obligations are considered.

All business proposals are subject to operational limits, which are included in the Loan Guidelines and Procedures. At our branches, the delegation of powers for submitting a proposal depends on its amount, our total exposure to the client, the collaterals and guarantees posted, the level of restriction and their credit risk rating. All business proposals are submitted for technical analysis and approval by the Credit Department.

The Executive Credit Committee was created to determine, within its authority, queries about the granting of limits or loans proposed by business areas which have been previously analyzed with the opinion of the Credit Department. Depending on the size of the operations/limits proposed, this Committee may then submit the proposal for approval by the Board of Directors.

Loan proposals pass through an automated system with parameters set to provide important information for the analysis, granting and subsequent monitoring of loans, minimizing the risks inherent in the operations.

There are exclusive Credit and Behavior Scoring systems for the granting of retail credit, which allows for a quick and reliable process, in addition to standardizing procedures in the process of analysis and approval of loans.

Our business is diversified, widespread and aimed at individuals and legal entities with a proven payment capacity and solvency. We seek to support loans granted with collaterals and guarantees that are adequate for the risk assumed, in line with the amounts, objectives and maturities of the loans granted.

4.B.20.01-02.02 Credit risk classification

We believe we have a robust governance process, practice and monitoring system. Governance practices include the Governance of Concession Limits and Credit Recovery, which, depending on the size of the operation or the total exposure to the counterparty, require approval from the Board of Directors. In addition, follow-ups on the portfolio are made frequently. We evaluate the portfolio progression, delinquencies, provisions, vintage studies and capital, as well as other factors.

In addition to the governance process for approving loan and recovery operations, within the risk appetite defined by us, the concentration limits of operations for each Economic Group, Sector and Transfer (concentration per country) are monitored. As well as indicators of concentration, there are specific indicators for: (i) the level of delinquencies above 90 days for Individuals; (ii) Problem Assets; and (iii) Credit Risk Economic Capital Margin, in order to monitor and track the capital in the economic and regulatory spheres.

The credit risk assessment methodology provides data to establish the minimum parameters for lending and risk management. It also allows for the possibility of defining Special Credit Rules and Procedures according to client characteristics and size. The methodology provides the basis for both the correct pricing of operations and for defining the appropriate guarantees for each operation.

The methodology applied also follows the requirements established by CMN Resolution No. 4,945/21, which provides for the Social, Environmental and Climate Responsibility Policy (PRSAC) and the actions aimed at its effectiveness.

In order to continuously improve our methodologies, the credit risk rating of loans entered into by our economic groups/clients is based on a grading scale in levels. This ensures greater adherence to the requirements set forth in the Basel Capital Accord and preserves the criteria established by CMN Resolution No. 2,682/99 for the constitution of the applicable provisions for regulatory reporting purposes.

The risk classifications of credit operations are determined on the basis of the credit quality of economic groups/clients defined by the Client Rating, guarantees relating to the contract, type of credit product, past behavior of delinquencies, notes/restrictions and value of credit granted.

Client Rating for economic groups is based on standardized statistical procedures and judgment, and on quantitative and qualitative information. The ratings are established by economic group and periodically monitored to preserve the quality of the loan portfolio.

For Individuals in general, Client Rating classifications are also based on statistical procedures and the analysis of variables that distinguish risky behavior, performed through the application of statistical models for credit evaluation.

The Client Rating is used, in conjunction with several decision variables, to analyze the granting and/or renewal of operations and credit limits, as well as to monitor the deterioration of the client’s risk profile.

4.B.20.01-02.03 Credit risk management process

The credit risk management process is carried out company-wide. This process involves several areas with specific attributes, ensuring an efficient structure. The measurement and control of credit risk is carried out in a centralized and independent manner.

Both the governance process and the existing limits are validated by COGIRAC and submitted for approval by the Board of Directors, being reviewed at least once a year.

The credit risk management structure plays a fundamental role in our second line, actively participating in the process of improving client risk classification models, supervising high risks through periodically monitoring key default events and providing levels of provisioning against expected and unexpected losses.

The attributes of the credit risk management structure follow our defined precepts of compliance. Integration with the other lines occurs on a continuous and frequent basis, enabling effective identification, measurement and control of credit risk.

4.B.20.01-02.04 Credit risk mitigation

Potential credit losses are mitigated using different types of collateral documented through different legal instruments, such as conditional sales, liens and mortgages, and financial instruments such as credit derivatives. The efficiency of these instruments is evaluated considering the recovery time and the amount of value to be realized in respect of the collateral, its market value, the guarantor's counterparty risk and the legal safeguards of each type of instrument. The main types of collateral include: term deposits; financial investments and securities; residential and commercial properties; and movable properties such as vehicles and aircraft. Additionally, collateral may include commercial bonds such as invoices, checks and credit card bills. Sureties and guarantees can also include bank guarantees.

Credit derivatives are bilateral contracts in which one counterparty hedges credit risk on a financial instrument. Its risk is then transferred to the counterparty selling the hedge. Normally, the latter is remunerated throughout the period of the transaction. In the case of default by the borrower, the buying party will receive a payment intended to compensate the loss in the financial instrument. In this case, the seller receives the underlying asset in exchange for the payment.

4.B.20.01-02.05 Control and monitoring

The credit risk unit of the Integrated Risk Control Department (DCIR) is responsible for the corporate control and monitoring of our credit risk. The department assists the Executive Risk Management Committee in discussions and the implementation of methodologies to measure credit risk. Relevant issues discussed by this committee are reported to COGIRAC, which reports to the Board of Directors.

In addition to committee meetings, the department holds monthly meetings with officers and heads of products and segments to ensure they are informed on the development of the portfolio of loans, delinquencies, adequacy of the provisions for non-performing loans, credit recovery, gross and net losses, portfolio limits and concentrations, the allocation of economic and regulatory capital and other items. This information is also reported monthly to the Executive Committee for Risk Monitoring and the Audit Committee.

Finally, the department also tracks each internal and/or external event that may significantly impact credit risk, such as mergers, bankruptcies or crop failures, and monitors economic sectors in which we have the most representative exposures.

4.B.20.01-03 Counterparty credit risk

Counterparty credit risk, to which we are exposed, is represented by the possibility of loss due to the non-compliance by the counterparty with obligations related to the settlement of operations involving bilateral flows. This includes the trading of financial assets or derivatives.

We maintain full control over the replacement cost and potential future exposure to transactions in which there is counterparty credit risk. Therefore, all exposure related to this risk is part of the general credit limits granted to our clients.

The management of Counterparty Credit Risk is responsible for modeling and monitoring (i) the use of the counterparty's credit limit; (ii) the portion of the fair value adjustment regarding the credit of the CVA (Credit Value Adjustment) of the derivatives portfolio; and (iii) the respective regulatory and economic capital. The methodology we adopted establishes that the portfolio’s credit exposure to a given counterparty can be calculated from the Replacement Cost (RC) of its operations in different financial market scenarios, which is made possible by the Monte Carlo simulation process.

In the context of risk management, we calculate the economic capital related to credit risk, including the derivatives portfolio segregated by counterparty, both for the definition of EAD (Exposure at Default) and CVA.

We carry out capital projection studies, such as the ICAAP Stress Test (Capital Adequacy Assessment) and the TEBU (Bottom-Up Stress Test). These multidisciplinary programs involve, at a minimum, the business areas and the Economic, Budget/Results and Risk Departments.

To mitigate the Counterparty Credit Risk to which we are exposed, we adopt a composition of guarantees including margin deposits and the disposal of government bonds (being operations conducted on behalf of clients), which are carried out by our own counterparty or in other custodian institutions, and which also have their own counterparty risks duly assessed.

Additionally, the calculation of the amount of exposure related to the counterparty’s credit risk, arising from operations with derivative financial instruments subject to the calculation of the capital requirement using the standardized approach (RWAcpad), was updated following the enactment of Circular No. 3,904/18 of the Central Bank of Brazil, but will be fully revoked by BCB Resolution No. 229/22 as of July 2023.

4.B.20.01-04 Market risk

This relates to the possibility of financial loss due to changes in prices and interest rates of our financial assets, as our asset and liability portfolios may have mismatches in amounts, maturities, currency and indexes.

This risk is identified, measured, mitigated, controlled and reported. Our exposure profile to market risk is in line with guidelines established by the governance process, with limits that are monitored in a timely manner and on an independent basis.

All operations exposing us to market risk are mapped, measured and classified according to probability and magnitude, with the whole process approved at governance level.

In line with what we believe to be best practices of corporate governance, aiming to preserve and strengthen our management of market risks, as well as meet the requirements of CMN Resolution No. 4,557/17, as amended, the Board of Directors approved the Market Risk Management Policy. This policy is reviewed at least once a year by the relevant committees and the Board of Directors, providing the main operational guidelines for approving, controlling and managing market risk.

In addition to this policy, we have several specific rules that regulate the market risk management process, including the:

4.B.20.01-04.01 Market risk management process

Our market risk management process is carried out on a corporate-wide basis, ranging from business areas to the Board of Directors. This process is applied to several areas to ensure an efficient structure, in which measurement and control of market risk is performed centrally and independently. This process led to us becoming, in January 2013, the first financial institution in the country authorized by the Central Bank of Brazil to use in-house models of market risk to determine regulatory capital requirements. The management process is reassessed at least annually by the relevant committees and approved by the Board of Directors.

4.B.20.01-04.02 Control and monitoring

Market risk is controlled and monitored by an independent entity, the DCIR, which measures the risk of outstanding positions, consolidates results and prepares reports required by the existing governance process on a daily basis.

In addition to daily reports, Trading Portfolio positions are discussed once every fifteen days by the Treasury Executive Committee. In this forum, results and risks are assessed and strategies are discussed. Both the governance process and the existing thresholds are ratified by the Integrated Risk Management and Capital Allocation Committee and submitted for approval by the Board of Directors. Processes and thresholds are revised at least once a year.

Should any threshold controlled by the DCIR be exceeded, the head of the business area responsible for the position is informed that the threshold was reached, and the Integrated Risk Management and Capital Allocation Committee is called in due time to make a decision. If the Committee decides to raise the threshold and/or maintain the positions, the Board of Directors is called upon to approve the new threshold or revise the positioning strategy.

For more information on how we assess and monitor market risk, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk”.

4.B.20.01-05 Liquidity risk

Liquidity Risk represents the possibility of being unable to fully meet our obligations, without affecting our daily operations and incurring significant losses, as well as the possibility of being unable to trade a position at market price due to our significant size when compared to the usually traded volume or due to some market discontinuation.

Understanding and monitoring this risk is crucial, especially in the context of settling transactions in a timely and secure manner.

4.B.20.01-05.01 Liquidity risk management process

The management of liquidity risk is carried out at the corporate level and permeates all layers of governance. The following table lists the responsibilities of the departments responsible for the management and control of liquidity risk:

4.B.20.01-05.02 Control and monitoring

Our liquidity risk management is carried out through tools developed by robust platforms and validated by the independent areas of the business. Among the main metrics and indicators considered in the liquidity risk framework, we highlight:

For the main metrics, limits have been established, which can be strategic (approved up to the level of the Board of Directors) or operational (approved by the Executive Committee), based on flags, which trigger different levels of governance according to the percentage of use (consumption) of their respective limits.

4.B.20.01-06 Operational risk

Operational risk is represented by the possibility of losses arising from faulty, deficient or inadequate internal processes, human and system error, or external events. This definition includes legal risk associated with our activities.

4.B.20.01-06.01 Operational risk management process

We adopted the Three Lines model, which consists of identifying and assigning specific responsibilities to each department so that essential operational risk management tasks are performed in an integrated and coordinated manner. The following activities are carried out for that purpose:

4.B.20.01-06.02 Control and monitoring

Operational risk is controlled and monitored primarily by an independent entity, the DCIR, and is supported by several areas involved in the process of managing this risk.

4.B.20.01-07 Socio-environmental risk

Socio-environmental risk is represented by the potential damage that an economic activity can cause to society and the environment. The socio-environmental risks associated with financial institutions are mostly indirect and arise from business relationships, including those with supply chains and clients, through financing and investment activities.

4.B.20.01-07.01 Socio-environmental risk management process

The socio-environmental risk management process relies on a governance structure made up of committees, policies, rules and procedures, which proactively ensures proper identification, measurement, mitigation, monitoring and reporting of this risk. This process complies with the Central Bank of Brazil’s resolutions and follows the principles of relevance and proportionality, which are necessary given the complexity of financial products and the profile of our activities.

We seek to constantly incorporate and improve the criteria for managing socio-environmental risk arising from business relationships with clients through credit and financing operations, by use of a questionnaire that addresses environmental, social and governance aspects, including in relation to collateral analysis, suppliers and investments, which make up the scope of the analysis reflected in our Social, Environmental and Climate Risk Standard.

We have several commitments related to environmental and social aspects, such as the Carbon Disclosure Project (CDP), the PRI, the Business Charter for Human Rights and the Promotion of Decent Work (Ethos), the UNEP-FI and the Global Compact, among others.

Ø  Equator Principles

We have been a signatory to the Equator Principles since 2004. These Principles assess, among other requirements, labor conditions, human rights, and impacts on traditional communities and the environment produced by projects financed by us, in line with Brazilian legislation, IFC guidelines and World Bank Group Health, Safety, and Environment Guidelines.

Ø  Equator Principles Implementation Process

For the implementation of the Equator Principles, the Project Finance Financial Advisory service is provided through Banco Bradesco de Investimentos – BBI, which has the support of the Socio-environmental Risk Control Area of the DCIR to present the content and application of the Equator Principles and the benefits of meeting them in future projects.

Operations involving Project Finance, Corporate Project Loans and Bridge Loans are designed mainly for clients in the corporate business, which is responsible for capturing and registering business through credit proposals. These proposals are analyzed from an economic-financial perspective by the Credit Department and from a socio-environmental risk perspective by the Socio-environmental Risk Control Area.

It is up to the Socio-environmental Risk Control Area to evaluate the proposals, analyze the documents and classify the projects according to the Equator Principles, categorizing them into High Risk (Category A), Medium Risk (Category B) or Low Risk (Category C) and issuing a socio-environmental risk opinion, taking into account the guidelines established by the Equator Principles:

The client’s operations approved in accordance with the established internal process are subject to socio-environmental obligations and monitored periodically.

4.B.20.01-07.02 Control and monitoring

Ø  Loan operations

We follow the process of analysis, approval, contracting and monitoring of operations that fall under the Equator Principles. In this context, the following application categories are analyzed:

In addition to complying with the Equator Principles, we also follow a set of socio-environmental criteria as part of our credit analysis of projects that present potential socio-environmental risk.

As part of the analysis, we conduct verification of the existence of contaminated or embargoed areas, licenses, certifications and environmental studies. This information helps to identify potential socio-environmental risks to be addressed with clients.

In making its decisions, the Executive Credit Committee takes into account socio-environmental risks, in addition to other economic and financial aspects, and, once the granting of credit is approved, the contracting of the operation is carried out through negotiation and the insertion of socio-environmental obligations in the financing agreements. Projects that present potential socio-environmental risks are monitored periodically, in order to ensure compliance with these contractual obligations.

Matters related to socio-environmental risk are considered by the Risk Management Executive Committee.

The Sustainability and Diversity Committee is responsible for validating the Corporate Sustainability Policy and works with Senior Management to define organizational sustainability strategies, reporting to the Board of Directors.

Ø  Supply chain

We carry out a socio-environmental assessment of suppliers, aimed at mitigating socio-environmental risks in their supply chain. In this sense, suppliers are evaluated in an ongoing process, taking into account the environmental, labor, occupational health and safety legislation, international standards, and internal guidelines in force.

4.B.20.01-08 Climate risk

Climate risk represents the possibility of financial losses due to the potential impacts arising from climate change. These include physical impacts caused by weather events, such as floods, storms, frosts, landslides, water crises, and temperature increases, among others. The set of changes that result in these consequences are called physical risks.

In response to physical events, regulatory or social changes are introduced, which tend to generate responses aimed at mitigating climate change. These initiatives depend on the transition to a low-carbon economy, in which the volume of greenhouse gas emissions must be much lower than from current levels. To accelerate this transition and mitigate the physical effects, changes in market logic, regulations and technologies are expected, as well as an increasing level of accountability from organizations for their role and performance in the transition. The risks associated with this process are known as transition risks.

Climate risks, when associated with financial institutions, are mostly indirect and come from business relationships with customers and suppliers.

4.B.20.01-08.01 Climate risk management process

Climate risk management is based on a governance structure consisting of committees, policies, standards and procedures which enable the identification, classification, and monitoring of climate risks, in accordance with the Resolutions of the Central Bank of Brazil and in line with the principles of relevance and proportionality.

Our management process, reflected in our policies, follows the scope of analysis defined by us and consists of identifying, classifying and monitoring levels of climate risk. This assessment is incorporated into our credit approval process for legal entities and is considered when making the approval decision. Additionally, it enables us to monitor the exposure of the corporate loan portfolio to the potential impacts of climate change by sector.

4.B.20.01-08.02 Initiatives and commitments

We have made commitments related to climate goals, joining the NZBA and subscribing to the PRI, as well as being a signatory to the Global Compact and integrating the UNEP-FI into our business. Since 2019, we have been participating in industry initiatives focused on developing climate risk management methodologies and tools for the banking industry, in line with the recommendations of the TCFD.

4.B.20.01-09 Compliance risk

Compliance risk is the risk arising from legal or administrative sanctions, financial losses, reputational or other damages due to a breach of, or a failure to comply with, the legal framework, regulations, recommendations of regulators and self-regulated entities and/or codes of conduct and ethics applicable to our activities.

4.B.20.01-09.01 Management process

We adopted the Three Lines model, which consists of identifying and assigning specific responsibilities to areas so that essential compliance risk management activities are carried out in an integrated and coordinated manner. To this end, the following activities are carried out:

These procedures are in line with the compliance activities management cycle, distributed in actions aimed at strategy, prevention, detection, response, remediation, and reporting.

4.B.20.01-09.02 Control and monitoring

Compliance risk is controlled and monitored primarily by an independent area, the Department of Compliance, Conduct and Ethics (DCCE), supported by several areas that are part of the risk management process.

4.B.20.01-10 Cybersecurity risk

Cybersecurity risk is represented by the possibility of cyber incidents, including attacks, intrusions and leakages, that could compromise the confidentiality, integrity and/or availability of our critical processes, assets and/or infrastructure.

4.B.20.01-10.01 Cybersecurity risk management process

Our cybersecurity risk management framework aims to ensure governance compatible with our size, risk profile and business model, so that critical IT assets and infrastructure are able to resist cyberattacks. This structure is adopted in a corporate manner and involves several areas with specific attributes, facilitating an effective structure that allows for the efficient control and mitigation of these risks by enabling them to be identified, measured, minimized and communicated, ultimately contributing to the achievement of our strategic objectives.

To ensure the proper management of cybersecurity risk, which allows for the proper assessment of risks and supports managers and Senior Management in decision making, we are guided by the following pillars of Information Security and Cybersecurity:

The above principles are followed in the adoption of best market practices in processes, methodology and controls for the identification and management of cybersecurity risk, as well as the prevention and resolution of information and cybersecurity incidents. To this end, the following activities are carried out:

4.B.20.01-10.02 Cybersecurity risk measurement methodology

We use internal and external sources of information about new types of threats, vulnerabilities and cyberattacks, in addition to market standards such as ISO/IEC 27005:2018 – Information Security Risk Management, NIST Cybersecurity Framework – NIST CSF (Guide for the Improvement of Cybersecurity for Critical Infrastructure) and the Information Security Forum (ISF), to develop an internal cybersecurity risk assessment model.

Ø  Incident Severity Classification

Information and cyber security incidents are classified according to the severity factors defined in the Information Security Incident Severity Matrix, considering the potential impacts on related parties, including financial, regulatory and reputational impacts, and the effect on system and service availability.

Ø  Group on Tactical Actions for Information Security and Cybernetic Incidents (GATI)

When classifying the severity of an information security or cyber incident as critical, the Cyber and Information Security Incident Management (GIS) team, Computer Security Incident Response Team (CSIRT) or Security Operation Center (SOC) teams inform the GATI. This multidisciplinary group is formed by members of the Legal, IT, Digital, Marketing, Compliance, Conduct and Ethics, Integrated Risk Control, Retail, High Income and Wholesale departments, and its objective is to conduct the technical analysis and communicate measures to handle prioritized incidents.

Ø  Hiring Relevant Service Providers

For service providers of data processing and storage and cloud computing classified as a relevant service, we perform an information security assessment, in line with CMN Resolution No. 4,893/21, applicable to institutions authorized to operate by the Central Bank of Brazil and which requires a cyber security policy and compliance with certain requirements. 

4.B.20.01-10.03 Cybersecurity risk control and monitoring

The Risk Control Commission (CCR) is responsible for controlling and monitoring cybersecurity risk, discussing aspects related to methodology, governance and monitoring of cybersecurity risk. This Commission also advises the Executive Risk Monitoring Committee, which is responsible for the cybersecurity risk monitoring report, and advises the Executive Risk Management Committee, which formalizes the methodologies for controlling and evaluating cybersecurity risk. These Executive Committees are subordinate to COGIRAC.

In compliance with CMN Resolution No. 4,893/21, we use various means to control and monitor cybersecurity risk, such as internal policies and regulations (reviewed annually), training and awareness activities around information and cybersecurity, the communication of threats and incidents to interested parties, the management of information and cybersecurity indicators and the issuance of an annual report, in addition to independent and periodic effectiveness tests carried out on key controls.

4.B.20.01-11 Business Continuity Management (BCM)

We base our BCM program on the ABNT NBR ISO 22,301 standard, which defines Business Continuity as “the Organization’s ability to continue to deliver products or services at a previously defined acceptable level following the occurrence of an interruption incident”.

The procedures adopted after an interruption incident, and which must guarantee the acceptable operational level of critical business processes – internal or outsourced – are contained in a Business Continuity Plan (BCP) or in a defined continuity strategy, which seek to resume activities and minimize possible impacts on our clients.

The organizational and governance structure established for Business Continuity includes corporate policies and standards which define roles and responsibilities and aim to ensure that the plans and strategies employed are up-to-date and efficient, by requiring periodic tests and exercises to be carried out within the business units. These policies also consider the critical processes carried out by service providers considered Relevant Suppliers.

These policies and internal rules are in line with the regulations of the Central Bank of Brazil and recommendations of the Basel Committee on Banking Supervision. The Business Continuity Management process is under the responsibility of the DCIR, in its BCM sector.

4.B.20.01-12 Corporate crisis management

The corporate crisis management process helps to ensure that any signs of crisis are timely identified, evaluated and classified according to their severity, so that actions can be promptly taken to reestablish the normal course of activities and strengthen our operational resilience.

The corporate crisis management process consists of the following steps:

In order to help judge the severity of a crisis, we have established 4 Levels of Impact that determine the optimization of resources and the necessary steps to be taken in light of the event that presents itself: low, medium, high or critical impact.

4.B.20.01-12.01 Corporate crisis management structure

The corporate structure for crisis management consists of a robust control process, composed of forums that support the Executive Committee for Crisis Management in making decisions, proposing and communicating necessary actions and reporting the effectiveness of actions taken.

4.B.20.01-12.02 Internal communication

Internal communication relating to corporate crisis management is carried out in a timely manner, through the issuance of bulletins and reports to the Executive Committee for Crisis Management and other areas involved.

When necessary, we carry out timely communication with interested parties, informing them about the incident, the actions in progress and guidance provided to clients.

4.B.20.01-13 Model risk

Model risk is represented by the possibility of loss due to models with failures or deficiencies, or due to inadequacies in the process of model development or implementation.

Model risk assessment is carried out through a qualitative analysis involving a self-assessment, which is conducted by the model manager, and an independent assessment of the models, which considers the main dimensions that make up the models: methodology, data, technology environment, performance and governance. Following assessment of these dimensions, the model is assigned a grade that will result in one of five rating levels: Minimum Risk, Low Risk, Moderate Risk, High Risk and Very High Risk.

4.B.20.02 Independent validation of management and measurement models for risks and capital

Models are quantitative tools that provide for the synthesis of complex issues, standardization and automation of decision making, and the possibility of reusing internal and external information. This improves efficiency both by reducing the costs associated with manual analysis and decision making and by increasing accuracy. The use of models is an increasingly widespread practice, especially due to technological advances and new artificial intelligence techniques.

We use models to support decision-making and to provide predictive information to several areas of the business, such as risk management, capital calculation, and stress testing. We also use other estimates from models to assess financial or reputational impacts.

However, virtually all models have inherent risks that can give rise to adverse consequences and which materialize as a result of decisions based on incorrect or obsolete estimates, improper calibration of parameters or inappropriate use of the risk models. In order to detect, mitigate and control these risks, as well as ensure adherence to the established minimum standards of compliance, robust governance of models is needed, as well as increased awareness of model risk throughout the business. Thus, it is the role of the Independent Model Validation area (of the Compliance, Conduct and Ethics Department) to work on strengthening the use of models, mitigating the limitations and weaknesses of the models, and reporting to corresponding managers, Internal Audit, Model Evaluation Technical Committee, and Risk Committees.

4.B.20.03 Internal controls

The DCIR, through the Internal Controls area, proactively manages risks and controls in our processes, in order to keep them at acceptable levels.

Our internal controls methodology is based on the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and based on the guidelines established by the Information Systems Audit and Control Association (ISACA) through the Control Objectives for Information and Related Technology (COBIT 5).

The Internal Controls area, in support of the first line areas, challenges the identification and evaluation of risks and controls, and the result of this activity is reflected in the risk maps for each entity, which are reviewed in light of the annual action plan issued by the Internal Controls area. In addition, it carries out thematic reviews (Swat Team), which aim to enhance the evaluation of the control environment of a given area, and the results of which are presented through thematic reports, with the identified risks and weaknesses being incorporated into the risk maps of each entity.

Risk maps, in turn, are reported monthly to the department officers, and contain information on all risks, problems and action plans under their responsibility. Periodically the Very High and High residual risks are reported to the Risk Monitoring Committee, Risk Management Committee and Integrated Risk Management and Capital Allocation Committee – COGIRAC, for acknowledgment or approval, according to the Governance Structure described in the Standard of the Internal Controls System.

In addition, a report is sent annually to the Board of Directors and the Audit Committee, consolidating the evaluations and conclusions of all the work carried out by the Internal Controls teams.

Internal controls effectiveness is supported by trained professionals and defined processes and technology as determined by our business needs.

4.B.20.04 Management and Processes in Cybersecurity

We assess Information Security/Cybersecurity at the highest strategic levels in order to protect our technological infrastructure against attacks, unauthorized access and malicious software. Our objective is to operate in a preventive, detective and corrective way to combat fraud and information security, in order to protect our information and that of our clients.

Accordingly, we have developed our security framework in line with the new digital environment, with a key focus on cybersecurity as one of the pillars of technology and processes, protecting client data, strengthening resilience, and establishing structures to identify and detect threats. We also have response and recovery procedures in place in case of cyberattacks.

With regard to the technical aspects, in order to prepare for and anticipate information security and cyber threats, the IT department promotes continuous investment in areas such as critical server and workstation processes, technology and tools and the inspection of source codes, and investment in the establishment of a lab for security tests.

We have systems to mitigate attacks from external connections and the internet; for the analysis of fraudulent behavior, unauthorized access and malicious software; for the analysis of network and user behavior; and intrusion detection, firewall, antivirus, ransomware and anti-spam systems. All of these provide protection for our IT infrastructure and systems. Furthermore, we continuously upgrade the security of our software and hardware, the digital certification in WEB servers and our encryption equipment, in addition to performing frequent resilience tests.

We continuously monitor the effectiveness of these measures and we have Security Operations Centers (SOCs) focused on identifying potential vulnerabilities and establishing an active defense through the use of cognitive intelligence.

Additionally, we have a cyber intelligence team working to identify threats and confirm the necessary corrective measures, and a Framework of Response to Incidents integrated into our crisis management policies that describes roles and responsibilities in three levels, covering the pillars of Confidentiality, Integrity and Availability: Strategic, Tactical and Technical.

We adopt strict procedures to ensure that our clients' information is secure. Management and technical areas communicate and interact with one another in order to create solutions, provide secure access to service channels and minimize exposure and vulnerabilities. We have a range of security devices and technologies, including biometrics, chip cards, 2D digital validation/QR code and OTP devices (physical and cell phone token, etc.), which are used to prevent fraud and unauthorized access. We have developed awareness campaigns through client channels and social media. On our “seguranca.bradesco” website there are several guidelines for the public, including videos of the web series “Protect Yourself” with prevention tips on current key scams/fraud, which aim to improve user knowledge of our security measures.

In conjunction with technical measures, we ensure that employees are prepared for, and engaged with, the issue of cybersecurity. A culture of security is fundamental for the measures, processes and technologies to be effective. For this reason, we invest in training and awareness materials for employees, associates and clients so that they are aware of the issue and can be prepared for, and up to date with, the inherent risks and threats.

We also provide continuous training programs and run awareness campaigns on the issue of cybersecurity, and we have an executive committee dedicated to the issue, focused on protecting technological infrastructure against attacks, unauthorized access, theft of information and insertion of malicious codes. This committee also develops cybersecurity strategies and ensures effective actions are taken.

The CMN amended Resolution No. 4,893/21, which regulates the cybersecurity policy on the requirements for contracting data processing, storage services and cloud computing, and which must be observed by institutions authorized to operate by the Central Bank of Brazil. In April 2021, following the same guidelines, BCB Resolution No. 85/21 was amended for payment institutions. In short, Resolutions No. 4,893/21 and No. 85/21 improved the current rules regarding cybersecurity policy, but without changing their essence, highlighting the need for financial and payment institutions to define and document criteria that would constitute a crisis situation on the grounds of a cyberattack and the interruption of relevant services. Furthermore, we observe the provisions of the Security Manual of Open Finance, which establishes the minimum security requirements for APIs (Application Programming Interfaces) and other systems related to Open Finance, of which we are compulsory participants according to Communication No. 36,480/20, instituted by BCB Normative Instruction No. 305/22.

4.B.20.05 Corporate security

Our Corporate Security Department’s mission is to promote security solutions by creating, implementing and maintaining and updating rules and processes aligned with our business.

It operates strategically in the areas of Information Security and Cybersecurity, Access Management, Privacy and Data Protection, Prevention of Electronic, Debit/Credit Card and Documentary frauds, and Physical and Property Security. We also systemically implement security procedures in electronic channels, systems and information to assess the level of security and propose improvements. In addition, the department is responsible for delivering Technical Opinions on strategic security issues and the implementation of products, services, processes and AML/TF.

We highlight the main areas and activities:

In addition to the activities performed by the corporate security area, we have our Card department, a fraud prevention area, whose mission is to provide security solutions aligned to our business through the creation, implementation, and maintenance of preventive rules, processes and technologies. This fraud prevention department assesses the security of service channels, systems, processes and products, and suggests improvements. The department also issues technical opinions in connection with strategic security issues and the introduction of products, services or processes.

Among the main responsibilities of the “Corporate Security Global Vision,” we highlight the following:

The area proposes solutions that aim to balance use and security of products and access to service channels to business and technical area managers, as well as corporate and strategic preventive actions that follow the best practices of the market; and

4.B.20.06 Data processing

4.B.20.07 Bradesco Integrity Program

Our main corporate integrity commitments are:

These commitments are upheld through the Bradesco Integrity Program, which consists of a set of mechanisms and measures contained in the Codes of Ethical Conduct, the Corporate Anti-corruption Policies and Standards, the Integrity Program, the Giveaways, Gifts, and Amenities (Public Sector) Program and other standards, as well as procedures, processes, and controls established therein, aimed at preventing, detecting, reporting and remedying any acts of corruption and bribery, including fraud against the Government.

The Program, supported by the Integrity and Ethical Conduct Committee and by the Board of Directors, determines the guidelines, responsibilities, procedures, and controls in connection with the granting and receiving of giveaways, gifts and amenities, donations and sponsorship analyses; due diligence on suppliers of goods and services; bids with the Brazilian Government; political contributions; relationships with government agents, Politically Exposed Persons (PEP); classified employees and those related to politically exposed persons; mergers and acquisitions; licenses and permits; whistleblowing and non-retaliation against whistleblowers acting in good faith, in accordance with laws and regulations applicable in Brazil and countries in which we have business units.

The Integrity Program applies to our managers, employees, interns, apprentices, goods and services providers, banking correspondents in Brazil, business partners, controlled companies and companies that are members of the Bradesco Organization in its interactions and daily decisions, emphasizing our high standards of conduct and ethics. We continuously review, evaluate and improve the Program to align its governance with national and international anti-corruption practices.

We aim to continually promote an ethical and integrity-based culture by following the Code of Ethical Conduct and the Integrity Program. This program has been implemented in order to foster and maintain our culture of integrity among managers, employees, apprentices, interns, suppliers and service providers.

In December 2022, we promoted the Bradesco Integrity Week, which was based on the theme “Integrity, ethics and transparency: anytime, anywhere”. The event was held in hybrid format (face-to-face and virtual), featuring renowned external speakers and our executives and officers opening and closing the panels, as well as relying on the participation of employees located in our premises across Brazil and in the External Units where we have business.

4.B.20.08 Treasury activities

The main objective of the Treasury Department is to maximize results with available resources and manage risks, by complying with the limits set by our Senior Management and the guidelines issued by DCIR.

The main activities are as follows:

4.B.20.09 Inovabra

In a world of exponential transformation, we created an innovation ecosystem to develop solutions that impact the life and experience of our clients. The work is three-fold:

To achieve these three goals, Inovabra has the following attributes:

The program is aimed at both our employees and influencers (a select group of representatives from different areas of the bank who are the catalysts for innovation in their departments).

In 2022, 254 influencers participated in the program, representing 80% of areas. The group had access to 100 hours of training (live and recorded) and 22 innovation challenges have been started and five ongoing experiments are being coordinated by influencers. Throughout the whole business, there were more than 12 events with the participation of market experts and executives and with an average of 1,500 views.

Ø  inovabra Results for 2022:

4.B.30 Business segment

The data for these segments was compiled from reports prepared for management to assess performance and make decisions about the allocation of funds for investments and other purposes. Our Management uses various data, including financial data in conformity with the accounting standards applicable to institutions authorized to operate by the Central Bank of Brazil (BR GAAP) and non-financial metrics compiled on a different basis. For further information on differences between the results on a consolidated basis and by segment, see “Item 5.A. Operating Results – 5.A.20.01 Results of operations for the year ended December 31, 2022 compared with the year ended December 31, 2021”.

The following table summarizes our main gross revenues by segment for the periods indicated:

⁽¹⁾ Includes industrial loans, financing under credit cards, overdraft loans, trade financing and foreign loans.

For further details of our segments, see Note 38 to our consolidated financial statements in “Item 18. Financial Statements”.

We do not break down our revenues by geographic regions within Brazil, and less than 2% of our revenues come from international operations. For more information on our international operations, see “4.B.30.01-02.10 International operations”.

As of December 31, 2022, according to the sources cited in parentheses below, we were:

4.B.30.01 Banking

In our banking segment, we offer a range of products and services to our clients including deposit-taking, granting of loans and advance payments, debit and credit card services and capital market solutions, through our extensive distribution network.

We have a diverse client base that includes individuals and small, mid-sized and large companies in Brazil. Historically, we have cultivated a strong presence among the broadest segment of the Brazilian markets, including middle- and low-income individuals.

The following table shows the income statement and other selected financial data for our banking segment for the periods indicated.

⁽¹⁾ Includes securities sold under agreements to repurchase, borrowing and on-lending obligations, funds from issuance of securities and subordinated debt. For more information about our funding sources, see “Item 5.B.20 Liquidity and funding”.

4.B.30.01-01 Clients

We aim to assist the largest number of people, thus fulfilling our mission of democratizing access to banking products and services, in addition to encouraging financial inclusion, social mobility and entrepreneurship. By the end of 2022, our client base was composed of 77.1 million clients.

A wide presence allows us to act on a large scale, with diversification as a differentiator of our business model. We do not make distinctions, but aim to serve every client with the same level of excellence, remaining aware of each client’s profile and continuously improving the way we provide services. These values extend to clients who are non-account holders.

4.B.30.01-01.01 Segmentation of Clients

To ensure we provide a high level of service to our clients, we operate a segmented business structure, for clients of Banco Bradesco, both individuals and companies, which we believe allows us to offer agility and practicality in all areas.

Companies

Ø  Bradesco Corporate

Bradesco Corporate is responsible for serving business groups and is focused on both large and medium-sized enterprises. Based on a value proposition of physical proximity and fostering client relationships, it offices are located in the main financial centers, offering customized services with a national reach and a highly skilled team to fulfill clients’ needs through a wide portfolio of products, structured solutions and financial services.

To provide these solutions, it is important to strengthen the relationship with clients and to deliver a robust value proposition. Bradesco Corporate is segmented according to sector, market, size and nature of its client companies, among other criteria, consisting of four large areas:

Bradesco Empresas e Negócios is a business unit prepared to meet the needs of micro, small and medium-sized enterprises, with revenues of up to R$50 million per year through its business units strategically positioned throughout Brazil.

The business unit offers business management solutions and includes specialized professionals who assist companies. The service is available through our Branch Network, Digital Platform and exclusive High Value Branches.

Our solutions, including loans, financing, investments and business specialist in activities related to foreign trade, foreign exchange and cash management and insurance, aim to satisfy our clients and support their growth.

Individuals

Bradesco Global Private Bank offers exclusive, personalized service and works side-by-side with clients to preserve and manage family wealth and provide support for future generations.

Designing innovative solutions to meet clients' individual objectives and needs, we believe we have a complete Wealth Management structure, which involves liquid and illiquid assets and investment structures for the perpetuation of wealth.

Global Private clients have access to, what we believe is, a differentiated portfolio of local and international investments, and access to a multidisciplinary team of specialists, in addition to all of our business solutions including, among others, Banco de Investimentos BBI, Bradesco Asset, Ágora Corretora, Insurance and Pension Funds.

Bradesco Global Private Bank currently has 13 offices located in São Paulo, Rio de Janeiro, Belo Horizonte, Blumenau, Campinas, Curitiba, Fortaleza, Goiânia, Manaus, Porto Alegre, Recife, Ribeirão Preto and Salvador, thus ensuring a nation-wide presence, in addition to providing exclusive international services in Luxembourg and Miami.

Bradesco Prime is tailored towards high-income individuals. Operating across Brazil, its mission is to be the client’s first choice of bank, focusing on quality of service and the provision of appropriate solutions for its users through its well-trained teams. Besides a broad network, it has exclusive platforms to serve digital customers.

Our clients have access to the full relationship model, with carefully considered solutions for each profile and stage of life, plus numerous benefits such as:

Throughout its existence, the Bradesco Prime has invested in technology, the improvement of relationships and the training of its professionals, which has resulted in it holding a prominent position in the Brazilian market of banking services for high-income clients and has consolidated its position as one of the largest banks in the segment.

One of Bradesco Prime's primary objectives continues to be to provide “the best experience to its clients”, always seeking to make the relationship between clients and the bank more satisfactory and sophisticated.

Bradesco Exclusive is aimed at average-income individuals. Operating throughout Brazil, its main focus is the quality of its customer service and the provision of appropriate solutions according to the client’s current life circumstances. Our clients are constantly evolving, so we offer exclusive services to make their life easier, thereby increasing their perception of value and strengthening our relationship with them. Such services include:

Bradesco Exclusive offers solutions to match a client’s needs and ambitions according to their priorities and provides recommendations aimed at specific products and services, based on the client's need and interest.

Bradesco Classic is centered upon financial inclusion, and is directed at our individual clients with an income profile of up to R$3,999 per month. Clients in this segment will have an easy access bank, along with a broad portfolio of products and services that meet their everyday needs and the advantage of being able to access them throughout Brazil, whether through our physical branches or our digital channels (App, Internet Banking and easy phone).

In 2018, the Non-Account Holders Department was created to strengthen the relationship with individual and corporate clients who purchased at least one of our products, except for checking accounts. By identifying the client’s profile and portfolio combination, we seek to provide financial products with personalized offerings through both physical and digital channels.

The purpose of the area is to coordinate offerings and approaches, as well as to facilitate access to financial products, creating new channels and providing new customer experiences with improved processes and technology.

4.B.30.01-02 Products and banking services

In order to meet the needs of each client, we offer the following banking products and services:

4.B.30.01-02.01 Deposit accounts

We offer a variety of deposit accounts to our clients, including:

As of December 31, 2022, we had 38.0 million account holders (clients who have a deposit account which is available for use), of which 36.2 million were Individuals and 1.8 million were Legal Entities. As of the same date, we had 68.7 million savings accounts.

4.B.30.01-02.02 Loans and advances to customers

The following table shows loans and advances to customers broken down by product type on the dates indicated:

⁽¹⁾ Refers to outstanding operations with pre-established limits linked to checking accounts and credit cards, which limits are automatically restored as the amounts used are paid.

The following table presents the proportion of our outstanding loans and advances represented by each borrower or group of borrowers on the dates indicated:

Ø  Financing and Onlending

Our Brazilian foreign-trade-related business consists of providing financial services to our clients in their export and import activities.

In import financing/refinancing, we directly transfer funds in foreign currency to foreign exporters, fixing the payment in local currency for Brazilian importers. In export financing, exporters obtain advances in reais on closing an export forex contract in exchange for future receipt of foreign currency on the contract due date. Export finance arrangements prior to shipment of goods/performance of services are known locally as Advances on Exchange Contracts or ACCs, and the sums advanced are used to manufacture goods or provide services for export. If advances are paid after goods/performance of services have been delivered, they are referred to as Advances on Export Contracts, or ACEs.

There are other forms of export financing, such as Export Prepayments, onlendings from BNDES-EXIM funds, Export Credit Notes and Bills (referred to locally as NCEs and CCEs), and Export Financing Program with rate equalization – PROEX.

Our foreign trade portfolio is funded primarily by credit lines from correspondent banks. We maintain relationships with various American, European, Asian and Latin American financial institutions for this purpose, using our network of approximately 845 correspondent banks abroad, 68 of which offered credit/guarantee lines as of December 31, 2022.

Housing loans are provided for: (i) the acquisition of residential and commercial real estate, and plots of land; and (ii) the construction of residential and commercial developments. As of December 31, 2022, we had 336 thousand financing contracts.

Loans for the acquisition of residential real estate have a maximum term of up to 35 years and annual interest rates of 9.5% to 9.9% p.a. and are indexed to TR, or annual interest rates of 2.99% p.a. and are indexed to the savings account remuneration. Commercial real estate financings have a maximum term of up to ten years and annual interest rates up to 11.0% p.a. and are indexed to TR.

Loans for construction, also known as the Businessman Plan, has a construction term of up to 36 months plus a grace period for transfers to borrowers, which varies between 6 and 12 months. The interest rates of these loans are priced individually at the time of contracting and are indexed to TR or savings rates.

Central Bank of Brazil regulations require us to grant at least 65.0% of the balance of savings accounts as housing loans. The remaining funds are to be used for financings and other operations permitted under the terms of the legislation in force.

BNDES is the bank used by the Federal Government to support entrepreneurs of all sizes, including individual rural producers in carrying out their plans for modernization, expansion and implementation of new businesses, with the aim of generating jobs, income and social inclusion in Brazil. Its portfolio has certain products and programs to provide government-funded long-term loans with different interest rates, focusing on economic development. We are one of the structuring agents of BNDES funds, lending to borrowers in several sectors of the economy. We determine the margin of return on the loans based on the borrower's credit. Although we bear the risk for these BNDES and Finame onlending transactions, the transactions are always secured.

In 2022, we disbursed R$6.3 billion, 71.3% of which were loaned to micro, small and medium-sized enterprises.

Vehicle Loans are granted for the purchase of light and heavy vehicles, both new and used, to individuals and legal entities. We offer these products through our branch network and Bradesco Financiamentos, being in direct contact with clients and business partners for the acquisition of light vehicles, motorcycles, trucks, buses, machinery and equipment.

Our vehicle loans portfolio grew in 2022 due to the changes made to our approval policies, economic recovery and improvements in procurement processes, maintaining its position among the largest portfolios in the Brazilian markets.

As of December 31, 2022, we had 3,763 active leasing agreements. According to ABEL, our leasing companies were among the sector leaders, with a 23.5% market share in Brazil, based on the market portfolio of leases of R$15.2 billion.

Financial leasing involves trucks, cranes, aircraft, ships and heavy machinery. In this same period, 23.6% of our transactions were for vehicles (cars, buses, micro-buses and trucks).

We conduct our leasing transactions through our primary leasing subsidiary, Bradesco Leasing, and through Bradesco Financiamentos.

Ø  Borrowings

This is a line of credit for companies, available via physical and digital channels, granted to cover expenses or investments inherent in the company’s working capital, such as payments relating to salaries, stock renewal, training and others.

Personal loans are loans with a pre-approved limit for an unspecified purpose. Payroll-deductible loans are available to INSS pension plan beneficiaries and retirees, to public servants and to the private sector.

The average term of these loans is 59 months and interest rates range from 1.6% to 3.5% p.m., as of December 31, 2022.

The provision of loans and financing to the agribusiness sector is made available from the following resources:

The majority of loans have semiannual or annual payments with payment terms matched to periods of the harvest cycle. The guarantees are usually tied to the disposal/mortgage of property and machines, the latter valid for the financing of goods in addition to agricultural or livestock lien.

Ø  Operations with limits

We offer a comprehensive range of credit cards to our clients including Elo, American Express, Visa, MasterCard and private label cards, which stand out due to the extent of benefits and convenience offered to associates.

We earn revenues from our credit card operations through:

We offer our clients a complete line of credit cards and related services, including:

We hold 50.01% of the shares of Elopar, an investment holding company with shares in Alelo (benefit and prepaid cards), Livelo (coalition loyalty program) and Elo Serviços (a card brand). We have joint control of, and a relevant stake in, Cielo S.A. (payment solutions).

We also have a card business unit abroad, Bradescard Mexico, operating exclusivity in leading retail chains in Mexico.

We have several partners to whom we have offered co-branded/hybrid and private label credit cards. This has allowed us to deepen our relationships with our clients and offer banking and insurance products to our credit card clients, such as financing and insurance.

The following table shows our volume of transactions and the total number of transactions by credit cards for the years indicated:

The overdraft is a revolving credit facility available for use with the checking account, which allows greater availability of financial resources in the case of withdrawals, transfers, honoring of payments and other debits, where the client's own resources are not sufficient.

Conta garantida is a revolving credit facility for companies and individuals to meet short-term needs. The limit of the conta garantida allows for the negotiation of more attractive rates. However, in most cases, it requires a guarantee which can be a surety, disposal of assets, guarantees of contracts or anticipation of receivables, and investments, among others.

Ø  Credit policy

Our credit policy is focused on:

Our credit policy defines criteria for lending and setting operational limits. In accordance with the rules set out in our internal policy, credit approvals can be decided by the commercial area, by the credit department and by our Board of Directors.

Our transactions are diverse and target individuals and legal entities that show an ability to pay and remain in good standing. In all cases, we aim to have them secured by appropriate collateral to compensate for the risks involved, considering the use of funds and repayment periods, as well as risk ratings. The Central Bank of Brazil’s risk rating system has nine categories ranging from “excellent” to “very poor”. In line with our commitment to the ongoing development of our methodologies, the credit risk rating for our clients /economic groups is based on a range of 19 levels for Corporate clients, of which 14 represent performing loans. This adheres to the requirements set forth in the Basel Accords. For more information, see “Item 4.B. Business Overview – 4.B.70 Regulation and Supervision – 4.B.70.02 Banking Regulations – 4.B.70.02-11 Treatment of Loans and Advances”.

We have credit limits for each type of loan. We also pre-approve some credit limits for individual and corporate clients.

We review the credit limits of our clients every 180 days. However, in general, the review process takes place every 90 days.

Our maximum exposure per client (e.g., individuals, companies or other economic groups) is determined by client rating and the aggregate maximum exposure is limited to 15.0% of our Reference Equity.

Any cases in which the maximum level of exposure per client exceeds the thresholds as set out in the table below or in which the total exposure equals or exceeds R$5.0 billion are required to be submitted to the Board of Directors for approval.

The table below refers to the maximum percentages of exposure on Level 1 Reference Equity of the Bank by Client Rating in the Individual and Corporate business:

Our credit policy is continuously developing and as part of our risk management process, we continue to improve our credit granting procedures, including procedures to gather data on borrowers, calculate potential losses and assess applicable classifications. Additionally, we assess our institutional credit risk management in view of the recommendations by the Basel Accords, including by:

We use systems which are continually supervised and reviewed for loans operations analysis, allowing us to build a level of flexibility and accountability, as well as standardize the procedures for conceding loans.

With these tools, we believe our branches can respond quickly to clients, keep costs low, and control the risks inherent in consumer credit in the Brazilian markets.

The following table shows approval limits established for loan analysis:

In order to serve our clients’ needs as quickly as possible and securely, the Credit Department uses segmented analyses with different methodologies and instruments for credit analysis in each segment, in particular:

We have a department that focuses on the collection and recovery of loans, seeking to reduce the rates of delinquency and losses, as well as to maintain our relationship with clients. By using our own algorithms, updated periodically, with separate debtors according to levels of risk and likelihood of payment, our collection strategies are more assertive and efficient.

Collection occurs through our network of branches, call centers, digital channels, and friendly and judicial collection offices. In addition, specialized regional teams tailor their operations and submit significant cases to the corresponding authority levels in the Commission or Executive Committee for Collection and Credit Recovery, respecting the governance of the established authority level. Once the usual means for loan recovery have been exhausted, we periodically perform sales of delinquent loans through auction processes in order to optimize all means of resources and collection.

4.B.30.01-02.03 Cash Management Solutions

These solutions, which can also be customized, facilitate our clients’ day-to-day tasks and help to generate more business. We also earn revenues from fees and investments related to collection, check custody, credit order, and payment processing services, and from funds in transit received up to the date of their availability to the related recipients.

As an example, the franchising niche has a team of franchising specialists who, through their relationship with franchising brands, identify opportunities to finance and provide services to all franchisees and their employees. The partnership with the franchise networks occurs through structured commercial activities in synergy with the managing departments, commercial segments, and affiliated companies. The focus on the peculiarities of this sector creates a competitive and sustainable position by structuring appropriate solutions and, in particular, through the strategy of providing differentiated and specialized services. We have more than 600 agreements in place with franchising brands, generating numerous opportunities to open new checking accounts and leveraging business with the respective franchisees.

Another important feature in this area is the support we provide toLocal Production Groups (APLs, local acronym), by providing services to businesses and assisting these clients. Participating in an APL strengthens companies, because together they can form a collaborative and important group for local development, allowing for greater competitive and sustainable advantages for micro and small businesses. Currently, there are 839 APLs throughout the country, located in 2,580 municipalities.

Microentrepreneurs use the MEI Portal, including free services provided by partners to meet their day-to-day needs.

4.B.30.01-02.04 Public authority solutions

We have a specific area dedicated to serving the public administration, which offers specialized services to identify business opportunities and structure customized solutions to entities and bodies of the Executive, Legislative and Judiciary branches at federal, state and municipal levels, in addition to independent governmental agencies, public foundations, state-owned and mixed companies, the armed forces (army, navy and air force) and the auxiliary forces (federal and state police forces).

Our exclusive website, developed for our clients, offers corporate solutions for federal, state and municipal governments for payments, receipts, human resources and treasury services.

Our commercial relationships with such public authorities are conducted by specialized business managers located in distribution platforms throughout the country, which can be identified on our website. We have nine Specialized Platforms to assist governments, capitals, courts, class councils, chambers, prosecutors, public defenders and the largest municipalities based on GDP, and 34 Platforms providing services to the City Halls and other Authorities.

In 2022, we took part and were successful in payroll bidding processes sponsored by the Brazilian government. Furthermore, according to INSS, we continue to be leaders in payments of INSS benefits, with more than 11.6 million retirees and pensioners.

4.B.30.01-02.05 Management and administration of third-party funds

We provide fiduciary administration services to investments funds and managed portfolios, with regulatory responsibility for operation of investments funds.

Bradesco Asset also conducts management of third-party resources, being responsible for investment decisions:

The following tables show the equity of funds and managed portfolios which are under our management, the number of investors and the number of investment funds and managed portfolios for each period.

⁽¹⁾ Source: ANBIMA. We present these amounts in order to give an indication of the scale of our fund activities. We generally earn administration and/or management fees at a percentage of the equity amount of the fund.

The following tables show the equity of, the number of, and the number of quotaholders in the funds, investment clubs and managed portfolios under our administration at each date shown.

⁽¹⁾ Amounts shown are funds of third parties and are estimated by us based on the records we keep as administrator of the funds, investment clubs and managed portfolios. We present these amounts in order to give an indication of the scale of our fund activities. We generally earn administration and/or management fees at a percentage of the equity amount of the fund.

4.B.30.01-02.06 Services related to capital markets and investment banking activities

As our investment bank, Bradesco BBI is responsible for (i) originating and executing project financing operations; (ii) originating and executing mergers and acquisitions; (iii) originating, structuring, syndicating and distributing fixed income securities in Brazil and abroad; and (iv) originating, structuring, syndicating and distributing issuances of securities of equity in Brazil and abroad.

In 2022, Bradesco BBI received the award “Investment Bank of the Year in Variable Income” by The Banker, the "Best Investment Banking Brazil" and "Outstanding Leadership in Sustainable Project Finance" awards by Global Finance, the "Investment Bank of the Year for Equity Raising" award by The Banker, the "Infrastructure Bank of the Year - Brazil" award " by Latin Finance and the award for "Best M&A Firm in Brazil" by the Global M&A Network.

In 2022, Bradesco BBI advised clients in a total of 282 operations across a range of investment banking products, totaling approximately R$362 billion.

4.B.30.01-02.07 Investment Platform

We have a full asset management platform that aims to provide clients with differentiated and customized investment advisory services, in person and remotely, covering our entire product range, including investment solutions in Bradesco Asset, Ágora Investimentos, Treasury, and Bradesco Previdência, all taking into account the client’s profile, current life circumstances, needs, and objectives.

The investment advisory service has a team of investment specialists, in addition to assisting managers in the branch network, who complement each other. The clients also benefit from tailored portfolios, which combine a range of financial assets, established monthly based on the client’s risk profile and the perspectives of economic scenarios in the local and international environments.

4.B.30.01-02.08 Intermediation and trading services

Ø  Ágora Investimentos

Ágora – Banco Bradesco’s official Brokerage – is an investment platform that prioritizes the journey and experience of the investor combining technology and innovation, and offering financial education, quality content and advice for all its clients. It is dedicated to the service of individuals and legal entities, both Bradesco and non-Bradesco account holders. Through the Ágora website or Ágora App, the client can access a Home Broker, their asset trading platform on B3 and a select portfolio of investments which is offered from selected institutions in the market, providing opportunities in fixed income, investment funds, COEs, LIGs, public offers and private pensions, including access to investments abroad. All of this is contained in one place, 24/7, either via the Ágora website or Ágora App.

To assist in making decisions when investing, on Ágora Insights, the clients have at their disposal recommendations, reports, analyses, livestreams during the trading session and podcasts, as well as greater coverage of companies listed on the stock exchange, with content prepared by a team of renowned economists and market analysts. With Ágora, whatever the profile, the client has a team of specialists who understand the subject when it comes to investing, finding the best opportunities according to their objectives.

In addition to the full range of investment products, the Ágora client has exclusive programs and services for their day-to-day life, such as the credit card Ágora Visa Infinite, with 1% cashback and several advantages; exclusive benefits such as a road toll tag and car parking with no fees, in partnership with Veloe; and the Ágora Plus Program, which offers discounts and cashback in several partner stores.

With regards to the pillar of financial education, through the Ágora Academy, we offer more than 90 courses, 50 of which are completely free. All have been developed by the best business schools in the country, for those who want to learn, specialize and even professionalize in the market.

Young people and university students can start their investment journey through special programs with Ágora Kids and Universitário. Market professionals have modern and advanced asset trading platforms, by Ágora Trader.

In December 2022, Agora Investimentos reached 886.2 thousand clients, with a total of R$68.9 billion in assets under custody, occupying the fourth position in the Ranking of Custody of Individuals of B3. We believe this was achieved by focusing on the journey and experience of the investor through technology and innovation, as well as the dissemination of financial education, quality content and specialized advice to all its clients.

Ø  Bradesco Corretora

Bradesco S.A. CTVM, or Bradesco Corretora, provides services exclusively to the institutional segment, offering a full suite of investment analyses that cover the main industries and companies in the Latin American market, a team composed of 29 sector specialists who provide consultations to the clients by follow-up reports and stock guides, and a wide range of projections and comparison multiples. Bradesco Corretora also has teams of its own economists and fixed income analysts dedicated to institutional clients. Over 360 reports, in English and Portuguese, are forwarded on a monthly basis to the most important investors around the world, such as those domiciled in Brazil, the United States, Europe and Asia.

Bradesco Corretora has as its objective the mediation of the purchase and sale of shares, commodities futures contracts, financial assets, indexes, options, share rental, swaps and forward contracts, in the primary and secondary markets, and negotiations in B3 and in the organized over-the-counter market, which are tailored to the needs of large corporate and institutional investors.

Bradesco Corretora traded R$514.0 billion on the B3 equity markets in 2022, and ranked second in Brazil in terms of the total trading revenues and third in terms of revenue from global investors according to MacLagan.

In addition, in the same period, Bradesco Corretora traded 1.5 billion futures, forwards, swaps and options totaling R$50.0 trillion in B3. In 2022, Bradesco Corretora ranked fourth in the Brazilian markets, in relation to the number of futures contracts, terms, swaps and options executed according to B3.

Bradesco Corretora remains adherent to the Operational Qualifying Program (PQO), maintaining the five excellence seals (Agro Broker, Carrying Broker, Execution Broker, Retail Broker and Nonresident Investor Broker), confirming the high quality of its futures contracts and variable income markets. Bradesco Corretora is also certified by CETIP (Clearing House for the Custody and Financial Settlement of Securities, currently B3).

4.B.30.01-02.09 Capital market solutions

In 2022, we were one of the main providers of capital market services and we maintained our leadership position in the domestic and global market, according to the ANBIMA’s ranking of custody of assets.

Among the main services we offer in this segment, we highlight: qualified custody of securities for investors and issuers, administrators of investment funds, clubs and managed portfolios; bookkeeping of securities (shares, BDRs, quotas of investment funds, CRIs and debentures); custody of shares backed by Depositary Receipts (DR), loan of shares, liquidating bank, depositary (Escrow Account – Trustee), clearing agent, tax and legal representation for non-resident investors, and fiduciary management for investment funds.

Bradesco Custódia has Quality Management System ISO 9001:2015 certifications and GoodPriv@cy certifications. We also hold an ISAE 3402 (International Standard on Assurance Engagements) certification, which includes the issuance of the Control Assurance report in a Service Provider Organization. These certifications improve our control structures, increasing the level of effectiveness and quality of processes.

As of December 31, 2022, the set of services provided by us which we call Bradesco Custódia, was composed of:

4.B.30.01-02.10 International operations

As a private commercial bank, we offer a wide range of international services, such as foreign trade finance and foreign currency loans, foreign exchange operations and international sureties, lines of credit and banking.

In October 2020, we concluded the acquisition of Bradesco Bank and its subsidiaries to offer a complete platform of banking and investments products and services in the United States.