Disclosure in accordance with Part 8 of CRR - BB

Disclosure in accordance with Part 8 of CRR

Dated 31 December 2016

Banco do Brasil AG / Viena / 2017

DIS

CLO

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Banco do Brasil AG | Disclosure Report dated 31/12/2016 PAGE 2 OF 51

Name of document

Disclosure in accordance with Part 8 of the Capital Requirements Regulation (CRR) Type of document Version Information classification Document owner

Disclosure 1.0 # public Risk Management Department Scope of application

Public Approved by Date of approval

Management Board 30 June 2017 Date of next ordinary publication Language

30 June 2018 German Source link language

- This document replaces

Disclosure 2015

DOCUMENT DETAILS


TABLE OF CONTENTS

Disclosure in accordance with Part 8 of CRR 4

1 Disclosure of policies and structure of Banco do Brasil AG 4

2 Risk management goal and policy (Article 435 CRR) 5

3 Area of application (Article 436 CRR) 14

4 Net equity (Article 437 CRR) 15

5 Net equity requirements (Article 438 CRR) 20

6 Counterparty credit risk (Article 439 CRR) 23

7 Capital buffer (Article 440 CRR) 25

8 Indicators relevant to the world system (Article 441 CRR) 26

9 Credit risk adjustments (Article 442 CRR) 27

10 Assets not amortised (Article 443 CRR) 36

11 ECAI execution (Article 444 CRR) 38

12 Market risk (Article 445 CRR) 40

13 Operational risk (Article 446 CRR) 40

14 Risk of equity items not included in the Commercial Code (Article 447 CRR) 41

15 Interest rate risk of items not included in the Commercial Code (Article 448 CRR) 42

16 Risk of securitization items (Article 449 CRR) 43

17 Compensation policies (Article 450 CRR) 43

18 Accumulation of debts (Article 451 CRR) 46

19 Application of IRB index on credit risk (Article 452 CRR) 48

20 Application of credit risk reduction techniques (Article CRR 453) 48

21 Application of continuous measurements of indices for operational risks (Article 454 CRR) 51

22 Application of internal models for market risk (Article 455 CRR) 51


Disclosure in accordance with Part 8 of CRR

1 Disclosure of policies and structure of Banco do Brasil AG

The Disclosure Report of Banco do Brasil AG is published once a year in the German language on the bank’s web page. Currently, there is no intention of frequent disclosure of risk information according to “EBA Guidelines on materiality, proprietary, and confidentiality and on disclosure frequency” of 23/12/2014. They propose a frequent disclosure of information, especially for each bank, complying at least with the criteria in accordance with Paragraph 18 of these Guidelines:

The institution belongs to three major institutions of the said member country

The institution’s consolidated assets correspond to over EUR 30 billion

The overall average of assets of the institution regarding the last four years corresponds to over 20% of the Gross Domestic Product (GDP) of the said member country

The institution’s consolidated disclosures for purposes of the average index correspond to over EUR 200 billion.

None of these criteria is applicable to Banco do Brasil AG. Banco do Brasil AG does not use the possibility due to failures of materiality or confidentiality of content as a result of the full disclosure. Even though the content is not applicable or relevant to the bank, it will be correspondingly represented in the Disclosure Report. The structure of the Disclosure Report follows directly the structure of disclosure requirements as shown in Capital Requirements Regulation (CRR). The disclosure policies of Banco do Brasil AG will be checked regularly whether they are in accordance with the type and frequency requested by regulatory requirements and are appropriate, making a demonstration of the risk profile of Banco do Brasil AG. This verification will occur at least once a year.


2 Risk management goal and policy (Article 435 CRR)

(1) The institution disclosures its risk management goals and policies for each individual category of risk, including the risks set out in this title. Therefore, the following items will be disclosed:

a) the strategies and processes for risk control;

The risk culture of Banco do Brasil AG is focused on the acquisitions of risks declared by parent company Banco do Brasil S.A., Brazil, in compliance with the income requirements. The requirements, competencies, and principles of control of risk policies are listed both according to the basic commercial principles and risk strategies, both of Banco do Brasil AG and globally by Banco do Brasil S.A. The key point of the risk strategies is the efficient application of the net equity regarding risk and income items. Active risk management means, for Banco do Brasil AG, the identification of all potential risks, which are measured quantitatively, as well as its control and inspection on the basis of the risk limits. Therefore, the goal is to deal with the risks in a fully planned way. The basic idea consists in determining consciously the optimisation of the relations of individual risks and income expectations, measuring them and controlling them actively.

b) the structure and organisation of the relevant risk management functions, including information about their powers and status, or other appropriate rules;

The risks of Banco do Brasil AG will be controlled by means of a comprehensive system of principles of risk, risk measurement processes and inspection as well as the respective organisational structures. The overall responsibility belongs to Banco do Brasil S.A. within an independent committee. The chart below provides an overview of the structure of risk and capital management of Banco do Brasil S.A. during the relevant period1. The existing committees are (acronyms in parentheses based on the local names in Portuguese):

- Credit Risk Executive Committee (CERC)

- Market and Liquidity Risks Executive Committee (CERML)

- Internal Controls and Operational Risk Executive Committee (CERO)

- Capital Management Executive Committee (CEGC)

- Global Risk Superior Committee (CSRG)

1 See “Risk Management Report – Pillar III – 4Q16” of Banco do Brasil S.A., page 14

(http://www.bb.com.br/docs/pub/siteEsp/ri/eng/dce/dwn/RiskMang4Q16.pdf).

http://www.bb.com.br/docs/pub/siteEsp/ri/eng/dce/dwn/RiskMang4Q16.pdf


In Austria, the Executive Board of Banco do Brasil AG presented to the Group the models and will support, thus, an independent risk management and a Controlling Department (RMCD)

2. The Executive Board of Banco do

Brasil AG decides to rebuild, on the risk policy of Banco do Brasil S.A., the basic principles of risk management, as well as the procedures for inspection of risks. Allocation of capital and the relevant limits will be determined in the central “Risk Strategy”, approved by the Board of Directors of Banco do Brasil AG. The risk control presented by RMCD Department as a core and independent control unit assists the Executive Board in executing these tasks. RMCD is one of the independent commercial operations of the risk management department

3, which reports directly to the Executive Board and assesses the risk situation under the

consideration of the ability to bear the risks and the respective risk limit. As an independent body, it ensures that the risks measured are within the limits determined by the Board of Directors. The latter is responsible for the development and implementation of risk measurement methods that govern the ongoing development and improvement of the control instruments and the development and maintenance of the basic guidelines.

2 RMCD – Risk Management and Controlling Department. This department is responsible for the overall risk

management of Banco do Brasil AG. RMCD is the department responsible for risk management matters,

including technical calculations of risks and the ongoing reporting to the Executive Board and monthly and

periodic reporting to the Risk Management Committee (RMC). On 11 November 2016, the "Controlling" and "Risk

Management” departments were introduced together to the newly created department “Risk Management and

Controlling Department (RMCD)”. 3 According to paragraph 39(5) BWG.


The process of extension of credit (credit analysis, credit rating, credit pricing) is settled centrally and globally by Banco do Brasil S.A. Banco do Brasil AG is responsible for the regular management of credit transactions. The control of liquidity is based on daily and monthly analysis, including on how to control the risks of foreign currency, while the risk of interest is based on the banking book which currently regulates interest rate risk statistics. As the internal independent body, the internal review of Banco do Brasil AG inspects the cooperation with the internal review of Banco do Brasil S.A. worldwide, with all the commercial and operational processes, the adequacy and effectiveness of the measures imposed by the risk management and risk control, as well as the internal control systems.

c) Scope and type of reporting system and measurement of risks

Credit risk Banco do Brasil AG calculates the credit risk in ICAAP based on standard indexes, consistently according to the calculations of column I. In addition to this credit risk, in these terms, the Bank also calculates a concentration risk, which is built according to the estimates of Banco de España and the application of the Herfindahl-Hirschman index. Banco do Brasil AG has internal limits of related customers (GvK) at a group level defined in levels of areas and regions. The maintenance of these limits or the maximum statutory limits of credit is checked by risk management (for example, in daily reports of credit portfolio) and the detailed analysis of loan agreements is also checked. Market risk Market risk is, in general, the risk of changes in market prices or losses through adverse and unexpected pricing development. With respect to the general market risk, parent bank Banco do Brasil S.A. implemented a VaR model (with the support of RiskWatch/Algorithmics system). In this way, Banco do Brasil AG converts VaR model parameters into foreign currency risks, applying them in ICAAP. For interest rate risk in banking books, currently, the regulated interest rate risk statistics is applied. Liquidity risk Liquidity risk means the risk that the current or future payment obligations are not fully complied with, or are not complied with in time. This also means that, in the event of a liquidity crisis, the methods of refinancing will generate increased costs (financing risk) or that the assets may be settled only with the discount with market indices (market liquidity risk). The measurement of the liquidity risk occurs daily or monthly with different methods:

Daily Cashflow projections

Daily verification of the liquidity balance (GAP Analysis)

Monthly liquidity stress test

Daily calculation until the liquidity coverage according to Basel III (LCR)


The liquidity risk is calculated in euros and U.S. dollars. In order to ensure the bank operation in the case of an emergency, Banco do Brasil AG issues a liquidity contingency plan, with the necessary measures to be implemented. Operational risk Banco do Brasil AG defines operational risk as the risk of losses, which are recorded as a result of inappropriate measures or failure of internal procedures, human or system errors, or external events. In this way, they are added through concepts of operational risks regarding legal and compliance risks (in accordance with the EBA-SREP Guidelines) with the risk of reputation and relevant risk model for Banco do Brasil AG. The measurement of the operational risk occurs according to the basic indicators. The cases of damage recorded are notified as “near misses” to the Risk Management and Controlling Department (RMCD), so that it can gather them together and send to the Risk Management Committee (RMC), which belongs to the Executive Board. The RMC must approve the losses reported to proceed with the accounting and notification to parent bank BB S.A., and the proposed measures are implemented to avoid the occurrence of other similar losses. The purpose of the contingency plan of Banco do Brasil AG is the guarantee of banking activities in emergency cases. The plan is a guideline that contains the measures needed to be implemented in crisis cases and situations. Other risks Different risks are included in “other risks” category, as shown in the general table below:

Gone Concern

Perspective

Going Concern

Perspective

Excessive Leverage risk Low Leverage ratio

Art. 429 CRR

Like Pillar I Like Pillar I

Macroeconomic risk Medium Art. 458 CRR,

Countercyclical

capital buffer (if

activated)

Macro Risk Buffer

(and Pillar I, if

activated)

Macro Risk Buffer (and

Pillar I, if activated)

Systemic risk Low Not required Macro Risk Buffer Macro Risk Buffer

Strategic risk Medium Not required Macro Risk Buffer Macro Risk Buffer

Risk of money laundering and

terrorist financing

Low Not required - -

Pillar II Risk Type Risk Subtype Risk Level Pillar I

Other Risks


The macroeconomic risk, systemic risk and strategic risk are covered in “Macro Risk Buffer”, which corresponds to at least 5% of the net equity available, but usually at high fall. If the risk measured exceeds 90% of the net equity available, there will be the issue of an early warning. The following chart illustrates this structure:

Stress test The ICAAP review, including a stress test, shall take place once a year. The scenarios then applied will build the choices and the economic model of Banco do Brasil AG according to appropriate stress situations.

d) the guidelines for guarantee and minimization of risks and the strategies and procedures for inspection of the effectiveness of the measures implemented for guarantee and minimization of risks.

Banco do Brasil AG uses minimal dimension of derivatives for the guarantee (Hedging) of risks. In the credit risk, it is verified whether there are sufficient guarantees for the control of the risk profile. On the granting of new loans to customers, the full refinancing is secured (typically on the access to the Liquidity-Center of the parent bank in London), so that the interest and liquidity risks are minimised. The current verification of the effectiveness of risk guarantee is a key component of the report. Operational damage cases must be immediately notified to the Risk Management and, subsequently, depending on the value of the damages, redirected to the “Risk Management Committee” (RMC) or the Board of Directors; in all cases of damages notified, what preventive measures should be implemented to avoid or reduce to the full extent the risk of occurrence of similar cases in the future must be analysed.

e) a statement approved by the managing board for adequacy of the risk management procedures of the institution, with the guarantee that the risk management system will direct the appropriate profile and strategy to the institution.

The Executive Board of Banco do Brasil AG certifies that the risk management system applied by the bank is suitable for the profile and strategies of the institution and is continuously developed and improved.


f) A concise statement of the risks approved by the managing board that described the commercial strategies related to the general risk profile of the institution. This statement contains the key numbers and information provided to the institution's risk management by external bodies with an interest in a comprehensive overview, including information that acts as a risk profile of the institution and that determine risk tolerances of the managing board.

The Executive Board of Banco do Brasil AG certifies that the risk profile of the bank follows a conservative risk policy and that corresponds, at any time, to the determined risk tolerance (risk appetite). The risk appetite of Banco do Brasil AG defined in the “Risk Strategy” of the bank will be regularly checked, monitored and controlled with the limits, and maintained accordingly. Risk appetite is therefore defined with a percentage of net equity available.


(2) The institution publishes the following information based on the Corporate Executive Board, which is updated regularly - at least once a year:

a) Number of members of the managing board with Management or Inspection roles;

Banco do Brasil AG is managed by a dual organisational model, with the Executive Board and the Board of Directors as a managing board. The members of the Executive Board of Banco do Brasil AG act solely in their management roles in Banco do Brasil AG. On 31/12/2016, the Executive Board was composed of 4 members:

Name Start Date

Marco Aurélio Picini de Moura 10.06.2014

João Paulo Dutra e Silva 01.09.2014

Maurício Fernandes Leonardo Junior 01.02.2015

Hans-Michael Mahlknecht 15.09.2016


At the end of 2016, the Board of Directors was composed of the following members:

Name Activities Date of appointment/re-appointment

Márcio Luiz

Moral

1 management role and 1 inspection role (within Banco do

Brasil Group)

18.05.2016

Leonardo Silva

de Loyola Reis

1 management role (within Banco do Brasil group), 2

inspection roles (outside Banco do Brasil Group);

18.05.2016

José Caetano

de Andrade

Minchilla

1 management role and 3 inspection roles (within Banco do

Brasil Group);

18.06.2016

Edson Rogério

da Costa

1 management role and 4 inspection roles (within Banco do

Brasil Group);

18.05.2016

Julia Monteiro

Takeya

Sent by the Operations Board 27.08.2013

Rafael de

Freitas Tavares

Sent by the Operations Board 12.01.2016


b) strategies for the selection of the members of the managing board and their knowledge, skills and experience;

The qualification requirements for the members of the managing board of Banco do Brasil AG are governed by the internal Guidelines for the selection and evaluation of the suitability of the members of the Executive Board and members of the Board of Directors. These Guidelines define the legal requirements according to which the internal structures will use to select and evaluate the suitability of the proposed and appointed members and present an important dimension for the good conduction and control of the company. The evaluation of the appointed and proposed members is made on the basis of the following criteria: personal competence, professional suitability and required experience, as well as governance criteria (possible conflicts of interests, independence, time availability, overall composition of the Executive Board or the Board of Directors, diversity). In order to ensure the proper qualification of the members of the body, the members of the managing board regularly participate in training seminars.

c) diversity to the selection of the members of the managing board, goals and applicable requirements of strategy, level of goal achievement;

Banco do Brasil builds high values of diversity and directs its recruitment and career ladder measures based on them. In the fiscal year of 2016, the portion of women in leading positions in Banco do Brasil AG corresponds to 31.25%.

d) information about whether the institution consists of separate risk committees and the number of committee meetings held so far;

Banco do Brasil AG formed, in 2014, a risk committee according to paragraph 39d BWG, which gathers together at least once a year. In the fiscal year of 2015, the risk committee gathered together on 21 July 2015 and 10 December 2015; in the fiscal year of 2016, on 9 September 2016. In this way, the “Risk Management Committee” (RMC) of Banco do Brasil AG gathered together monthly, with the participation and reports of the entire Board of Directors, as well as the Management of the Treasury, Accounting and Risk Management and Controlling departments.

e) Description of the flow of information to the managing boards in the case of risk issues.

The Risk Management Department offers direct and indirect access to the entire Executive Board of Banco do Brasil AG. The information flow occurs both in writing (through regular and standardised reporting, including through ad hoc reports) and verbally (especially in the case of urgent risks discussed and declared in person). A fixed component of the flow of information to the managing board in the risk issues is the monthly occurrence of the meetings of "Risk Management Committee" of Banco do Brasil AG, with the participation of the entire Board of Directors, as well as department managers (and eventually deputies) of the Treasury, Accounting, Risk Management and Controlling departments.


3 Area of application (Article 436 CRR)

Based on the area of application of the requirements of this decree, the institution publishes the following information:

a) Name of the institution to which the requirements of this decree apply

Banco do Brasil Aktiengesellschaft

b) Explanation of the differences in the basis of consolidation for accounting and inspection purposes, with a short description of the participating companies:

Banco do Brasil AG has only one affiliate: BB Asset Management Irland Limited, Dublin (securities company). The Company is excluded from consolidation for accounting and inspection purposes, as it is not meaningful in terms of paragraph 59 BWG and Article 19 CRR.

And the information of:

i) Fully consolidated: no company

ii) Shared consolidated: no company

iii) Deduction of net equity: no company

iv) Consolidated or discounted: BB Asset Management Irland Limited, Dublin, (assessment

with 250% in credit risk)

are

c) all existing or foreseen legal or factual obstacles for the immediate transfer of net equity or the return of payments of accounts payable between the parent company and its affiliates.

From the current point of view, it is not relevant to Banco do Brasil AG.

d) total amount that includes the net equity of all affiliates and non-consolidated companies less than that specified, and name or names of these companies,


e) Possible circumstances of the execution of articles 7 and 9.



4 Net equity (Article 437 CRR)

(1) Based on its net equity, the institution publishes the following information:

a) a complete agreement of the items of the unit of fixed capital, additional capital, supplementary capital, the items of deduction and correction, as well as the net equity discounts of the institution according to Articles 32 up to 35, 36, 56, 66 and 79 with the verified accounts of the institution included on the balance sheet,

31/12/2016 in EUR

Decree (UE) No. 575/2013 Article

indication

Fixed capital unit: instruments and reserves

1 Equity instruments and goodwill related to them Article 26 (1), 27, 28, 29

of these: basic capital 33,778,300.00 Article 26 (1)

of these: other reserves 196,915,380.39 Article 26 (1)

2 Profits included 27,434,341.70 Article 26 (1) (c)

3 Other accumulated income 0.00 Article 26 (1)

3a Funds for general banking risks 500,000.00 Article 26 (1) (f)

4

Amount of the items in accordance with Article 484, Paragraph 3, plus the goodwill related to them, whose calculation corresponds to CET1 0.00 Article 486 (2)

State capital transfer with stock protection until 1 January 2018 0.00 Article 483 (2)

5 Minority interests 0.00 Article 84, 479, 480

5a

Intermediate profits verified and partly independent, less all estimated expenses and dividends 0.00 Article 26 (2)

6 Fixed capital unit (CET1) in view of regulatory adjustments 258,628,022.09


Fixed capital unit (CET1): regulatory adjustments

6 Fixed capital unit (CET1) in view of regulatory adjustments 258,628,022.09

7 Additional assessment adjustments 0 Article 34, 105

8 Intangible assets -891,657.17 Article 36 (1) (b), 35, 472 (4)

9 to 14 … Not applicable

15 assets identified in the balance sheet from pension funds with defined payments -233,600.32

Article 36 (1) (e), 472 (7)


25a Loss in the current fiscal year -45,057,699.87 Article 36 (1) (a)


28 Total regulatory adjustments of the fixed capital unit (CET1) -46,182,957.36

29 Fixed capital unit (CET1) 212,445,064.73

Additional capital unit (AT1): Instruments

30 to 43 … No existing AT1 instrument

44 Additional capital unit (AT1) 0.00

45 Capital unit (T1 = CET1 + AT1) 212,445,064.73

Supplementary capital (T2): instruments and reserves

46 to 57 … No existing T2 instrument

58 Supplementary capital (T2) 0.00

59 Total net equity (TC = T1 + T2) 212,445,064.73

60 Total assets at risk *) 1,505,052,942.73

Shares of the net equity and buffer

61 Fixed capital unit share 14.12% Article 92 (2) (a), 465

62 Capital unit share 14.12% Article 92 (2) (b), 465

63 Share of total capital 14.12% Article 92 (2) (c) *) of these, 1,424,081,345.85 Euros are risk position amounts according to default indices. Scheme according to Decree of Implementation (EU) No. 1423/2013 for the determination of technical standards for the implementation of mandatory publications of the institution (Appendix VI).


b) a description of the main characteristics of the instruments of the fixed capital unit, the additional capital unit and the supplementary capital operated by the institution, and

c) complete conditions associated with all the instruments of the unit of fixed capital, additional capital and supplementary capital

Main characteristics of the capital instruments

1 Issuer Banco do Brasil AG

2 Unified identification (e.g., CUSIP, ISIN or Bloomberg identification for private location)

No record

3 Valid law for the instrument (regulatory law treatment) Austrian law

4 CRR transition rules Fixed capital unit

5 CRR rules after transition period Fixed capital unit

6 Calculable levels - individual / of the group and individual-group Individual and consolidated

7 Type of instrument (specify the type of each country) Common shares

8

Auf aufsichtsrechtliche Eigenmittel anrechenbarer Betrag (Währung in Millionen, Stand letzter Meldestichtag) own funds of amounts calculated according to the inspection law (currency in million, status of the last base date informed)

EUR 33,778,300

9 Par value of the instrument 337,783 shares with a par

value of EUR 100 each

9a Issued price Corresponding par value

9b Price of settlement No record

10 Accounting classification Stock capital

11 Original issue date Various expenses, last one in

January 2014

12 Unrestricted period or with maturity Unrestricted

13 Original maturity date No maturity date

14 Terminable by the issuer with prior approval by the inspection No

15 eligible termination period, conditioned termination periods and the settlement amount

No record

16 Subsequent termination periods, if applicable (Coupons/dividends) No record

17 Fixed or variable payments of coupons/dividends Variable

18 Nominal coupons and eventual reference index No record

19 Existence of “idle dividends” No

20a Completely arbitrary, partly arbitrary or compulsory (temporal) Completely arbitrary

20b Completely arbitrary, partly arbitrary or compulsory (regarding the amount)

Completely arbitrary

21 Existence of a clause of increase in costs or other settlements No

22 Cumulative or non-cumulative Non-cumulative


23 Convertible or non-convertible Non-convertible

24 If convertible: dissoluble for conversion No record

25 If convertible: totally or partially No record

26 If convertible: conversion index No record

27 If convertible: compulsory or optional conversion No record

28 If convertible: type of instrument into which it was converted No record

29 If convertible: issuer of the instrument in which it was converted No record

30 Amortization characteristics No

31 In case of amortization: dissolution for amortization No record

32 In the event of amortisation: totally or partially No record

33 In the event of amortisation: permanently or temporarily No record

34 In case of temporary amortization: relocation mechanism No record

35 Position in the sequence in case of settlement (name of the respective instrument)

No record

36 Stipulated characteristics of converted instruments No

37 Name of eventual stipulated characteristics No record

d) as a separate publication, there are the following types and amounts of elements:

i) all correction and discount items applied according to Articles 32 to 35

Not relevant from the current point of view of Banco do Brasil AG.

ii) all discounts performed according to Articles 36, 56 and 66

Discount of

EUR 45,057,699.87 from current losses in the fiscal year in accordance with Article 36 (1) (a) EUR 891,657.17 on intangible assets in accordance with Art. 36 (1) b EUR 233,600.32 for the assets identified in the balance sheet from pension funds with payment requests in accordance with Article 36 (1) (e)

iii) it does not comply with Articles 47, 48, 56, 66 and 79 of discount items,

None

e) a description of all net equity calculations in accordance with such Decree and restrictions applied to the instruments, discount and correction items and discounts on which the restrictions are applied,

Not relevant for Banco do Brasil AG.


f) A comprehensive explanation of the basic principles of calculation of the capital share, if the institution publishes the capital shares, along with the support of components of net equity issued according to other basic principles determined differently in such decree.

Currently, there are no issues of divergent capital shares.


5 Net equity requirements (Article 438 CRR)

The institution publishes, based on maintenance of the requirements of Article 92 of this Decree and Article 73 of Guidelines 2013/36/EU, the following information:

a) a summary of the indices according to which the institution evaluates the suitability of its internal capital for submission of current and future activities,

The adequacy of the internal capital will be checked in accordance with the “Internal Capital Adequacy Assessment Process” (ICAAP) of Banco do Brasil AG.

In accordance with the risk management process, all relevant risk items associated with the banking operations will be raised by Banco do Brasil AG. The purpose of the identification of risks is the issuance of individual relevant permanent, complete and economically viable risks. The identified risks will be measured and aggregated to a full potential of losses (risk capital requirement).

The potential of risk will be contrasted in the terms of the calculation of a risk capacity for the provision of a risk coverage (index defined in Going-Concern for regulatory net equity). It serves for planning, measurement, and inspection of the banking total risk and the main tasks of RMCD.

b) when required by the relevant competent authorities, the result of the institution's own processes for assessing the suitability of its internal capital, including the composition of the additional net equity required, in accordance with Article 104, subparagraph 1 letter a of Directive 2013/36/EU, by virtue of the verification by inspection,

Currently, it is not relevant for Banco do Brasil AG.


c) for institutions that calculate the values of items according to the risk pursuant to Part 3, title II, chapter 2, 8% of the values of risk items for each requirement category included in Article 112,

Categories of risk items of the standard index of credit risk according to Article 107 CRR

Net equity required 12/31/2016

in EUR

a) Risk items before state-owned centres or state-owned banks 27,300.02

b) Risk items before regional or local legal entities/ 0.00

c) Risk items before government agencies 0.00

d) Risk items before multilateral development banks 0.00

e) Risk items before international organisations 0.00

f) Risk items before institutions 4,659,560.34

g) Risk items before companies 106,343,091.09

h) Risk items from the number of transactions 242,118.22

i) Risk items secured by real estate 0.00

j) Arising risk items 14,201.12

k) Risk items with special high risk 0.00

l) Risk items in the form of debentures covered 0.00

m) Items represented by amortised items 0.00

n) Risk items before institutions and companies, with short-term bonus 0.00

o) Risk items in the form of interests in organisations for common facilities (OGA) 0.00

p) Equity items 139,424.09

q) Other items 2,500,812.79

Total 113,926,507.67

d) for institutions that calculate the values of risk items according to Part 3, title II, chapter 3, 8% of the values of risk items for each requirement category described in Article 147. In the case of requirement category “number of transactions”, this requirement will be valid for all categories which are different from the correlations described in Article 154, paragraphs 1 to 4. In case of requirement category of equity items, this requirement shall apply to

i) each index according to Article 150,

ii) equity items listed on the stock exchange, items from private equity in diversified portfolios and other equity items,

iii) risk items for net equity-related requirements valid for a transitional rule,

iv) risk items for which the determinations of maintenance of ownership related to net equity requirements are valid,

It is not relevant for Banco do Brasil AG.


e) net equity requirements according to Article 92, subparagraph 3, letters b and c


in EUR

Commercial and accounting activities Not applicable

Foreign currency risk 0.00

Settlement risk 0.00

Risk of items of goods 0.00

f) net equity requirements calculated in accordance with Part 3, title III, chapters 2, 3 and 4, published separately.


in EUR

Operational risk according to the basic indicator 6,477,727.75

Institutions that calculate the values of risk items according to Article 153, subparagraph 5 or Article 155, subparagraph 2, that publish the risk items for each category under Article 153, subparagraph 5, Table 1 or for each weight risk under Article 155, subparagraph 2.

Not relevant for Banco do Brasil AG.


6 Counterparty credit risk (Article 439 CRR)

With respect to the counterparty credit risk of the institution in accordance with Part 3, title II, chapter 6, the following information is published:

a) a description of the method according to which the internal capital and the high limits for counterparty credit risk items are identified

Banco do Brasil AG enters into interest and currency derivative agreements currently only for purposes of coverage, whose base date of the balance sheet is 31/12/2016, with no derivative financial instruments. There are no pension transactions, securities transactions and loans, Lombard transactions or transactions with the long-term settlement. The parties to contracts in derivative transactions can become institution’s credits only when maintained by Banco do Brasil S.A. with a credit limit for Banco do Brasil AG. The current party is exclusively Banco do Brasil S.A.

b) a description of the provisions for insurance and credit formation and reserves,

In general, the derivative transactions are for the guarantee of the existing risks and act in proportion to the secured risk. On the base date of 31 December 2016, there was no derivative financial instruments.

From this security, there is no formation of reserves. The measurement takes place according to the Original Risk Method (Article 275 CRR).

c) a description of the provisions regarding the correlated risks,

Banco do Brasil AG did not stipulate any risk of correlation (correlation of factors of market and credit risk or risks of specific correlations).

d) a description of the collateral amount that the institution should reassess at the time of reclassification of its bonuses,


e) the current positive gross contract amount, positive effects of liquidity, current risk items with balance, guarantees maintained and items with net risk in the case of derivatives. Net risk items in the case of derivatives correspond to the risk items associated with derivative transactions after the consideration of the legal liquidity agreements and guarantee agreements,

On the base date of the balance sheet on 31 December 2016, there were no financial derivative instruments.

f) the measurement quantities for the values of risk items according to the methods applied pursuant to Part 3, title II, chapter 6, paragraphs 3 to 6,


There is, exclusively, the original risk method under Article 275 to be applied. Exchange transactions will be calculated according to the period and, after that, there will be the partnership risk. On the base date of 31 December 2016, there was no derivative financial instruments.

g) the nominal value of guarantees on credit derivatives and the distribution of current risk items, listed according to the type of risk items;

From the current point of view, it is not relevant to Banco do Brasil AG, as no credit derivatives will be held.

h) nominal values of derivative credit transactions classified according to the application of risk items stocks of the institution and the application of the institution’s terms for brokerage transactions, as well as the distribution of credit derivatives applied, which are purchased according to the individual groups of products and guarantees sold and redistributed yet,

From the current point of view, it is not relevant to Banco do Brasil AG, as no credit derivatives will be held.

i) for the case of the institution receiving the evaluation of the approval from competent authorities, including alpha valuation.



7 Capital buffer (Article 440 CRR)

(1) Regarding the maintenance of the countercyclical capital buffer stipulated according to Title VII, chapter 4 of Directive 2013/36/EU, the institution publishes the following information:

a) The geographic distribution essential for the calculation of counter-cyclical capital buffer of credit risk items.

It is not relevant to the base date of 31/12/2016 because there was no provision of counter-cyclical capital buffer.

b) The value of counter-cyclical capital buffer specific to institutions.

Not applicable.


8 Indicators relevant to the world system (Article 441 CRR)

(1) Institutions classified as relevant to the world system (G-SRI), according to Article 131 of Directive 2013/36/EU, publish annually the values of indicators from which the institution's assessment results are recorded, according to the method of issuance described in this article.

Banco do Brasil AG is not an institution relevant to the world system. Including the parent company, Banco do Brasil S.A., is not on the list of the world system-relevant banks conducted by the Financial Stability Board (FSB).


9 Credit risk adjustments (Article 442 CRR)

With respect to credit risk and dilution, the institution publishes the following information:

a) for accounting purposes, the definitions of “arrears” and “depreciated”,

Definition of “arrears” and “fall risk” criteria. The applied fall definitions cover the “arrears” and “fall risk” criteria appropriately. The definition of Base II for receivables overdue determines whether the Debtor’s account payable is overdue with the credit institution in more than 90 days. The excessive withdrawal begins on the date on which the Beneficiary establishes as a limit, and a minimum limit is informed to him/her as current implementation of unpaid debt, interest and indices, or if a loan in progress is not approved. The excessive withdrawal will be valid, then, as essential if it is over 2.5% of the agreed terms and greater than EUR 250. The excessive withdrawal must be greater than 90 days without interruption. As accounts receivable are valid with the risk of fall if they are not exclusive anymore because of the customer’s bonus with the risk of future fall. With the determination of the risk of obligations for the definition of quantities, the customer’s own competence of reliability expires, and the customer is redirected to the credit risk management centre. A full report on the current status of processing of these efforts is quarterly sent to the Executive Board. The main indices of fall are:

Determination of maturity

90 days overdue

Execution proceedings against customers

Interest rebates due to negative bonus

Internal bonus classification E

The risk items with which the reductions of payments and reductions in values are calculated through individual value adjustments are valid as a value reduction risk item.

b) a description of the indices applied when determining specific and general credit risk adjustments and methods,

The risks recognised at the time of issuance of the balance sheet shall be borne by the formation of individual value adjustments or provisions. For the individual risk items, individual value adjustments shall be carried out according to specific criteria of groups. Provisions for possible accounts payable shall be identified on the page of liabilities.


c) the total value of the risk items according to the basic accounting principles and without the consideration of the effects of credit risk reduction, as well as the categories of accounts receivable and distributed average values of risk items during the reporting period,

Categories of credit risk items according to standard indices according to Article 107 CRR

12/31/2016 12/31/2016

in EUR thousand

2016 Average in EUR thousand

a) Risk items before state-owned centres or state-owned banks 268,719 236,948

b) Risk items before regional or local legal entities/ 0 0

c) Risk items before government agencies 0 0

d) Risk items before multilateral development banks 0 0

e) Risk items before international organizations 0 0

f) Risk items before institutions 160,354 298,085

g) Risk items before companies 1,520,296 1,727,341

h) Risk items from the number of transactions 5,034 6,519

i) Risk items secured by real estate 0 0

j) Arising risk items 181 34,238

k) Risk items with special high risk 0 0

l) Risk items in the form of debentures covered 0 0

m) Items represented by amortized items 0 0

n) Risk items before institutions and companies, with short-term bonus 0 0

o) Risk items in the form of interests in organisations for common facilities (OGA) 0 0

p) Equity items 1,555 1,555

q) Other items 31,962 36,858

Total 1,988,101 2,341,544


d) the geographic distribution of the risk items, distributed according to the main regions and main categories of accounts receivable, eventually with additional information,

Categories of risk items of the standard indices under Article 107 CRR

Region In EUR

thousand

a) Risk items before state-owned centres and state-owned banks Austria 81,213

Italy 79,613

France 62,058

Portugal 26,119

Spain 19,375

Brazil 341

Intermediate result 268,719

f) Risk items before credit institutions Brazil 75,287

United States 35,652

Italy 15,497

France 12,268

Germany 11,623

Spain 6,043

Portugal 1,373

Austria 1,343

Great Britain 1,230

Belgium 33

Others 5


g) Risk items before companies Italy 322,184

France 298,070

Brazil 237,594

Spain 185,486

Portugal 126,272

Netherlands 74,870

Austria 49,775

Luxembourg 46,467

Singapore 33,204

Mauritius 28,455

Germany 27,613

Switzerland 25,160

Belgium 21,081

Cayman Islands 19,878

Angola 19,287

Others 4,900

Intermediate result 1,520,296

h) Risk items from the number of transactions Brazil 3,800

Portugal 1,185

Italy 38

Netherlands 7

Spain 4



j) Arising risk items Brazil 173

Portugal 8

Intermediate result 181

p) Equity items Portugal 1,427

Ireland 125

Belgium 3


q) Other items Brazil 15,936

Portugal 11,439

Italy 1,955

Austria 1,044

France 937

Spain 627

Germany 24


Total 1,988,101

e) the distribution of risk items by economic areas or types of counterparties listed according to the categories of receivables, as well as information on risk items before KMU, possibly with other information,

In EUR thousand


Central banks /State-owned

centres Credit

institutions Free/private

workers Companies Others Total

a) Risk items before state-owned centres or state-owned banks 268,719 268,719

b) Risk items before regional or local legal entities/ 0

c) Risk items before government agencies 0

d) Risk items before multilateral development banks 0

e) Risk items before international organizations 0

f) Risk items before institutions 160,354 160,354

g) Risk items before companies 16,469 3,475 1,500,352 1,520,296

Of these, KMU 0

h) Risk items from the number of businesses 5,034 5,034

Of these, KMU 0

i) Risk items secured by real estate 0

Of these, KMU 0

j) Arising risk items 0 181 0 181


k) Risk items with special high risk 0

l) Risk items in the form of debentures covered 0

m) Items represented by amortised items 0

n) Risk items before institutions and companies, with short-term bonus 0

o) Risk items in the form of interests in organisations for common facilities (OGA) 0

p) Equity items 460 1,095 1,555

q) Other items 15,936 8,782 7,244 31,962

Total 268,719 177,283 24,626 1,510,229 7,244 1,988,101


f) listing of all risk items according to the residual period and categories of accounts receivable, eventually with other information

In EUR thousand


Fall due on a daily basis

up to 3 months

3 months to 1 year

1 year to 2 years

2 years to 3

years

3 years to 4

years

4 years to 5

years Over 5 years Total

a) Risk items before state-owned centres or state-owned banks 154,644 0 3,721 0 0 62,309 47,597 448 268,719

b) Risk items before regional or local legal entities/ 0 0 0 0 0 0 0 0 0

c) Risk items before government agencies 0 0 0 0 0 0 0 0 0

d) Risk items before multilateral development banks 0 0 0 0 0 0 0 0 0

e) Risk items before international organizations 0 0 0 0 0 0 0 0 0

f) Risk items before institutions 84,096 70,499 3,368 1,144 563 67 0 617 160,354

g) Risk items before companies 3,121 353,207 361,714 270,985 242,988 124,598 86,306 77,377 1,520,296

h) Risk items from the number of transactions 98 23 919 1,009 1,291 1,120 7 567 5,034

i) Risk items secured by real estate 0 0 0 0 0 0 0 0 0

j) Arising risk items 0 0 1 162 9 9 0 0 181

k) Risk items with special high risk 0 0 0 0 0 0 0 0 0

l) Risk items in the form of debentures covered 0 0 0 0 0 0 0 0 0

m) Items represented by amortized items 0 0 0 0 0 0 0 0 0

n) Risk items before institutions and companies, with short-term bonus 0 0 0 0 0 0 0 0 0

o) Risk items in the form of interests in organizations for common facilities (OGA) 0 0 0 0 0 0 0 0 0

p) Equity items 0 0 0 0 0 0 0 1,555 1,555

q) Other items 4,829 0 3,125 4,790 8,021 0 0 11,197 31,962

Total 246,788 423,729 372,848 278,090 252,872 188,103 133,910 91,761 1,988,101


g) amounts listed according to the main economic areas or types of counterparties

i) Depreciated and overdue risk items reported separately,

in EUR thousand Free/private

workers Companies

Depreciated risk items 181 0

Of these, overdue risk items 2 0

ii) General and specific credit risk adjustments,


workers Companies Credit

institutions

Credit risk-specific adjustments 332 67,588 0

General credit risk adjustments 16 1,459 702

iii) expenses for specific and general adjustments of credit risk during the period reported,


workers Companies Credit

institutions

Credit risk-specific adjustments 152 29,581 0

General credit risk adjustments -5 -2,713 -660

Negative amounts mean a dissolution of the credit risk adjustments during the period reported.

h) the amount of the depreciated and overdue risk items reported separately and listed according to the main geographical areas, if the feasible amounts undergo specific and general adjustments of credit risk for each geographical area,

in EUR thousand

Countries Risk item depreciated

Of these, overdue risk items

Credit risk-specific adjustments

General credit risk adjustments

Brazil 173 4,252 231

Portugal 8 2 84 28

Spain 43,724 630

Uruguay 7,467

Chile 6,641

Italy 3,384 250

Peru 2,235

Angola 132

Cayman Islands 509

Luxembourg 193

France 157

Switzerland 76

Netherlands 50

Germany 25

Poland 20

Mauritius Island 6


Total 181 2 67,920 2,177


i) the agreement presented separately from the changes in specific and general adjustments of credit risk for depreciated risk items. The information shall include the following:

i) a description of the type of specific and general credit risk adjustments

The specific adjustment of credit items occurs through the formation of individual value adjustments in view of the risks recognised at the time of issuance of the balance sheet. The general credit risk adjustment shall be executed based on specific group criteria, including any provisions for possible accounts payable.

ii) The opening inventory,

iii) the amounts taken during the reporting period from the credit risk adjustments

iv) the amounts entered or recorded again during the reporting period for possible losses from risk items, any other adjustments, including those differentiated by exchange flow, the composition of trade activities, acquisition and disposal of affiliates and transfers between values of risk provisions,

(v) the closing inventories.

in EUR thousand Specific credit risk adjustment

General credit risk adjustment

Opening stock 38,040 5,562

- Consumption -41 0

- Dissolution -5,484 -3,883

+ New formation 35,216 505

Difference of exchange flow 189 -7

Final inventory 67,920 2,177

In 2016, direct amortisations corresponded to EUR 0 thousand and the entries from amortised accounts receivable to EUR 1 thousand.


10 Assets not amortised (Article 443 CRR)

A - Assets

in EUR thousand Book value of

assets not amortised

Actual value of assets not amortised

Book value of assets not amortised

Actual value of assets not amortised

010 040 060 090

010 Institution’s declared assets

472,693 1,283,112

Loans terminable at any time

0 187,252

030 Equity instruments 0 0 125 125

Registered debentures 110,263 110,261 0 0

Loans and receivables, except loans terminable at any time

362,430 1,074,842

120 Other assets 0 20,893

B - Guarantees received

In EUR thousand Actual value of the

guarantees received or bonds granted

Actual value of the guarantees received or bonds granted for debit

010 040

130 Guarantees received by the institution and declared

0 0

150 Share instruments 0 0

160 Bonds 0 0

230 Other guarantees received 0 0

240 Other own guarantees received of bonds as certificate of security or ABS

0 0


C - Assets debited / guarantees received and, with this, related accounts payable

In EUR thousand

Coverage of accounts payable, possible

accounts payable or loan securities

Assets from guarantees received

and other bonds issued as a certificate of security and ABS

010 030

010 Book value of accounts payable

344,560 472,693

D – information for debit value

The amortised assets refer almost exclusively to collateral securities for refinancing by the

Central Bank.

Other amortised assets refer to a security as a guarantee for the surplus limit for Intraday

payments in accordance with the payment procedures.

Banco do Brasil AG does not issue the consolidated annual accounts and thus, there is no

Group among the debts, because the company has subordinate significance according to

UGB for the presentation of equity, financial and income situation.

Through the increase of the refinancing by the Central Bank, there was eventually a strong

increase of the assets amortised.

The other assets according to column 60, row 120, in Table A - Assets are not appropriate

for amortisation, because they are tangible and intangible assets, tax claims and

dissociations.


11 ECAI execution (Article 444 CRR)

Institutions that calculate the amounts of accounts receivable according to the risk weight, according to Part 3, Title II, Chapter 2, publish the following information for each category of account receivable described in Article 112:

a) the names of the said ECAI and export insurance agents (ECA) and the reasons for any changes,

ECAI is used by Standard & Poor's.

b) the categories of accounts receivable for execution of an ECAI or ECA respectively;

For all categories of risk items under Article 112 CRR, Ratings will be issued by Standard & Poor's, as long as there are assessments of bonuses.

c) a description of the procedure for transfer of assessments of issuers’ bonus and issues of items that are not part of the ledger,

The process of transfer of ratings of issuers and issues of items that are not part of the accounting book correspond to the provisions of Article 138 CRR and shall be executed according to the standard for these types of items.

d) the classification of external assessments of the bonus of all the said ECAI or ECA for the levels of the bonus of Part 3, Title II, Chapter 2, shall be considered so that this information does not need to be published if the institution maintains an EBA publication standard,

The institution maintains a publication according to the EBA standard.


e) amounts of accounts receivable and amounts of accounts receivable according to the credit risk mitigation, classified with individual bonus levels of Part 3, Title II, Chapter 2, as well as net equity amounts.

In EUR thousand


Before the credit risk reduction

After the credit risk reduction

Net equity requirement

Risk items before state-owned centres and state-owned banks

Bonus level 1 - - -

Bonus level 2 - - -

Bonus level 3 - - -

Bonus level 4 341 341 27

Bonus level 5 - - -

Bonus level 6 - - -

Risk items before institutions Bonus level 1 Bonus level 2 67,228 67,228 1,076

Bonus level 3 Bonus level 4 77,648 77,648 3,336

Bonus level 5 - - -

Bonus level 6 - - -

Risk items before companies Bonus level 1 - - -

Bonus level 2 - - -

Bonus level 3 50,175 7,965 637

Bonus level 4 71,305 71,305 3,186

Bonus level 5 54,364 54,364 6,524

Bonus level 6 - - -


12 Market risk (Article 445 CRR)

Institutions that calculate their capital requirements according to Article 92, subparagraph 3, letters b and c publish the requirements for each of these said determined risks. In this way, the capital requirement is published separately from the risk of special interest in the case of items of securitization.

The bank does not conduct an accounting book. Therefore, there are no capital requirements according to Article 92, subparagraph 3, letter b. The capital requirements for foreign currency risk according to Article 92, subparagraph 3, letter c (i) corresponds to 0. There are no items of goods and there is no settlement risk.

13 Operational risk (Article 446 CRR)

The institution publishes the indices for the assessment of the equity accounts receivable for operational risks that must be applied; the institution also publishes a description of the methods according to the measures of Article 312, subparagraph 2, if applicable, including an explanation of the relevant internal and external factors considered at the time of the measurement of the institute, as well as – in partial application – the area of application and scope of the different methods.

Banco do Brasil AG issues the minimum equity requirements according to the basic indicators according to Part 3, Chapter 2 of Decree (EU) No. 575/2013. The three-year average of operating income corresponds to EUR 43,185 thousand. Net capital requirements of EUR 6,478 thousand result of them.


14 Risk of equity items not included in the Commercial Code

(Article 447 CRR)

The institution publishes the following information not included in the ledger of equity items:

a) differentiation of accounts receivable according to its goals, including according to the intentions of profits and strategic goals, and an overview of the accounting techniques applied and valuation methods, including the main revenues and procedures for the assessment and possible differences among these processes,

Banco do Brasil AG acquires interests only for strategic reasons or if required as a result of operational business activities. Obtaining profits is not, in this context, a primary goal. Interests and shares in affiliates will be evaluated with the costs of acquisition, as long as no permanent losses due to impairment are recorded, which would need a depreciation.

b) the amounts of the balance sheet, the actual value and securities listed on the stock exchange in comparison with the market value, if they differ from the main actual value,

Interests Book value in EUR Share in the

nominal capital in %

Einlagensicherung der Banken und Bankiers Gesellschaft m.b.H, Viena

70.00 0.1

UNICRE – Instituição Financeira de Crédito, S.A., Lissabon

460,223.42 0.36

SIBS – Sociedade Interbancária de Serviços S.A., Lissabon

966,577.70 0.63

SWIFT - Society for Worldwide Interbank Financial Telecommunication, SCRL, La Hulpe

3,430.00 0.0009

Total 1,430,301.12

In addition, Banco do Brasil AG has a share of 100% stake in BB Asset Management Ireland Limited, Dublin, in the amount of EUR 125,000.--. The net equity of the Company corresponded, on 31 December 2016 to EUR 488,967. --, of which there are reserves in the amount of EUR 363,967.--. In the case of equities presented, they are not shares listed on the stock exchange.

c) type and contributions of items of equities listed on the stock exchange, items of private equity capital in various portfolios and other equity items,

Not applicable for Banco do Brasil AG.


d) the actual accumulated profits or losses from sales and settlements during the reporting period and

In the reporting period, there were no sales or settlements.

e) total unrealized profits or losses, total latent profits reassessed or losses, and all amounts entered in the net equity with bases or complementary ones,

In the fiscal year of 2016, no net equity amounts were included from the calculation of equities.

15 Interest rate risk of items not included in the Commercial Code

(Article 448 CRR)

The institution publishes, for interest rate risks, the following information about the items not included in the ledger:

a) the type of interest rate risk and the main revenues (including revenues based on credit refund before maturity and list of deposits without terms), as well as the frequency of measurement of interest rate risk,

The interest rate risk will be calculated on a quarterly basis in accordance with the provisions of the inspection authorities with interest-related methods (interest rate risk notification under VERA-V – Decree on Equity, Income and Identification of Risks). In the case of instruments with fixed and variable interest, there is an allocation of periods in view of its ratios of effective interest. All items are classified with undetermined ratios of interest in the period of up to 1 month.

b) fluctuations in the case of profits, economic values or other relevant quantities applied through management in the case of progressions or retrocession according to its methods for measuring interest rate risks, listed according to the currencies

According to the law of inspection of the scenario of interest with 200 basis points, there are the following debits of net equity on 31/12/2016:

EUR thousand

EUR 7,501

USD 155

Total 7,656


16 Risk of securitization items (Article 449 CRR)

Banco do Brasil AG is not the service provider, donor or investor in securitization transactions. This chapter is not relevant, and the provisions of this article do not apply and will not be listed.

17 Compensation policies (Article 450 CRR)

(1) With regard to compensation policies and practices for categories of staff whose activities impact mainly the risk profile, the institution publishes the following:

a) information about the decision-making process leading to the determination of the compensation policies, as well as the number of meetings for inspection of compensation and main responsible associations during the fiscal year, possibly with information regarding the composition and the mandate of a compensation committee, for external consultants, whose services are requested for the determination of compensation policies, and functions of stakeholders in general,

The Board of Directors of Banco do Brasil AG created a compensation committee on 24/01/2012. It advised the Board of Directors on the appropriate compensation policies and practices, checking strategies critically and taking the decisions applicable by the Management, and ensuring that there were measures for the control and minimization of risk with respect to compensation opportunities. In the fiscal year of 2016, four meetings were held (on 04/03/2016, 29/03/2016, 04/04/2016 and 25/08/2016).

The compensation committee consists of at least three members of the Board of Directors: Chairman, Deputy Chairman and an expert on compensations. In addition, at least one member must belong to the Operations Board. The Chairman of the Board of Directors is, at the same time, the Chairman of the Compensation Committee.

In 2016, the compensation committee of Banco do Brasil AG was composed of six members, of which 2 belonged to the Operations Board.

b) Information for correction between compensation and success,

The new compensation policies approved by the Board of Directors on 4 March 2016 treated the possibility of a variable compensation. On 4 April 2016, Guidelines were approved for a variable compensation by the Board of Directors. The compensation policies, as well as the Guidelines for a Variable compensation, is based on legal provisions of compensation of BWGs, particularly, under paragraph 39, 39b, and all appendices 39c, 39d.

Based on the Guidelines for variable compensation approved on 4 April 2016 by the Board of Directors, in 2016, there were negotiations with representatives of local employees, to issue a unified program for the different target groups in all branches. With the closure of the negotiations, the final programs were then presented, including the main characteristics of the constitution for the approval by the Board of Directors.


c) the main characteristics of the constitution of the compensation system, including information on the criteria for measuring success and correction of the risks, strategies for the provision of compensation payments and payments criteria

The new guidelines for variable compensation are guided with the support of the long-term interests of Banco do Brasil, and avoid situations subject to risk. Portions of compensation for payment consider personal performance, the performance of business units, as well as the results at a corporate level.

To each employee whose professional activity has an important impact on the overall risk profile of Banco do Brasil, 40% of the portion of compensation is reserved for payment and made available within the period of five years.

d) The amounts determined under Article 94, subparagraph 1, letter g of Directive 2013/36/EU for relations between the fixed and variable components of compensation,

In the new guidelines for variable compensation approved on 4 April 2016, the relation between fixed and variable compensation components is limited to 30%.

e) information on the success criteria, on the basis of which the requirements of shares, options or variable compensation components are decided,

Not applicable in 2016

f) the main parameters and arguments for systems with variable components and other payments in cash,

Not applicable in 2016.

g) summary quantitative information about compensations, listed according to commercial areas,

Commercial areas

Commercial management

Retail & Commercial Banking

Business activities area

Control functions

Servicing Center

Compensations € 1,359,553.49 € 5,341,119.43 € 1,446,561.28 € 2,065,346.70 € 1,767,051.83

h) Summary quantitative information about compensations, listed according to the Executive Board and employees, whose activities have the influence of the risk profile of the institution, includes the following:

Commercial areas

Commercial management

Retail & Commercial Banking

Business activities area

Control functions

Servicing Center

Compensations € 1,359,553.49 € 2,121,719.74 € 1,327,290.53 € 962,208.34 € 1,491,526.69


i) the compensation amounts for the fiscal year divided into fixed and variable compensations, as well as the number of beneficiaries,

Fixed compensation Variable compensation Total Number of beneficiaries

€ 11,870,012.51 € 109,620.21 € 11,979,632.72 24

ii) the amounts and forms of variable compensation, divided into cash, shares, shares with related instruments and other types,

The variable compensation was paid only in cash and discounted from local salaries.

iii) the amounts from withheld compensations, divided into portions earned and still not earned,

The variable compensation in the case of employees, whose activities have a significant influence on the risk profile of the institution was paid in 2016 so that the amount for all beneficiaries remained below 10% of the fixed annual compensation.

iv) the amounts of withheld compensation granted during the fiscal year, either paid or reduced as a result of payment adjustments,


v) new adjustments of premiums and indemnities paid during the fiscal year, as well as payments according to the European Federal Official Gazette DE 27/06/2013, L 176/261

Processes Number of

beneficiaries

€ 158,186.49 06

vi) amounts of compensations granted during the fiscal year, the number of beneficiaries, as well as the highest value granted to each individual.

See item v)

i) the number of people whose compensation, in the fiscal year, corresponded to EUR 1 million or more, listed according to the levels of compensation of EUR 500,000, and the case of compensations between EUR 1 million and EUR 5 million, as well as listing according to the compensation of EUR 1 million in the case of compensations of EUR 5 million or more,



j) The total compensation of each member of the managing bodies or the Executive Board when requested by the member states or competent authorities.


18 Accumulation of debts (Article 451 CRR)

(1) the institution publishes the following information, based on its Article 429 of the rates of calculation of accumulation of debts and the super-indebtedness risk inspection:

a) debt accumulation rates, as well as the type and method, as applied by the institution in Article 499, subparagraph 2,

The debt accumulation rate under application of the definition of transfer (information about article 499, subparagraph 2) on 31/12/2016, 11.21%.

The debt accumulation rate under application of the fixed capital unit definition according to the new determinations corresponds to 11.21%.

b) a listing of general risk measurement quantities, as well as a determination of these quantities with the published relations and applicable information,

Agreement with the closure published on 31/12/2016 EUR thousand

1 Total assets according to the closure published 1,755,805

2

Adjustment for companies that have consolidated their accounting, but that do not belong to the scope of consolidation according to the legal inspections 0

3 Fiduciary assets adjustment 0

4 Adjustment of derivative financial instruments 0

5 Adjustment for securities financing transactions (SFT)

6 Adjustment for off-balance sheet items (i.e. conversion of off-balance sheet risk items into credit equivalent amounts) 139,113

EU-6a Adjustment for the group's internal risk items 0

EU-6b Adjustment of risk items under Article 429, subparagraph 7 of Decree (EU), No. 575/2013 0

7 Other adjustments 0

8 General quantities for measuring indebtedness ratio risk items 1,894,918

Effective risk items in the balance sheet (no derivatives and SFT) on 31.12.2016 EUR thousand

1 Effective items on the balance sheet (no derivatives, SFT, and fiduciary assets, but including guarantees) 1,755,805

2 (asset values at the time of the issuance of the related capital unit) -156

3 Total effective risk items in the balance sheet 1,755,649

Risk items from derivatives


4-5 Irrelevant

EU-5a Risk items according to the original risk methods 0

6-10 Irrelevant

11 Total risk items from derivatives 0

Risk items from securities financing transactions (SFT) 0

12-16 Irrelevant

16 Total risk items from securities financing transactions 0

Other off-balance sheet risk items

17 Off-balance sheet risk items at gross nominal value 139,113

18 Adjustments for the conversion into equivalent credit amounts) 0

19 Other off-balance sheet risk items 139,113

Net equity and quantities for measuring general risk items

20 Capital unit 212,445

21 Quantities for general measurement of risk items with indebtedness ratio 1,894,762

Indebtedness ratio

22 Indebtedness ratio 11.21%

Rules selected for the transfer and amounts recorded of fiduciary items

EU-23 Rules selected for the transfer and definition of quantities for the measurement of capital Transfer rules

EU-24 Amount according to Article 429 subparagraph 11 of Decree (EU) No. 575-2013 of fiduciary assets recorded 0

Classification of effective risk items in the balance sheet (without derivatives, SFT and risk items excluded) EUR thousand

EU-1 Total effective risk items in the balance sheet (without derivatives, SFT and risk items excluded): out of these 1,755,805

EU-2 Risk items in the ledger 0

EU-3 Risk items in the attached book, out of these: 1,755,805

EU-4 Registered debentures covered, 0

EU-5 Risk items treated as risk items before countries 268,378

EU-6

Risk items before regional companies, development banks, international organisations and government agencies that are not treated as risk items before countries 0

EU-7 Institutions 160,229

EU-8 Properties secured by collateral rights 0

EU-9 Risk items from the number of businesses 4,504

EU-10 Companies 1,288,996

EU-11 Resulting positions 181

EU-12 Other risk items (for example, interests, securitizations and other assets that are not credit obligations) 33,517


c) any fiduciary item amounts according to Article 429, subparagraph 11

On the base date of the balance sheet on 31/12/2016, there were no fiduciary transactions identified on the balance sheet.

d) a description of the procedures for inspection of super-indebtedness risk,

The accumulation of debts is inspected on the basis of quarterly indebtedness ratios in ICAAP. Banco do Brasil AG has determined, for the indebtedness ratio, a prior indicator of 7%, and a limit of 5%.

e) A description of the factors during the reporting period and effects on the indebtedness ratios published.

The development of indebtedness ratios in the reporting period is driven mainly by the reduction in the loan portfolio and the lower net equity through an annual loss.

19 Application of IRB index on credit risk (Article 452 CRR)

Banco do Brasil AG does not calculate the amounts of accounts receivable with risk weight according to the IRB index. The matters of this article are not applicable and, therefore, will not be listed.

20 Application of credit risk reduction techniques

(Article CRR 453)

The institution publishes the following information on credit risk reduction techniques:

a) the provisions and procedures for balance sheet and off-balance sheet net amounts and information on the scopes applied by the institution,

Banco do Brasil AG does not use the balance sheet and off-balance sheet net amounts.

b) the provisions and procedures for the assessment and management of guarantees,

For the reduction of net equity requirements, Banco do Brasil AG currently accepts collateral in the form of cash deposits. The assessment occurs with the nominal value and is co-processed automatically in accounting.


c) a description of the main types of collateral approved by the institution,

Currently, only guarantees in the form of a cash deposit are received for the reduction of requirements for equity reduction.

d) the main types of Guarantors and credit derivatives counterparty and their credibility,

Currently, the guarantees are not included as instruments of credit risk reduction at the time of calculation of the net equity requirements.

e) Information about the concentration of market and credit risk within credit risk reduction, DE 27/06/2013, European Federal Official Gazette L 176/263.

Currently, no concentrations of credit risk were determined in the event of a reduction of credit risk.


f) for institutions that calculate the amounts of accounts receivable with a risk weight according to the standard indices or IRB index, but without the own valuations of LGD or conversion factors with respect to the respective category of receivables, separated by each category of individual accounts receivable of a total amount of accounts (possibly according to balance sheet and off-balance sheet net amounts), which are secured by appropriate financial guarantees and other insurance - applying the volatility adjustments,

Risk item amounts secured in EUR

thousand


Financial guarantees

a) Risk items before state-owned centres or state-owned banks 0

b) Risk items before regional or local legal entities/ 0

c) Risk items before government agencies 0

d) Risk items before multilateral development banks 0

e) Risk items before international organisations 0

f) Risk items before institutions 0

g) Risk items before companies 125,333

h) Risk items from the number of transactions 671

i) Risk items secured by real estate 0

j) Arising risk items 4

k) Risk items with special high risk 0

l) Risk items in the form of debentures covered 0

m) Items represented by amortised items 0

n) Risk items before institutions and companies, with short-term bonus 0

o) Risk items in the form of interests in organisations for common facilities (OGA) 0

p) Equity items 0

q) Other items 0

Total 126,008

g) for institutions that calculate the amounts of accounts receivable with a risk weight according to the standard indices or IRB index, separated by each category of individual accounts receivable of a total amount of accounts (possibly according to balance sheet and off-balance sheet net amounts), which are secured by collateral, sureties or credit derivatives. The requirements are valid for each index provided for in Article 155, for the categories of accounts receivable of equity items.

Currently, collateral, sureties and credit derivatives are not included as instruments of credit risk reduction at the time of calculation of the net equity requirements.


21 Application of continuous measurements of indices for

operational risks (Article 454 CRR)

Institutions that apply, as continuous measurement index according to Articles 321 to 324 for the calculation of their net equity requirements for operational risk, publish a description of the use of insurance and other risk transfer mechanisms to minimise the existing risks.

Banco do Brasil AG does not apply continuous measurement index to operational risks. Therefore, this article is not applicable.

22 Application of internal models for market risk (Article 455 CRR)

Banco do Brasil AG does not apply internal models for market risk. Therefore, the provisions of this article are not applicable and will not be listed.

Disclosure in accordance with Part 8 of CRR - BB

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