EX-99.1 2 v430354_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

Risk and Capital Management – Pillar 3

OBJECTIVE		4

KEY INDICATORS		4

1	RISK AND CAPITAL MANAGEMENT	5
1.1	Organizational Structure	5
1.2	Risk and Capital Governance	5

2	CAPITAL	6
2.1	Capital Management	6
2.2	Capital Requirements in Place and in Progress	6
2.3	Capital Composition	8
2.4	Risk-Weighted Asset (RWA)	9
	Risk-Weighted Assets for Credit Risk (RWA_CPAD)	10
	Risk-Weighted Assets for Market Risk (RWA_MPAD)	10
	Risk-Weighted Assets for Operational Risk (RWA_OPAD)	11
2.5	Leverage Ratio	12
2.6	Capital Adequacy	13

3	BALANCE SHEET	14
	Balance Sheet	14
	Institutions that comprises the Financial Statements of Itaú Unibanco Holding	16
	Material entities	17

4	INVESTMENTS IN OTHER ENTITIES	18
4.1	Investments in other entities not classified in the trading book	18

5	CREDIT RISK	19
5.1	Framework and Treatment	19
5.2	Credit Portfolio Analysis	21
	Operations with Credit Granting Characteristics by Brazil Geographic Regions and by Countries	21
	Operations with Credit Granting Characteristics by Economic Sector	22
	Remaining maturity of loan transactions	23
	Concentration on the Major Debtors	23
	Overdue Amounts	24
	Allowance for Loan Losses	24
	Mitigating Instruments	25
	Counterparty Credit Risk	26
	Acquisitions, Sale or Transfer of Financial Assets	27
	Operations of Securitization	28
	Credit Derivatives	29

6	MARKET RISK	30
6.1	Framework and Treatment	30
6.2	Portfolio Analysis	33
	Interest rate risk in the non-trading book	33
	Evolution of the Trading Portfolio	34
	Evolution of the Derivatives Portfolio	34
	VaR - Consolidated Itaú Unibanco	35
	VaR - Trading Portfolio	35
	VaR - Foreign Units	36
	Backtesting	37

Itaú Unibanco

Risk and Capital Management – Pillar 3

7	OPERATIONAL RISK	38
7.1	Framework and Treatment	38
7.2	Crisis Management and Business Continuity	39

8	LIQUIDITY RISK	40
8.1	Framework and Treatment	40
8.2	Primary Sources of Funding	40

9	OTHER RISKS	41
	Insurance products, pension plans and “capitalização” risks	41
	Social and Environmental Risk	41
	Risk Regulatory Risk	42
	Model Risk	42
	Country Risk	42
	Business and Strategy Risk	43
	Reputational Risk	43

10	ENTERPRISE RISK MANAGEMENT AND ALIGNMENT OF INCENTIVES	45
	Risk Appetite	45
	Stress Test	45
	Risk-adjusted Compensation	45

11	APPENDIX I	47

12	GLOSSARIES	50
12.1	Glossary of Acronyms	50
12.2	Glossary of Norms	52

Itaú Unibanco

Risk and Capital Management – Pillar 3

Objective

This document aims at submitting Itaú Unibanco Holding S.A. (Itaú Unibanco) information required by the Central Bank of Brazil (BACEN) through Circulars 3,678 and 3,716, which address the disclosure of information on risks management, calculation of risk-weighted assets (RWA), and calculation of the Referential Equity (PR), consistently with the new capital rules and in accordance with Itaú Unibanco’s institutional standards.

For other information than the contained on this document, please visit http://www.itau.com.br/investor-relations.

Key indicators

Itaú Unibanco’s risk and capital management focuses on maintaining the institution’s risk profile in line with the risk strategy and guidelines approved by the Board of Directors. The main metrics of the Prudential Conglomerate, on December 31, 2015, are summarized below.

BIS Ratio	Common Equity Tier I Ratio	Tier II Ratio
17.8%	14.0%	3.8%
3º Q. 2015: 16.1%	3º Q. 2015: 12.3%	3º Q. 2015: 3.8%


Referential Equity	Common Equity Tier I	Tier II
R$ 128,465 million	R$ 100,955 million	R$ 27,464 million
3º Q. 2015: R$ 124,763 million	3º Q. 2015: R$ 95,318 million	3º Q. 2015: R$ 29,399 million

RWA	Credit Risk Exposure
R$ 722,468 million	R$ 679,593 million
3º Q. 2015: R$ 774,662 million	3º Q. 2015: R$ 728,976 million

Itaú Unibanco

Risk and Capital Management – Pillar 3

Risk and Capital Management

Itaú Unibanco understands risk and capital management as essential to optimize the use of resources and to select the best business opportunities, seeking to maximize value creation for its shareholders.

The Risk Management process at Itaú Unibanco:

Identifies and measures existing and potential risks to Itaú Unibanco’s positions;

Aligns risk management and control institutional policies, procedures and methodologies with the directives from, and approved by, the Board of Directors;

Seeks the best risk-return ratios for Itaú Unibanco’s portfolio management.

The risk identification process purpose is to map internal and external risk threats that may affect the business’ and support units’ strategies, potentially impacting Itaú Unibanco’s results, capital, liquidity and reputation.

The risk management processes permeate the entire institution and are aligned with the Board of Directors and the Senior Management directives, which define the overall objectives by setting targets and limits for business units through its corporate bodies. The capital management and control units support Itaú Unibanco’s management through monitoring and analyzing risk and capital processes.

According to National Monetary Council (CMN) Resolution 3,988, BACEN Circular 3,547 and BACEN Circular Letter 3,565, Itaú Unibanco implemented a capital management structure and the Internal Capital Adequacy Assessment Process (ICAAP), adopting a prospective capital management attitude.

1.1

Organizational Structure

Itaú Unibanco’s risk management organizational structure complies with Brazilian and international regulations in place and is aligned with the market’s best practices. Credit, market, liquidity, operational and underwriting risks control is centrally performed by an independent division, ensuring the risks to which Itaú Unibanco is exposed, are managed in accordance with the group risk appetite, policies and procedures in place. This independent division is also responsible for centralizing Itaú Unibanco’s capital management. The purpose of the centralized control is to provide the Board and the Senior Management with a global perspective of Itaú Unibanco’s risk exposure, as well as with a prospective understanding of its capital adequacy, enhancing the agility and optimization of corporate decisions.

Itaú Unibanco uses information technology (IT) systems, managed to fully comply with Central Bank’s requirements on capital adequacy and risk measurement, in accordance with regulatory models and requirements in place. It also monitors adherence to the qualitative and quantitative regulators’ minimum capital and risk management requirements.

1.2

Risk and Capital Governance

Itaú Unibanco has established risk and capital management committees that report directly to the Board of Directors, with members being elected or appointed by the Board. At the executive level, risk is managed by corporate bodies.

A detailed description of the structure can be found in the Consolidated Annual Report in session Our Risk Management. The Consolidated Annual Report can be found in the website www.itau.com.br/investor-relations, section “Financial Information”.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Capital

2.1

Capital Management

The Board of Directors is the main body in the Itaú Unibanco’s capital management and it is responsible for approving the capital management institutional policy and guidelines regarding the capitalization level of the conglomerate. The Board is also involved in approving the ICAAP report, a process which is intended to assess the adequacy of Itaú Unibanco’s capital by identifying material risks; by defining the need for additional capital for such risks and the internal means of quantifying it; by preparing a capital plan, both for normal and stress situations; and by structuring a capital contingency plan.

The result of the latest ICAAP – which was dated December 2014 – shows that, in addition to the capital required to cover material risks, Itaú Unibanco has a significant capital surplus, thus ensuring the organization’s soundness.

At the executive level, committees are responsible for approving risk assessment and capital calculation methodologies, as well as reviewing, monitoring and recommending capital-related documents and topics to the Board of Directors. As for the committees governance, Itaú Unibanco has a dedicated structure for capital management, which consolidates information and coordinates related processes, all of which subject to verification by the independent validation, internal controls and audit areas.

In order to provide the necessary information for supporting decision taking by the Executives and the Board of Directors, management reports are prepared and presented at committees, informing about Itau Unibanco’s capital adequacy, as well as about the projections of future capital levels in normal and stress situations.

The guidelines of the institutional capital management policy can be accessed at www.itau.com.br/investor-relations, under “Corporate Governance, Regulations and Policies, Public Access Report – Capital Management”.

2.2

Capital Requirements in Place and in Progress

Itaú Unibanco’s minimum capital requirements follow the set of resolutions⁽²⁾ and circulars disclosed by the Central Bank of Brazil (BACEN) that implemented, in Brazil, the global capital requirement standards known as Basel III. These are expressed as ratios of the capital available stated by the Referential Equity (PR), or Total Capital, composed by the Tier I Capital (which comprises the Common Equity and Additional Tier 1 Capital) and Tier II Capital, and the risk-weighted assets, or RWA.

From the first quarter of 2015, the Total Capital, Tier 1 Capital and Common Equity Tier 1 Capital ratios are calculated on a consolidated basis, applied to institutions included in Prudential Conglomerate⁽³⁾, which comprises not only financial institutions but also collective financing plans (“consórcios”), payment entities, factoring companies or companies that directly or indirectly assume credit risk, and investment funds in which the conglomerate retains substantially all risks and rewards. The information published in periods prior to the first quarter of 2015 is determined in the Financial Conglomerate.

For purposes of calculating these minimum capital requirements, the total RWA is determined as the sum of the risk-weighted asset amounts for credit risk, market risk, and operational risk. Itaú Unibanco uses the standardized approaches to calculate these risk-weighted asset amounts described in section “2.4 Risk-weighted Assets”.

The required minimum Total Capital ratio is 11% between October 1, 2013, and December 31, 2015, reducing gradually to 8% on January 1, 2019. To counteract this, the BACEN rules call for Additional Common Equity Tier 1 Capital (ACP), corresponding to the sum of the components ACP_{Conservation,}ACP_{Countercyclical} and ACP_Systemic, which, in conjunction with the requirements mentioned in the preceding paragraph, increase capital requirements over time. Under CMN Resolution 4,193, the value of the components ACP_Conservationand ACP_{Countercyclical} will increase gradually from 0.625%, as from January 1, 2016, to 2.5% as from January 1, 2019. However, actually, according to BACEN Circular 3,769, the value required for component ACP_{Countercyclical} is zero until any further change by the regulator. In the case of component ACP_Systemic, the current requirement applicable to Itaú Unibanco under BACEN Circular 3,768 is 0%, increasing gradually from 0.25%, as from January 1, 2017, to 1% as from January 1, 2019, since the ratio between the amount of our Total Exposure and Brazil’s Gross Domestic Product (GDP) is more than ten percent (10%) and less than fifty percent (50%).

New requirements were redefined to qualify instruments eligible for Tier 1 or Tier 2 Capital. Additionally, it was established a gradual reduction of the eligibility of the instrument inventory issued pursuant to CMN Resolution 3,444.

⁽²⁾ The standards that implemented the Basel III rules in Brazil were disclosed on March 1, 2013 through Resolutions No. 4,192 to No. 4,195 of the National Monetary Council (CMN) (Resolution No. 4,195 was revoked by Resolution No. 4,280), together with 15 Circulars published by BACEN on March 4, 2013, as amended.

⁽³⁾Further details of Prudential Conglomerate can be found in BACEN Circular No. 3,644, CMN Resolution No. 3,533 or in the link: http://www.bcb.gov.br/?BRPRUDENTIALFINREG.

Itaú Unibanco

Risk and Capital Management – Pillar 3

The Basel III implementation calendar was set by the BACEN as follows:

Basel III - Schedule	From January 1^st
	2015			2016			2017			2018			2019
Common Equity Tier 1		4.5	%		4.5	%		4.5	%		4.5	%		4.5	%
Tier 1		6.0	%		6.0	%		6.0	%		6.0	%		6.0	%
Total Capital		11	%		9.875	%		9.25	%		8.625	%		8.0	%
Additional Common Equity Tier 1 (ACP)		0.0	%		0.625	%		1.50	%		2.375	%		3.5	%
conservation		0	%		0.625	%		1.25	%		1.875	%		2.5	%
countercyclical ⁽¹⁾		0	%		0	%		0	%		0	%		0	%
systemic		0	%		0	%		0.25	%		0.5	%		1.0	%
Common Equity Tier 1 + ACP		4.5	%		5.1	%		6.0	%		6.9	%		8.0	%
Total Capital + ACP		11.0	%		10.5	%		10.8	%		11.0	%		11.5	%
Prudential adjustments deductions		40	%		60	%		80	%		100	%		100	%

⁽¹⁾ According to Circular Bacen nº 3,769, the ACP _{countercyclical requirement} is zero.

In addition to the minimum capital requirements, BACEN Circular No. 3,748 also comes into effect this quarter. It incorporates the Leverage Ratio (the ratio between Tier I Capital and Total Exposure, calculated as indicated in this Circular) in the Basel III framework in Brazil. More details are given in section “2.5 Leverage Ratio in this report”.

The compliance of BACEN to the standards recommended by the Basel Committee was assessed at the end of 2013, under the Regulatory Consistency Assessment Programme (RCAP)⁽⁴⁾. The rules effective in Brazil were considered compliant—pursuant to the BIS, Brazil is a compliant jurisdiction—i.e., the capital standards established in Brazil also consistent with the internationally accepted minimum requirements. The pointed out discrepancies were considered immaterial.

Minimum capital requirement for Insurance

In July 2015, the National Council of Private Insurance (CNSP) issued CNSP Resolution 321, which, among other things, deals with the minimum capital requirements for underwriting, credit, operating and market risks for insurers, open private pension entities, premium bonds companies and reinsurers. Upon publication of this resolution, CNSP Resolutions 228, 280, 283, 284, 316 and 317 are cancelled.

⁽⁴⁾ Regulatory Consistency Assessment Programme (RCAP). Assessment os Basel III regulations in Brasil in December 2013, updated in March 2015 with no additional material points.

Itaú Unibanco

Risk and Capital Management – Pillar 3

2.3

Capital Composition

The Referential Equity (PR), used to monitor compliance with the operational limits imposed by BACEN, is the sum of Tier I and Tier II, where:

Tier I: comprises the Common Equity Tier I, based on the social capital, selected reserves and retained earnings, net from deductions and prudential adjustments, as well as the Additional Tier I Capital;

Tier II: comprises eligible instruments, primarily, subordinated debts, subject to prudential limits.

The table below presents the composition of the referential equity and its components (Common Equity Tier I, Additional Tier I Capital and Tier II Capital), taking into consideration their respective deductions and prudential adjustments, as per Resolutions mentioned.

Composition of Referential Equity							R$ million
	Prudential						Financial
	12/31/2015			9/30/2015			12/31/2014
Stockholders’ equity Itaú Unibanco Holding S.A. (Consolidated)		106,462			103,353			95,848
Minority Interest in Subsidiaries		916			911			2,333
Changes in ownership interest in a subsidiary in capital transactions		3,683			3,988			4,899
Consolidated Stockholders’ Equity (BACEN)		111,061			108,251			103,079
Preferred shares with clause of redemption excluded from Tier I		-			-			(1,048	)
Deductions		(10,107	)		(12,934	)		(5,819	)
Common Equity Tier I		100,955			95,318			96,212
Instruments eligible to comprise Additional Tier I		-			-			-
Additional Tier I deductions		46			46			20
Additional Tier I Capital		46			46			20
Tier I (Common Equity Tier I + Additional Tier I Capital)		101,001			95,364			96,232
Instruments eligible to comprise Tier II ⁽¹⁾		27,403			29,354			33,547
Tier II deductions		61			45			12
Tier II		27,464			29,399			33,559
Reference Equity (Tier I + Tier II)		128,465			124,763			129,790

⁽¹⁾ The Instruments eligible to comprise Tier II also includes R$ 226 million of Preferred Shares.

In accordance with the schedule for the implementation of Basel III in Brazil, as from the first quarter of 2015, the information is reported in the Prudential Conglomerate.

Appendix I (“Breakdown of the Referential Equity and Information on its adequacy”) hereto breaks down in detail the Referential Equity as required by BACEN Circulars 3,678 and 3,716.

Funds obtained through the issue of subordinated debts that compose Tier II capital, for the purpose of the Basel ratio between capital and risk-weighted assets, are described below:

Subordinated Debt and Referential Equity Tier II																	R$ million
	Maturities												12/31/2015		9/30/2015		12/31/2014
Name of instrument	<1 year		1-2 years		2-3 years		3-4 years		4-5 years		> 5 years		Total		Total		Total
Bank Deposit Certificate (CDB)		6,657		806		-		-		-		-		7,463		7,282		7,368
Financial Bills		2,983		8,690		11,552		169		34		3,484		26,912		26,665		25,765
Euronotes		425		-		-		-		3,858		26,203		30,486		31,017		20,732
Subordinated Debt (Dec/15)		10,065		9,496		11,552		169		3,892		29,687		64,861		64,964		53,865
Subordinated Debt Not Elegible to Capital⁽¹⁾		142		32		30		28		66		625		923		946		703
Subordinated Debt - Total (Dec/15)		10,207		9,528		11,582		197		3,958		30,312		65,784
Subordinated Debt after Reducer (Dec/15)		-		1,899		4,621		101		3,114		29,687		39,422
Subordinated Debt Elegible to Capital (Dec/12)		-		990		290		4,198		6,993		26,352		38,824
Threshold ⁽¹⁾ Subordinated debt		-		693		203		2,939		4,895		18,446		27,177
Subordinated Debt Elegible to Capital (Dec/15)⁽²⁾		-		693		203		2,939		4,895		18,446		27,177

⁽¹⁾ Subordinated debt with application of threshold in accordance with the current rules (Resolution 4.192/13 - Art 28).

⁽²⁾ According to current legislation, the accounting balance of subordinated debt as of December 2012 was used for the calculation of referential equity as of December, 2015.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Details concerning maturities, compensation, principal amount, accounting balance and subordinated debt balance are described next:

Subordinated Debts Elegibles to Capital																		R$ million
						12/31/2015		9/30/2015		12/31/2014		Dec/15-Sep/15			Dec/15-Dec/14			12/31/2015
Name of instrument/ Currency	Issue		Maturity		Compensation p.a.	Principal Value		Principal Value				Principal Variation						Accouting Balance
Subordinated CDB ⁽¹⁾ - BRL
		2008		2015	119.8% of CDI		-		-		400		-			(400	)
		2010		2015	113% of CDI		-		50		50		(50	)		(50	)
		2006		2016	100% of CDI + 0.7%		466		466		466		-			-		1,235
		2010		2016	110% to 114% of CDI		2,665		2,665		2,665		-			-		5,154
					IPCA⁽²⁾+ 7.21%		123		123		123		-			-		268
		2010		2017	IPCA + 7.33%		367		367		367		-			-		806
					Total		3,621		3,671		4,071		(50	)		(450	)	7,463
Subordinated Financial Bills – BRL
		2010		2016	100% of CDI + 1.35% to 1.36%		365		365		365		-			-		385
					112% to 112.5% of CDI		1,874		1,874		1,874		-			-		1,973
					IPCA + 7%		30		30		30		-			-		59
		2010		2017	IPCA + 6.95% to 7.2%		206		206		206		-			-		312
		2011		2017	108% to 112% of CDI		3,224		3,224		3,224		-			-		3,493
					100% of CDI + 1.29% to 1.52%		3,650		3,650		3,650		-			-		3,790
					IPCA + 6.15% to 7.8%		352		352		352		-			-		578
					IGPM⁽²⁾+ 6.55% to 7.6%		138		138		138		-			-		241
		2012		2017	100% of CDI + 1.12%		500		500		500		-			-		506
		2011		2018	IGPM + 7%		42		42		42		-			-		60
					IPCA + 7.53% to 7.7%		30		30		30		-			-		44
		2012		2018	108% a 113% of CDI		6,373		6,373		6,373		-			-		7,027
					IPCA + 4.4% to 6.58%		461		461		461		-			-		690
					100% of CDI + 1.01% to 1.32%		3,782		3,782		3,782		-			-		3,900
					9.95% to 11.95%		112		112		112		-			-		158
		2011		2019	109% to 109.7% of CDI		2		2		2		-			-		3
		2012		2019	110% of CDI		1		1		1		-			-		2
					11.96%		12		12		12		-			-		19
					IPCA + 4.7% to 6.3%		101		101		101		-			-		148
		2012		2020	111% to CDI		1		1		1		-			-		2
					IPCA + 6% to 6.17%		20		20		20		-			-		33
		2011		2021	109.25% to 110.5% of CDI		6		6		6		-			-		10
		2012		2022	IPCA + 5.15% to 5.83%		2,307		2,307		2,307		-			-		3,454
					IGPM + 4.63%		20		20		20		-			-		25
					Total		23,609		23,609		23,609		-			-		26,912
Subordinated Euronotes - USD
		2010		2020	6.2%		990		990		990		-			-		3,908
		2010		2021	5.75%		1,000		1,000		1,000		-			-		3,890
		2011		2021	5.75% to 6.2%		730		730		730		-			-		2,998
		2012		2021	6.2%		550		550		550		-			-		2,148
		2012		2022	5.5% to 5.65%		2,600		2,600		2,600		-			-		10,264
		2012		2023	5.13%		1,851		1,851		1,851		-			-		7,278
					Total USD		7,721		7,721		7,721		-			-
					Total BRL													30,486
					Grand Total													64,861
		Subordinated Debt Reducer																39,422
		Subordinated Debts Elegibles to Capital (Dec/15)																27,177

⁽¹⁾ CDB is Bank Deposit Certificate and CDI is Interbank Deposit Certificate. The subordinated CDBs are redeemable from November 2011.

⁽²⁾ IPCA and IGP-M are Brazilian Inflation Indexes.

For information on each instrument that is part of the Referential Equity as required by BACEN Circulars 3,678 and 3,716, please visit the website www.itau.com.br/investor-relations, section “Corporate Governance, Pillar 3 – Spreadsheet Support”, “Appendix I and II – Pillar 3”, “Appendix II – Main Features of the Referential Equity Instruments (PR)”.

2.4

Risk-Weighted Asset (RWA)

According to CMN Resolutions 4,193 and 4,281, for assessing the minimum capital requirements, the RWA must be

calculated by adding the portions, as shown below:

RWA_CPAD= portion related to exposures to credit risk;

RWA_CAM= portion related to the exposures in gold, foreign exchange rate and assets subject to foreign exchange rate variations;

RWA_JUR= portion related to exposures subjects to variations of interest rates, interest coupons and coupon rates and classified in the Trading Portfolio;

RWA_COM= portion related to exposures subjects to variations in commodity prices;

RWA_ACS= portion related to exposures subjects to variations in equities prices and classified in the Trading Portfolio;

RWA_OPAD= portion relating to the calculation of operational risk capital requirements.

Itaú Unibanco

Risk and Capital Management – Pillar 3

The table below presents the consolidated evolution of RWA composition of Itaú Unibanco. Each of the portions mentioned above will be presented in detail in the following topics.

Composition of Risk-Weighted Asset									R$ million
	Prudential								Financial
Risk exposures	12/31/2015				9/30/2015				12/31/2014
Risk-Weighted Assets for Credit Risk (RWA_CPAD)		679,593	94	%		728,976	94	%		706,081	92	%
Risk-Weighted Assets for Market Risk (RWA_MPAD)		14,252	2	%		17,062	2	%		25,176	3	%
Risk-Weighted Assets for Operational Risk (RWA_OPAD)		28,623	4	%		28,623	4	%		36,817	5	%
Risk-Weighted Assets (RWA)		722,468	100	%		774,662	100	%		768,075	100	%

Risk-Weighted Assets for Credit Risk (RWA_CPAD)

The table below presents the credit risk-weighted (RWA_CPAD) separated by weighting factor and asset type:

Composition of Risk-Weighted Assets for Credit Risk (RWA_CPAD)					R$ million
	Prudential				Financial
	12/31/2015		9/30/2015		12/31/2014
Risk exposures
Exposure weighted by credit risk (RWA_CPAD)		679,593		728,976		706,081
a) Per Weighting Factor (FPR):
FPR at 2%		179		219		75
FPR at 20%		7,000		6,873		3,249
FPR at 35%		11,695		9,667		8,139
FPR at 50%		46,025		49,583		34,486
FPR at 75%		136,104		138,755		146,705
FPR at 85%		129,884		151,295		139,730
FPR at 100%		288,057		304,598		307,259
FPR at 250%		37,858		35,744		34,838
FPR at 300%		10,751		17,918		14,015
FPR up to 1250%⁽¹⁾		1,990		2,400		4,430
Derivatives – Future potential gain and Variation of the counterparty credit quality		10,050		11,924		13,156
b) Per Type:
Securities		51,085		54,556		37,571
Loan operations - Retail		109,882		111,979		121,534
Loan operations - Non-retail		237,365		240,200		226,925
Joint liabilities - Retail		242		259		324
Joint liabilities - Non-retail		46,655		64,930		63,509
Loan commitments - Retail		25,972		26,497		24,835
Loan commitments - non-retail		12,924		16,223		23,699
Other exposures		195,468		214,333		207,684

⁽¹⁾ Taking into consideration the application of the “F” factor required by Article 29 of BACEN Circular 3,644.

Risk-Weighted Assets for Market Risk (RWA_MPAD)

The amount of RWA_MPADis obtained by adding the portions terms: RWA_CAM, RWA_JUR, RWA_COM, RWA_ACS. The table below presents the risk weighted assets for Market Risk:

Composition of Risk-Weighted Assets for Market Risk (RWA_MPAD)					R$ million
	Prudential				Financial
	12/31/2015		9/30/2015		12/31/2014
Risk-Weighted Assets for Market Risk (RWA_MPAD)		14,252		17,062		25,176
Trades subject to interest rate variation (RWA_JUR)		11,291		11,844		10,347
Fixed income interest rate denominated in reais (RWA_JUR1)		2,127		2,934		1,612
Foreign exchange linked interest rate (RWA_JUR2)		6,700		5,652		4,809
Price index linked interest rate (RWA_JUR3)		2,464		3,258		3,744
Interest rate linked interest rate (RWA_{JUR 4})		-		-		183
Operations subject to commodity price variation (RWA_COM)		473		574		952
Operations subject to stock price variation (RWA_ACS)		952		1,209		474
Operations subject to the risk of exposures in gold, foreign currency and foreign exchange rate variations (RWA_CAM)		1,536		3,435		13,403

Referential equity calculated for covering the interest rate risk of trades of the banking book (RBAN)		1,275		1,211		1,846

Itaú Unibanco

Risk and Capital Management – Pillar 3

Risk-Weighted Assets for Operational Risk (RWA_OPAD)

BACEN Circulars 3,640, 3,675 and 3,739 establish the criteria for determining the portion of risk-weighted assets related to the capital required for operational risk (RWA_OPAD). In accordance with current regulation, the exposure of RWA_OPAD is calculated on a semiannual basis, related to June 30^thand December 31^st.

The RWA for operational risk is presented below:

Composition of Risk-Weighted Assets for Operational Risk (RWA_OPAD)

R$ million

	Prudential						Financial
	12/31/2015			9/30/2015			12/31/2014
Risk-Weighted Assets for Operational Risk (RWA_OPAD)		28,623			28,623			36,817
Retail		7,470			7,470			7,079
Commercial		16,491			16,491			13,429
Corporate finance		1,380			1,380			1,132
Negotiation and sales		(4,927	)		(4,927	)		8,256
Payments and settlements		3,074			3,074			2,856
Financial agent services		2,873			2,873			2,031
Asset management		2,145			2,145			2,030
Retail brokerage		118			118			4

Itaú Unibanco

Risk and Capital Management – Pillar 3

2.5

Leverage Ratio

The following information is based on the methodology and standard format introduced by BACEN Circular 3,748. As of December 31, Itaú Unibanco’s Leverage Ratio stood at 7.9%.

	Comparative Summary of Published Financial Statements and Leverage Ratio
		R$ Thousand
		12/31/2015
1	Total assets according to published financial statements		1,359,172,441
2	Adjustment for differences in consolidation of accounts		(122,280,032	)
3	Adjustment for assets assigned or transferred with substantial transfer of risks and benefits and		(4,855,298	)
4	Adjustment for changes in reference values and potential future gains on derivative financial instruments		18,170,046
5	Adjustment for repurchase transactions and securities lending		6,749,914
6	Adjustment for transactions not booked in prudential conglomerate's total assets		110,181,720
7	Other adjustments		(81,883,640	)
8	Total Exposure		1,285,255,152

	Disclosure of information on Leverage Ratio
		R$ Thousand
		12/31/2015
	Items shown in the Balance Sheet
1	Balance sheet items other than derivative financial instruments, securities received on loan and resales	891,531,269
2	Adjustments for equity items deducted in calculating Level I Capital	(14,903,083	)
3	Total exposure shown in the Balance Sheet	876,628,185
	Transactions using Derivative Financial Instruments
4	Replacement value for derivatives transactions	27,570,116
5	Potential future gains from derivatives transactions	13,839,814
6	Adjustment for collateral in derivatives transactions	-
7	Adjustment for daily margin held as collateral	-
8	Derivatives in the name of customers where there is no contractual obligation to reimburse in the event of bankruptcy or default of the entities responsible for the settlement system	-
9	Reference value adjusted for credit derivatives	8,798,831
10	Adjustment of reference value calculated for credit derivatives	(3,424,798	)
11	Total exposure for derivative financial instruments	46,783,963
	Repurchase Transactions and Securities Lending (TVM)
12	Investments in repurchase transactions and securities lending	244,911,369
13	Adjustment for repurchases for settlement and creditors of securities lending	-
14	Amount of counterparty credit risk	6,749,914
15	Amount of counterparty credit risk in transactions as intermediary	-
16	Total exposure for repurchase transactions and securities lending	251,661,283
	Off-balance sheet items
17	Reference value of off-balance sheet transactions	293,415,937
18	Adjustment for application of FCC specific to off-balance sheet transactions	(183,234,216	)
19	Total off-balance sheet exposure	110,181,720
	Capital and Total Exposure
20	Level I	101,000,684
21	Total Exposure	1,285,255,152
	Leverage Ratio
22	Basel III Leverage Ratio	7.9	%

Itaú Unibanco

Risk and Capital Management – Pillar 3

2.6

Capital Adequacy

Itaú Unibanco, through the ICAAP, assesses the adequacy of its capital to face the incurred risks. For ICAAP, capital is composed by regulatory capital for credit, market and operational risks and by the necessary capital to face other risks.

In order to ensure the robustness of Itaú Unibanco and the availability of capital to support business growth, Itaú Unibanco maintains PR levels above the minimum levels, according to the Basel ratio, Common Equity Tier I, Additional Tier I Capital and Tier II.

On December 31, 2015, the PR reached R$ 128,465 million, R$ 101,001 million of Tier I and R$ 27,464 million of Tier II.

Composition of Referential Equity (PR)					R$ million
	Prudential				Financial
	12/31/2015		9/30/2015		12/31/2014
Tier I		101,001		95,364		96,232
Common Equity Tier I		100,955		95,318		96,212
Additional Tier I Capital		46		46		20
Tier II		27,464		29,399		33,559
Referential Equity (PR)		128,465		124,763		129,790
Required Referential Equity (PRE)		79,471		85,213		84,488
Excess capital in relation to Required Referential Equity		48,994		39,550		45,302

As at December 31, 2015, the BIS ratio reached 17.8%, an increase of 170 basis points from September 30, 2015. This increase was driven by the higher referential equity, mainly impacted by the net income for the period and by the decrease in the balance of tax credits. The BIS ratio increase was also due to the decrease in RWA, which, in addition to being impacted by tax credits, is influenced by BACEN Circular 3,770 and by the decrease in the loan portfolio.

In what regards the fixed asset ratio, (the level of adjusted PR committed to adjusted permanent assets), Itaú Unibanco is within the maximum limit of 50% of the adjusted PR, as established by BACEN.

The Basel and Fixed asset ratios are presented in the table below.

Basel and Fixed Asset Ratios							R$ million
	Prudential						Financial
	12/31/2015			9/30/2015			12/31/2014
Basel ratio		17.8	%		16.1	%		16.9	%
Tier I		14.0	%		12.3	%		12.5	%
Common Equity Tier I		14.0	%		12.3	%		12.5	%
Additional Tier I Capital		0.0	%		0.0	%		0.0	%
Tier II		3.8	%		3.8	%		4.4	%
Fixed assets ratio		27.7	%		29.7	%		49.1	%
Excess Capital in Relation to Fixed Assets		28,616			25,302			1,160

Considering Itaú Unibanco ´s current capital base, and if the Basel III rules were fully implemented, the core capital (Common Equity Tier I) would be 13.6% on December 31, 2015, taking into consideration the use of all tax credits. This scenario is presented in the following chart.

Simulated Common Equity Tier I with Fully Loaded Basel III Rules

⁽⁶⁾Includes deductions of Goodwill, Intangible Assets, Tax Credits from Temporary Differences and Tax Loss, Pension Fund Assets, Equity Investments in Financial Institutions, Insurance and similar companies.

⁽⁷⁾Includes the increase of the multiplier of the market risk, operational risk and certain credit risk accounts. This multiplier, which is at 9.09 nowadays, will be to 12.5 in 2019.

⁽⁸⁾Does not include any reversal of the complementary allowance for loan losses.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Balance Sheet

The following is a comparison between Itaú Unibanco’s Prudential Conglomerate Balance Sheet and its Consolidated Balance Sheet presented in the Financial Statements. Information presented in the Prudential Conglomerate are detailed so that the elements disclosed in Appendix I are identified in the last column of the table below.

Comparisson of balance sheets – Assets										R$ million
	Consolidated
	balance sheet			Diferences ⁽¹⁾			Prudential			Ref. Annex I
Assets	12/31/2015
Current assets and Long-term receivables		1,340,483			(144,290	)		1,196,193
Cash and cash equivalents		18,544			(371	)		18,173
Interbank investments		280,944			(4,085	)		276,859
Securities and derivative financial instruments		338,391			(131,160	)		207,231
Interbank accounts		67,341			-			67,341
Interbranch accounts		31			-			31
Loan, lease and other credit operations		439,751			(3,716	)		436,035
Other receivables		191,797			(4,190	)		187,607
Tax credit and Actuarial Assets		-			-			24,682
Tax credits arising from income tax losses and social contribution		-			-			6,031		(b)
Credits resulting from temporary differences		-			-			18,427		(c)
Actuarial assets related to defined benefit pension funds		-			-			224		(d)
Other		-			-			162,925
Other assets		3,684			(768	)		2,916
Permanent assets		18,689			22,010			40,699
Investments		3,939			17,401			21,340
Goodwill based on the expectation of future profitability		-			-			341		(e)
investments in the capital of companies that are similar to non-consolidated financial institutions and insurance companies		-			-			8,109		(f)
investments in the capital of financial institutions		-			-			765		(a)
Other		-			-			12,125
Real estate in use		7,055			(575	)		6,480
Deferred permanent assets		-			-			25		(g)
Other		-			-			6,455
Goodwill		232			(231	)		1
Goodwill based on the expectation of future profitability		-			-			1		(e)
Intangible assets		7,463			5,415			12,878
Acquisition of rights to credit payroll		1,001			-			1,001
Intangible assets acquired from october 1^st 2013		-			-			243		(h)
Intangible assets acquired before october 1^st 2013		-			-			758		(i)
Other intangible assets		9,707			10,856			20,563
Intangible assets acquired from october 1^st 2013		-			-			3,202		(h)
Intangible assets acquired before october 1^st 2013		-			-			3,823		(i)
Goodwill based on the expectation of future profitability		-			-			12,836		(e)
Deferred permanent assets		-			-			485		(g)
Other		-			-			217
(Accumulated amortization)		(3,244	)		(5,442	)		(8,686	)
Intangible assets acquired from october 1^st 2013		-			-			(750	)	(h)
Intangible assets acquired before october 1^st 2013		-			-			(1,652	)	(i)
Goodwill based on the expectation of future profitability		-			-			(5,862	)	(e)
Deferred permanent assets		-			-			(422	)	(g)
Total assets		1,359,172			(122,280	)		1,236,892

⁽¹⁾ Differences are mainly due to non-consolidation of non financial companies (highlighting the following companies: Insurance, Pension Plan and Premium Bonds) within the Prudential Conglomerate and also by the eliminations of transactions with related parties.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Comparisson of balance sheets – Liabilities										R$ million
	Consolidated
	Balance Sheet			Diferences ⁽¹⁾			Prudential			Ref. Annex I
Liabilities	12/31/2015
Current and Long-term Liabilities		1,248,995			(125,092	)		1,123,903
Deposits		292,610			5,709			298,319
Deposits received under securities repurchase agreements		350,954			2,733			353,687
Funds from acceptances and issuance of securities		75,590			6			75,596
Interbank accounts		520			-			520
Interbranch accounts		6,406			2			6,408
Borrowings and onlending		104,589			-			104,589
Derivative financial instruments		31,116			-			31,116
Technical provision for insurance, pension plan and capitalization		132,053			(132,053	)		-
Other liabilities		255,155			(1,487	)		253,668
Social and statutory		14,882			(2,361	)		12,521
Tax credits arising from income tax losses and social contribution		-			-			5,099		(b)/(c)
Provision of Actuarial assets related to defined benefit pension funds		-			-			136		(d)
Other		-			-			7,286
Other		-			-			241,147
Deferred income		1,960			(32	)		1,928
Minority interest in subsidiaries		1,755			(839	)		916
Non-controlling interest in subsidiaries that are part of the conglomerate		-			-			916		(j)
Stockholders' equity		106,462			3,683			110,145
Capital		85,148			-			85,148
Eligible Instruments		-			-			85,148		(k)
Capital reserves		1,537			-			1,537
Capital reserves		-			-			1,537		(m)
Revenue reserves		25,350			2,998			28,348
Revenue reserves		-			-			28,348		(l)
Asset valuation adjustment		(1,219	)		684			(535	)
Other revenue and other reserve		-			-			(535	)	(m)
(Treasury shares)		(4,353	)		-			(4,353	)
Shares or other instruments issued by the bank		-			-			(4,353	)	(n)
Total liabilities and stockholders' equity		1,359,172			(122,280	)		1,236,892

⁽¹⁾Differences are mainly due to non-consolidation of non financial companies (highlighting the following companies: Insurance, Pension Plan and Premium Bonds) within the Prudencial Conglomerate and also by the eliminations of transactions with related parties.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Institutions that comprises the Financial Statements of Itaú Unibanco Holding

The following is a list of institutions that comprise the financial statements of Itaú Unibanco Holding for means of the disclosure of its Financial Statements. The institutions that, in addition to being included in the Consolidated Balance Sheet, are also included in the Prudential Conglomerate, are listed below.

List of institutions that comprises the Financial Statements of Itaú Unibanco Holding

Institutions

Aco Ltda.	Itaú Administradora de Consórcios Ltda.⁽¹⁾
Afinco Américas Madeira, Sgps, Sociedade Unipessoal, Ltda.	Itaú Asia Securities Ltd.⁽¹⁾
Aj Títulos Públicos Fundo de Investimento Referenciado DI⁽¹⁾	Itaú Asset Management S.A. Sociedad Gerente de Fondos Comunes de Inversión
Albarus S.A.	Itaú Bahamas Directors Ltd.
Banco Del Paraná S.A.	Itaú Bahamas Nominees Ltd.
Banco Investcred Unibanco S.A.⁽¹⁾	Itaú Bank & Trust Bahamas Ltd.⁽¹⁾
Banco Itaú (Suisse) S.A.⁽¹⁾	Itaú Bank & Trust Cayman Ltd.⁽¹⁾
Banco Itaú Argentina S.A.⁽¹⁾	Itau Bank, Ltd.⁽¹⁾
Banco Itaú BBA S.A.⁽¹⁾	Itaú BBA Colombia S.A. Corporacion Financiera⁽¹⁾
Banco Itaú BMG Consignado S.A.⁽¹⁾	Itaú BBA Corredor de Bolsa Ltda.⁽¹⁾
Banco Itaú Chile S.A.⁽¹⁾	Itaú BBA International (Cayman) Ltd.⁽¹⁾
Banco Itaú International⁽¹⁾	Itau BBA International plc⁽¹⁾
Banco Itaú Paraguay S.A.⁽¹⁾	Itaú BBA México, Casa de Bolsa, S.A. de C.V.⁽¹⁾
Banco Itaú Uruguay S.A.⁽¹⁾	Itaú BBA México, S.A. de C.V.
Banco Itaú Veículos S.A.⁽¹⁾	Itaú BBA Participações S.A.
Banco Itaubank S.A.⁽¹⁾	Itaú BBA Trading S.A.
Banco Itaucard S.A.⁽¹⁾	Itaú BBA Uk Securities Limited⁽¹⁾
Banco Itauleasing S.A.⁽¹⁾	Itaú BBA Usa Securities Inc.⁽¹⁾
Bicsa Holding Ltd.	Itaú BMG Corretora de Seguros Ltda.
Bie Cayman Ltd.	Itaú BMG Gestão de Vendas Ltda.
Borsen Renda Fixa Crédito Privado - Fundo de Investimento	Itaú BMG Participação Ltda.
Cia. Itaú de Capitalização	Itaú BMG Seguradora S.A.
Credicard Promotora de Vendas Ltda.	Itaú Cayman Directors Ltd.
Ctbh Fundo de Investimento Imobiliário - Fii⁽¹⁾	Itaú Cayman Nominees Ltd.
Dibens Leasing S.A. - Arrendamento Mercantil⁽¹⁾	Itaú Chile Administradora General de Fondos S.A.
Estrel Serviços Administrativos S.A.	Itaú Chile Compañia De Seguros de Vida S.A.
Estrutura III - Fundo de Investimento em Participações⁽¹⁾	Itaú Chile Corredora de Seguros Ltda.
Facilita Promotora Ltda.	Itaú Chile Holdings, Inc.
Fic Promotora de Vendas Ltda.	Itaú Chile Inversiones, Servicios y Administracion S.A.
Financeira Itaú CBD S.A. - Crédito, Financ. e Investimento⁽¹⁾	Itaú Cia. Securitizadora de Créditos Financeiros⁽¹⁾
Fundo de Inv. Direitos Creditórios não Padr. Barzer⁽¹⁾	Itaú Corretora de Valores S.A.⁽¹⁾
Fundo Fortaleza Investimento Imobiliário ⁽¹⁾	Itaú Distribuidora de Títulos e Valores Mobiliários S.A.⁽¹⁾
Garnet Corporation	Itaú EU Lux-Itaú Latin America Equity Fund⁽¹⁾
Hipercard Banco Múltiplo S.A.⁽¹⁾	Itaú Europa Luxembourg S.A.
Icarros Ltda.	Itaú Global Asset Management Limited
Iga Participações S.A.	Itaú Institucional Curto Prazo - Fundo de Investimento
Intrag Distribuidora de Títulos e Valores Mobiliários Ltda.⁽¹⁾	Itaú International Investment LLC
Intrag-Part Administração e Participações Ltda.	Itaú International Securities Inc.⁽¹⁾
Investcard Referenciado DI - Fundo de Invetimentos Cotas FI⁽¹⁾	Itaú Japan Asset Management Limited
Investimentos Bemge S.A.	Itaú Kinea Private Equity MM FICFI CP⁽¹⁾
Ipi - Itaúsa Portugal Investimentos, Sgps Lda.	Itaú Middle East Limited
Itaú Administração Previdenciária Ltda.	Itaú Rent Administração e Participações Ltda.

⁽¹⁾ Institutions that also comprise the Prudential Conglomerate.

Itaú Unibanco

Risk and Capital Management – Pillar 3

List of institutions that comprises the Financial Statements of Itaú Unibanco Holding

Institutions

Itaú Seguros S.A.	MCC Securities Inc.⁽¹⁾
Itaú Singapore Securities Pte. Ltd.	Megabônus Negócios de Varejo Ltda.
Itaú Uk Asset Management Limited	Microinvest S.A. Soc. de Crédito a Microempreendedor⁽¹⁾
Itaú Unibanco Holding Cayman Branch⁽¹⁾	Mundostar S.A.
Itaú Unibanco Holding S.A.⁽¹⁾	Nevada Woods S.A.
Itaú Unibanco S.A. Cayman Branch⁽¹⁾	Oca S.A.⁽¹⁾
Itaú Unibanco S.A. New York Branch⁽¹⁾	Oiti Fundo de Investimento Multimercado Crédito Privado Investimento no Exterior⁽¹⁾
Itaú Unibanco S.A. Tokyo Branch⁽¹⁾	Pró-Imóvel Promotora Ltda.
Itaú Unibanco S.A.⁽¹⁾	Proserv - Promociones y Servicios S.A. de Capital Variable
Itaú Unibanco S.A.Nassau Branch⁽¹⁾	Provar Negócios de Varejo Ltda.
Itaú Unibanco Serviços e Processamento de Informações Comerciais Ltda.	Recuperadora de Creditos Ltda.
Itaú Unibanco Veículos Administradora de Consórcios Ltda.⁽¹⁾	Redecard S.A.⁽¹⁾
Itaú Usa Asset Management Inc.	Rt Alm 5 Fundo de Investimento Renda Fixa
Itaú Usa Inc.	Rt Alm Soberano 2 Fundo de Investimento Renda Fixa
Itaú Valores S.A.⁽¹⁾	Rt Challenger Renda Fixa Crédito Privado FIC
Itaú Vida E Previdência S.A.	Rt Columbia Renda Fixa Crédito Privado FIC
Itauprev Retirement Renda Fixa Crédito Privado - Fundo de Investimento	Rt Defiant Multimercado - Fundo de Investimento
Itaúsa Europa Investimentos, Sgps, Lda.	Rt Discovery Renda Fixa Crédito Privado FIC
Itaúsa Portugal - Soc. Gestora de Partic. Sociais, S.A.	Rt Endeavour Renda Fixa Crédito Privado - Fundo de Investimento
Itauseg Participações S.A.	Rt Enterprise Curto Prazo - Fundo de Investimento⁽¹⁾
Itauseg Saúde S.A.	Rt Excelsior Renda Fixa Crédito Privado - Fundo de Investimento
Itauvest Distribuidora de Títulos e Val. Mobiliários S.A.⁽¹⁾	Rt Galelio Renda Fixa Crédito Privado FIC
Itb Holding Brasil Participações Ltda.	Rt Itaú Dj Títulos Públicos Fundo de Investimento Referenciado DI⁽¹⁾
Itb Holding Ltd.⁽¹⁾	Rt Itaú SIF – Brasil
Itrust Servicios Inmobiliarios S.A.C.I.	Rt Magellan Renda Fixa Crédito Privado FIC
IU Seguros S.A.	Rt Multigestor 4 FIC
Iucor Corretora de Seguros Ltda.	Rt Nation Renda Fixa Fundo de Investimento
Jasper International Investment LLC	Rt Nor Renda Fixa FIC⁽¹⁾
Karen International Limited	Rt Odissey Renda Fixa de Crédito Privado FIC
Kinea Dinâmico Master Long Biased Fundo de Investimento Em Ações⁽¹⁾	Rt Pathfinder Renda Fixa Crédito Privado FIC
Kinea I Pipe Fundo de Investimento em Ações⁽¹⁾	Rt Union Renda Fixa Fundo de Investimento
Kinea I Private Equity Fip⁽¹⁾	Rt Valiant Renda Fixa - Fundo de Investimento
Kinea I Total Return Equity - Fundo de Investimento Em Cotas de Fundos de Investimento Multimercado⁽¹⁾	Rt Voyager Renda Fixa Crédito Privado - Fundo de Investimento⁽¹⁾
Kinea II Macro Fundo de Investimento Multimercado⁽¹⁾	Scala Curto Prazo FIC⁽¹⁾
Kinea Investimentos Ltda.	Topaz Holding Ltd.
Kinea Macro Offshore Segregated Portfólio⁽¹⁾	Trishop Promoção e Serviços Ltda.
Licania Fund Limited⁽¹⁾	Tulipa S.A.
Luizacred S.A. Soc. de Crédito, Financiamento e Investimento⁽¹⁾	Unibanco Empreendimentos Ltda.
Marcep Corretagem de Seguros S.A.	Unibanco Negócios Imobiliários Ltda.
Maxipago Serviços de Internet S.A.	Uni-Investment International Corp.⁽¹⁾
MCC Asesorías Limitada	Unión Capital Afap S.A.
MCC S.A. Corredores de Bolsa⁽¹⁾	Universo Fundo de Investimento em Participacoes⁽¹⁾

⁽¹⁾ Institutions that also comprise the Prudential Conglomerate.

Material entities

Total assets, shareholders’ equity, and the industries of the material entities, including those subject to the risk weight for the purpose of capital requirements are as follows:

Major Institutions											R$ million
			12/31/2015				9/30/2015				12/31/2014
Institutions	Country	Activity	Total Assets		Equity		Total Assets		Equity		Total Assets		Equity
Banco Itaú Argentina S.A. ⁽¹⁾	Argentina	Financial institution		6,918		777		7,224		983		5,270		596
Banco Itaú BBA S.A. ⁽¹⁾	Brazil	Financial institution		6,293		5,690		5,984		5,676		6,321		5,685
Banco Itaú BMG Consignado S.A ⁽¹⁾	Brazil	Financial institution		42,265		2,290		42,443		2,276		43,103		1,349
Banco Itaú Chile ⁽¹⁾	Chile	Financial institution		46,458		4,315		47,164		4,384		33,905		3,134
Banco Itaú Paraguay S.A. ⁽¹⁾	Paraguay	Financial institution		12,417		1,639		13,144		1,770		9,160		1,261
Banco Itaú Suisse S.A. ⁽¹⁾	Switzerland	Financial institution		6,096		714		5,240		743		3,821		458
Banco Itaú Uruguay S.A. ⁽¹⁾	Uruguay	Financial institution		16,510		1,296		17,148		1,482		10,447		894
Banco Itaucard S.A. ⁽¹⁾	Brazil	Financial institution		107,221		19,383		106,134		19,703		153,509		19,277
Banco Itauleasing S.A. ⁽¹⁾	Brazil	Financial institution		10,875		10,245		10,718		10,131		41,805		40,504
Cia. Itaú de Capitalização	Brazil	Capitalization		4,099		679		4,352		609		4,568		933
Dibens Leasing S.A. - Arrendamento Mercantil ⁽¹⁾	Brazil	Leasing		167,917		3,864		150,059		3,638		152,992		3,065
Financeira Itaú CBD S.A. Crédito, Financiamento e Investimento ⁽¹⁾	Brazil	Consumer Finance Credit		3,983		908		3,813		1,110		3,893		915
Hipercard Banco Múltiplo S.A. ⁽¹⁾	Brazil	Financial institution		9,516		3,915		8,325		3,853		8,442		3,458
Itau Bank, Ltd. ⁽¹⁾	Cayman Islands	Financial institution		43,097		1,592		28,270		2,867		33,607		2,259
Itau BBA Colombia S.A. Corporación Financiera ⁽¹⁾	Colombia	Financial institution		677		393		736		410		411		364
Itaú BBA International PLC ⁽¹⁾	United Kingdom	Financial institution		27,497		3,938		26,930		4,012		16,291		2,618
Itaú BBA USA Securities Inc. ⁽¹⁾	United States	Broker		1,811		1,687		1,950		1,731		6,515		1,221
Itaú BMG Seguradora S.A.	Brazil	Insurance		195		77		202		77		199		72
Itaú Corretora de Valores S.A. ⁽¹⁾	Brazil	Broker		4,519		1,365		7,272		3,094		5,192		2,512
Itaú Seguros S.A.	Brazil	Insurance		10,858		5,435		12,284		4,980		14,195		6,561
Itaú Unibanco Financeira S.A. - Crédito, Financiamento e Investimento ⁽¹⁾ ⁽²⁾	Brazil	Consumer Finance Credit		-		-		-		-		4,330		3,756
Itaú Unibanco S.A. ⁽¹⁾	Brazil	Financial institution		1,297,135		56,199		1,235,422		55,873		1,148,099		51,498
Itaú Vida e Previdência S.A.	Brazil	Pension Plan		128,760		3,769		124,314		3,572		111,445		5,608
Luizacred S.A. Soc. Cred. Financiamento Investimento ⁽¹⁾	Brazil	Consumer Finance Credit		4,376		609		4,308		617		4,611		599
Redecard S.A. - REDE ⁽¹⁾	Brazil	Acquirer		50,635		13,729		46,147		13,911		48,437		12,689

⁽¹⁾ Prudential Conglomerate Institutions.

⁽²⁾ Institution incorporated on 01/31/2015 by Itaú Unibanco S.A. and Itaú BBA Participações S.A.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Investments in other entities

4.1

Investments in other entities not classified in the trading book

The financial statements of Itaú Unibanco and its subsidiaries have been prepared in accordance with accounting practices adopted in Brazil, as established by Brazilian Corporate Law, together with CMN and Brazilian Securities and Exchange Commission (CVM) regulations, in the latter cases when such regulations are not inconsistent with BACEN regulations.

The interests held in other entities, except those measured at book value (equity method of accounting), which we intend to hold for a long term, are classified in Permanent Assets and measured at their acquisition cost (cost method). Investments measured under the cost method are stated at their historical amount, i.e., the price the company paid to acquire them. The investor does not account for the profits or losses of an investee, except when related to the dividends based on profits obtained, when distributed.

Investments in other companies which there is no intention to hold for a long term are classified as Securities and, based on the designation defined pursuant to Management strategies, they are recognized at fair value, in Other Comprehensive Income.

Itaú Unibanco applies its policies on a systematic basis, ensuring the consistency and comparability of its information, except when otherwise required by regulators, under amended regulations.

In 2015, there were no significant amendments to policies related to equity interests.

For further information on Itaú Unibanco’s accounting policies, please see Note 4 – “Summary of the main accounting practices”, to the Complete Financial Statements, that can be found on the website www.itau.com.br/investor-relations.

The table below presents the amounts for corporate shareholdings classified as permanent assets, excluding those valued by equity accounting, and for investments in equity classified as securities, both of which are not included in the trading portfolio. As of December 31, 2015, the capital required for these shareholdings was R$ 61.0 million.

Investments in other entities							R$ million
	Prudential						Financial
	12/31/2015			9/30/2015			12/31/2014
Carrying Amount		573.9			580.6			860.2
Public		396.7			395.5			105.4
Private		177.2			185.1			754.8
Fair value		715.1			721.1			969.2
Public		516.3			515.0			206.9
Private		198.8			206.1			762.2
Gain or losses arising on investments in other entities		0.1			0.3			0.7
Recognized and unrealized gain or losses		(159.2	)		(132.6	)		(228.1	)
Unrecognized and unrealized gain or losses		141.1			140.5			106.7

The risk of shareholdings not included in the trading portfolio is assessed, for ICAAP purposes, as part of the Itaú Unibanco risk assessment process.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Credit Risk

5.1

Framework and Treatment

Credit risk is the possibility of losses associated with: failure by a borrower, issuer or counterparty to fulfill their respective financial obligations as defined in the contracts; value loss of credit agreements resulting from deterioration of the borrower’s issuer’s or counterparty’s credit rating; reduction of profits or income; benefits granted upon subsequent renegotiations; or debt recovery costs.

Itaú Unibanco’s credit risk management and control structure establishes operational limits, risk mitigation mechanisms and processes, and instruments to measure, monitor and control risk that can quantify the credit risk inherent to all products, portfolio concentrations and the impacts of potential changes in the economic environment. The Bank’s portfolio, policies and strategies are continuously monitored so as to ensure compliance with the rules and laws in effect in each country.

Itaú Unibanco’s credit risk management is the primary responsibility of all Business Areas and is aimed at maintaining the quality of the credit portfolio at levels that are consistent with the institution’s risk appetite, for each market segment in which it operates. The Business Areas have to:

Follow up and closely monitor the portfolios under their responsibility;

Grant credit in accordance to the authority levels, market conditions, macroeconomic prospects, changes in markets and products and the effects of sector and geographic concentrations;

Manage credit risk adopting actions that provide sustainability to its business.

Itaú Unibanco’s credit policy is based on internal factors, such as: client rating criteria, performance and evolution of the portfolio, default levels, return rates, and the allocated economic capital; and on external factors, related to the economic environment, interest rates, market default indicators, inflation and changes in consumption.

Itaú Unibanco has a structured process to maintain a diversified portfolio, which is considered appropriate by the institution. The concentrations are monitored continuously for economic sectors, and largest debtors, allowing preventive measures to be taken to avoid the violation of the established limits.

The credit risk management governance is conducted through collegiate bodies, and act primarily by assessing the competitive market conditions, setting the credit limits for the institution, reviewing control practices and policies, approving these actions at the respective authority levels. The risk communication and reporting process, including disclosure of institutional policies on credit risk management, are responsibility of this structure.

The credit risk control is carried out by an independent executive area segregated from the business units, as required by the current regulation. Among others, the mains responsibilities of the credit risk control area are to:

Monitor and control the performance of the credit portfolios in view of the limits approved by senior management;

Conduct the centralized control of the credit risk segregated from the business units;

Manage the process of preparation, review and approval of institutional policies of credit risk, meeting the regulatory guidelines;

Assess the credit risk of the operations at the authority levels appointed by the credit commissions.

The policies and products’ evaluation process enables the Itaú Unibanco to identify potential risks in order to ensure that credit decisions make sense from an economic and risk perspective.

Itaú Unibanco’s centralized process for approving credit policies and validating models ensures the synchronization of credit actions.

The credit rating process for wholesale transactions is based on information such as the economic and financial condition of the counterparty, its cash-generating capabilities, the economic group to which it belongs, the current and prospective situation of the economic sector in which it operates. Credit proposals are analyzed on a case-by-case basis through the approval governance.

With respect to retail transactions (individuals, small and medium companies), ratings are assigned based on statistical application and behavior score models. Decisions are met based on continuously monitored scoring models. Extraordinarily, an individual analysis of specific cases may be performed, in which case credit approval follows the applicable authority levels.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Additionally, the risk assessment of both the retail segments and the wholesale segment incorporate client debts both to Itaú and the market.

Itaú Unibanco rates government securities and other debt instruments according to their credit quality with the purpose of managing the exposures.

Itaú Unibanco strictly controls credit exposure to clients and counterparties, acting on occasional limit breaches. In this sense, contractual covenants may be used, such as the right to demand early payment or require of additional collateral.

Itaú Unibanco counts on a specific structure and processes aimed at ensuring that the country risk is managed and controlled, including: (i) country risk governance; (ii) country ratings; (iii) credit limits for countries; (iv) limits monitoring; and (v) actions for limit breaches.

In line with the principles of CMN Resolution 3,721, Itaú Unibanco’s credit risk management structure and institutional policy are approved by its Board of Directors, applicable to all companies and subsidiaries in Brazil and abroad.

The guidelines of the institutional credit risk management policy can be accessed at http://www.itau.com.br/investor-relations, under Corporate Governance, Regulations and Policies, Public Access Report – Credit Risk.

Itaú Unibanco

Risk and Capital Management – Pillar 3

5.2

Credit Portfolio Analysis

The information presented in the following tables allow the analysis of the credit portfolio, and its behavior, from different view stands: operations with credit granting characteristics segregated by Brazil Geographic Regions, by Countries, economic sector, by type of product and remaining maturity, concentration of the credit portfolio on largest debtors and the amount of the overdue transactions and allowance for loan losses.

Operations with Credit Granting Characteristics by Brazil Geographic Regions and by Countries

Operations with Credit⁽¹⁾ Granting Characteristics in Brazil: Exposure											R$ million
	12/31/2015												9/30/2015
	Southeast		South		North		Northeast		Midwest		Brazil		Brazil
Individuals		124,620		21,737		7,805		29,951		12,896		197,009		197,346
Rural Loans		175		31		-		2		5		213		213
Real State		28,930		2,378		362		1,299		1,613		34,582		33,435
Payroll		24,110		5,257		3,728		8,554		3,716		45,365		46,037
Vehicle and Leasing		10,749		3,094		897		2,418		1,954		19,112		20,694
Credit card		38,566		7,825		2,250		15,877		3,765		68,283		66,160
Endorsements and Sureties⁽²⁾		659		33		2		8		47		749		734
Personal Loans (Other)		21,431		3,119		566		1,793		1,796		28,705		30,073
Companies		227,634		20,361		2,022		8,676		5,454		264,147		291,491
Rural Loans		5,207		3,540		6		255		350		9,358		9,888
Investments		56,184		6,253		834		3,374		2,283		68,928		72,690
Import and Export		26,068		1,275		188		619		180		28,330		30,045
Working Capital, Discount Bonds and Guaranteed Account		87,920		8,398		895		4,031		2,403		103,647		104,107
Endorsements and Sureties⁽²⁾		49,455		391		35		159		96		50,136		71,081
Other		2,800		504		64		238		142		3,748		3,680
Total		352,254		42,098		9,827		38,627		18,350		461,156		488,837

⁽¹⁾The amount includes endorsements, sureties and committed loans, net of allowance for loan losses.

⁽²⁾From the 4th quarter of 20015, the BACEN Circular 3,770 has changed the Credit Conversion Factor (“Fator de Conversão de Crédito”) applied to some specific Endorsements and Sureties to 50%.

Operations with Credit⁽¹⁾ Granting Characteristics by Countries: Exposure																					R$ million
	12/31/2015																						9/30/2015
	Brazil		Argentina		Chile		Colombia		United States of America		Paraguay		United Kingdon		Switzerland		Uruguay		Other		Total		Total
Individuals		197,009		1,489		19,622		-		-		2,864		-		-		2,666		-		223,650		220,607
Rural Loans		213		-		-		-		-		-		-		-		-		-		213		213
Real State		34,582		2		10,031		-		-		205		-		-		276		-		45,096		44,087
Payroll		45,365		-		-		-		-		-		-		-		-		-		45,365		46,037
Vehicle and Leasing		19,112		-		-		-		-		165		-		-		-		-		19,277		20,869
Credit card		68,283		1,134		1,443		-		-		784		-		-		1,600		-		73,244		71,289
Endorsements and Sureties⁽²⁾		749		-		10		-		-		-		-		-		17		-		776		755
Personal Loans (Other)		28,705		353		8,138		-		-		1,710		-		-		773		-		39,679		37,357
Companies		264,147		3,488		23,530		478		4,004		5,032		13,004		2,121		5,833		373		322,010		354,454
Rural Loans		9,358		-		-		-		-		-		-		-		-		-		9,358		9,888
Investments		68,928		3		2,546		-		-		8		32		-		94		-		71,611		75,417
Import and Export		28,330		304		295		-		3,818		-		3,995		2,066		49		-		38,857		41,286
Working Capital, Discount Bonds and Guaranteed Account		103,647		2,536		18,846		478		-		4,793		8,736		-		5,322		340		144,698		148,783
Endorsements and Sureties⁽²⁾		50,136		645		1,843		-		186		230		241		55		368		33		53,737		75,399
Other		3,748		-		-		-		-		1		-		-		-		-		3,749		3,681
Total		461,156		4,977		43,152		478		4,004		7,896		13,004		2,121		8,499		373		545,660		575,061

⁽¹⁾The amount includes endorsements, sureties and committed loans, net of allowance for loan losses.

Operations with Credit⁽¹⁾ Granting Characteristics in Brazil: Quarterly Average Exposure											R$ million
	12/31/2015												9/30/2015
	Southeast		South		North		Northeast		Midwest		Brazil		Brazil
Individuals		124,536		21,780		7,869		29,990		13,003		197,178		198,732
Rural Loans		175		31		-		1		6		213		210
Real State		28,372		2,324		357		1,376		1,580		34,009		32,495
Payroll		24,283		5,296		3,752		8,602		3,767		45,700		46,112
Vehicle and Leasing		11,242		3,204		929		2,493		2,036		19,904		21,649
Credit card		37,878		7,690		2,247		15,679		3,729		67,223		67,284
Endorsements and Sureties⁽²⁾		648		33		2		9		49		741		698
Personal Loans (Other)		21,938		3,202		582		1,830		1,836		29,388		30,284
Companies		240,704		20,536		2,087		8,890		5,604		277,821		289,851
Rural Loans		5,282		3,634		11		254		443		9,624		8,761
Investments		57,565		6,483		877		3,577		2,307		70,809		74,132
Import and Export		26,882		1,313		193		605		196		29,189		27,142
Working Capital, Discount Bonds and Guaranteed Account		88,348		8,189		909		4,031		2,401		103,878		105,662
Endorsements and Sureties⁽²⁾		59,903		394		34		178		99		60,608		70,883
Other		2,724		523		63		245		158		3,713		3,271
Total		365,240		42,316		9,956		38,880		18,607		474,999		488,583

⁽¹⁾The amount includes endorsements, sureties and committed loans, net of allowance for loan losses.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Operations with Credit⁽¹⁾ Granting Characteristics by Countries: Quarterly Average Exposure																					R$ million
	12/31/2015																						9/30/2015
	Brazil		Argentina		Chile		Colombia		United States of America		Paraguay		United Kingdon		Switzerland		Uruguay		Other		Total		Total
Individuals		197,178		1,642		17,836		-		-		2,956		-		-		2,515		-		222,127		221,343
Rural Loans		213		-		-		-		-		-		-		-		-		-		213		210
Real State		34,009		2		10,106		-		-		201		-		-		274		-		44,592		42,220
Payroll		45,700		-		-		-		-		-		-		-		-		-		45,700		46,112
Vehicle and Leasing		19,904		-		-		-		-		170		-		-		-		-		20,074		21,812
Credit card		67,223		1,229		1,440		-		-		841		-		-		1,534		-		72,267		71,954
Endorsements and Sureties⁽²⁾		741		-		10		-		-		-		-		-		13		-		764		753
Personal Loans (Other)		29,388		411		6,280		-		-		1,744		-		-		694		-		38,517		38,282
Companies		277,821		3,673		25,713		467		4,037		4,825		13,427		2,239		5,798		233		338,233		344,968
Rural Loans		9,624		-		-		-		-		-		-		-		-		-		9,624		8,761
Investments		70,809		4		2,562		-		-		9		33		-		96		-		73,513		76,651
Import and Export		29,189		265		319		-		3,844		-		4,249		2,182		25		-		40,073		37,166
Working Capital, Discount Bonds and Guaranteed Account		103,878		2,745		20,651		467		-		4,563		8,884		-		5,355		199		146,742		144,493
Endorsements and Sureties⁽²⁾		60,608		659		2,181		-		193		252		261		57		322		34		64,567		74,625
Other		3,713		-		-		-		-		1		-		-		-		-		3,714		3,272
Total		474,999		5,315		43,549		467		4,037		7,781		13,427		2,239		8,313		233		560,360		566,311

⁽¹⁾The amount includes endorsements, sureties and committed loans, net of allowance for loan losses.

Operations with Credit Granting Characteristics by Economic Sector

The composition of loan portfolios by economic sector is presented below:

Operations with Credit Granting Characteristics in Brazil⁽¹⁾: Exposure

R$ million

12/31/2015

9/30/2015

Individuals

Rural Loans

Real State

Payroll

Vehicle and
Leasing

Credit Card

Endorsements
and Sureties⁽²⁾

Personal Loans
(Other)

Total

213

45,096

45,365

19,277

73,244

776

39,679

223,650

220,607

⁽¹⁾The amount includes endorsements, sureties and committed loans, net of allowance for loan losses.

Operations with Credit⁽¹⁾ Granting Characteristics in Brazil: Exposure																													R$ million
	12/31/2015																												9/30/2015
													Working Capital,
	Rural Loans				Investments				Import and Export				Discount Bonds and Guaranteed Account				Endorsements and Sureties⁽³⁾				Other				Total				Total
Companies		Total	%			Total	%			Total	%			Total	%			Total	%			Total	%			Total	%			Total	%
Public Sector		-	0.0	%		1,813	2.5	%		1,065	2.7	%		331	0.2	%		803	1.5	%		-	0.0	%		4,012	1.2	%		4,697	1.3	%
ENERGY		-	0.0	%		-	0.0	%		-	0.0	%		90	0.1	%		-	0.0	%		-	0.0	%		90	0.0	%		133	0.0	%
PETROCHEMICAL AND CHEMICAL		-	0.0	%		1,732	2.4	%		1,021	2.6	%		5	0.0	%		752	1.4	%		-	0.0	%		3,510	1.1	%		4,215	1.2	%
SUNDRY		-	0.0	%		81	0.1	%		44	0.1	%		236	0.2	%		51	0.1	%		-	0.0	%		412	0.1	%		349	0.1	%
Private Sector		9,358	100.0	%		69,798	97.5	%		37,792	97.3	%		144,367	99.8	%		52,934	98.5	%		3,749	100.0	%		317,998	98.8	%		349,757	98.7	%
SUGAR AND ALCOHOL		1,147	12.3	%		5,389	7.5	%		2,562	6.6	%		503	0.3	%		629	1.2	%		52	1.4	%		10,282	3.2	%		10,536	3.0	%
AGRIBUSINESS AND FERTILIZERS		2,166	23.1	%		1,972	2.8	%		3,903	10.0	%		6,500	4.5	%		1,342	2.5	%		56	1.5	%		15,939	4.9	%		17,298	4.9	%
FOOD AND BEVERAGE		1,443	15.4	%		3,559	5.0	%		1,773	4.6	%		5,909	4.1	%		4,879	9.1	%		96	2.6	%		17,659	5.5	%		20,691	5.8	%
BANKS AND OTHER FINANCIAL INSTITUTIONS		554	5.9	%		373	0.5	%		5	0.0	%		6,728	4.6	%		2,135	4.0	%		6	0.2	%		9,801	3.0	%		12,411	3.5	%
CAPITAL ASSETS		152	1.6	%		2,896	4.0	%		1,256	3.2	%		2,628	1.8	%		1,803	3.4	%		182	4.9	%		8,917	2.8	%		9,695	2.7	%
PULP AND PAPER		102	1.1	%		873	1.2	%		1,449	3.7	%		818	0.6	%		264	0.5	%		11	0.3	%		3,517	1.1	%		3,772	1.1	%
ELECTRONIC AND IT		1	0.0	%		541	0.8	%		266	0.7	%		3,118	2.2	%		1,799	3.3	%		120	3.2	%		5,845	1.8	%		6,839	1.9	%
PACKAGING		-	0.0	%		500	0.7	%		441	1.1	%		1,745	1.2	%		411	0.8	%		135	3.6	%		3,232	1.0	%		3,379	1.0	%
ENERGY AND SEWAGE		-	0.0	%		4,595	6.4	%		59	0.2	%		3,050	2.1	%		4,930	9.2	%		342	9.1	%		12,976	4.0	%		12,398	3.5	%
EDUCATION		8	0.1	%		259	0.4	%		-	0.0	%		1,189	0.8	%		684	1.3	%		33	0.9	%		2,173	0.7	%		2,156	0.6	%
PHARMACEUTICALS AND COSMETICS		-	0.0	%		395	0.6	%		453	1.2	%		3,443	2.4	%		1,635	3.0	%		94	2.5	%		6,020	1.9	%		7,185	2.0	%
REAL ESTATE AGENTS		15	0.2	%		14,880	20.8	%		13	0.0	%		8,056	5.6	%		1,453	2.7	%		175	4.7	%		24,592	7.6	%		25,969	7.3	%
ENTERTAINMENT AND TOURISM		-	0.0	%		425	0.6	%		29	0.1	%		3,501	2.4	%		402	0.7	%		155	4.1	%		4,512	1.4	%		4,520	1.3	%
WOOD AND FURNITURE		37	0.4	%		730	1.0	%		367	0.9	%		1,625	1.1	%		122	0.2	%		100	2.7	%		2,981	0.9	%		3,166	0.9	%
CONSTRUCTION MATERIAL		1	0.0	%		1,747	2.4	%		644	1.7	%		3,506	2.4	%		1,334	2.5	%		105	2.8	%		7,337	2.3	%		8,145	2.3	%
STEEL AND METALLURGY		41	0.4	%		2,416	3.4	%		2,156	5.5	%		6,072	4.2	%		1,551	2.9	%		206	5.5	%		12,442	3.9	%		13,447	3.8	%
MEDIA		-	0.0	%		481	0.7	%		97	0.2	%		445	0.3	%		285	0.5	%		18	0.5	%		1,326	0.4	%		1,577	0.4	%
MINING		3	0.0	%		845	1.2	%		734	1.9	%		3,325	2.3	%		2,128	4.0	%		13	0.3	%		7,048	2.2	%		7,945	2.2	%
INFRASTRUCTURE WORK		-	0.0	%		1,175	1.6	%		629	1.6	%		1,837	1.3	%		2,023	3.8	%		116	3.1	%		5,780	1.8	%		6,375	1.8	%
OIL AND GAS ⁽²⁾		112	1.2	%		512	0.7	%		516	1.3	%		3,963	2.7	%		1,285	2.4	%		47	1.3	%		6,435	2.0	%		6,780	1.9	%
PETROCHEMICAL AND CHEMICAL		250	2.7	%		1,530	2.1	%		2,329	6.0	%		3,555	2.5	%		1,534	2.9	%		238	6.3	%		9,436	2.9	%		10,534	3.0	%
HEALTH CARE		1	0.0	%		565	0.8	%		44	0.1	%		1,565	1.1	%		345	0.6	%		32	0.9	%		2,552	0.8	%		2,721	0.8	%
INSURANCE AND REINSURANCE AND PENSION P		-	0.0	%		-	0.0	%		-	0.0	%		12	0.0	%		84	0.2	%		-	0.0	%		96	0.0	%		93	0.0	%
TELECOMMUNICATIONS		-	0.0	%		569	0.8	%		-	0.0	%		768	0.5	%		4,798	8.9	%		8	0.2	%		6,143	1.9	%		9,471	2.7	%
CLOTHING AND FOOTWEAR		91	1.0	%		875	1.2	%		690	1.8	%		3,061	2.1	%		460	0.9	%		123	3.3	%		5,300	1.6	%		5,566	1.6	%
TRADING		31	0.3	%		145	0.2	%		435	1.1	%		1,141	0.8	%		618	1.2	%		21	0.6	%		2,391	0.7	%		2,503	0.7	%
TRANSPORTATION		10	0.1	%		8,523	11.9	%		822	2.1	%		4,693	3.2	%		1,597	3.0	%		237	6.3	%		15,882	4.9	%		17,616	5.0	%
DOMESTIC APPLIANCES		-	0.0	%		140	0.2	%		285	0.7	%		1,664	1.1	%		416	0.8	%		15	0.4	%		2,520	0.8	%		2,696	0.8	%
VEHICLES AND AUTOPARTS		2	0.0	%		5,446	7.6	%		3,486	9.0	%		6,655	4.6	%		4,741	8.8	%		188	5.0	%		20,518	6.4	%		22,668	6.4	%
THIRD SECTOR		-	0.0	%		23	0.0	%		-	0.0	%		3,778	2.6	%		27	0.1	%		2	0.1	%		3,830	1.2	%		3,878	1.1	%
PUBLISHING AND PRINTING		-	0.0	%		137	0.2	%		41	0.1	%		753	0.5	%		174	0.3	%		68	1.8	%		1,173	0.4	%		1,274	0.4	%
COMMERCE - SUNDRY		14	0.1	%		1,194	1.7	%		704	1.8	%		14,824	10.2	%		1,921	3.6	%		371	9.9	%		19,028	5.9	%		18,253	5.1	%
INDUSTRY - SUNDRY		14	0.1	%		106	0.1	%		5,297	13.6	%		5,011	3.5	%		282	0.5	%		10	0.3	%		10,720	3.3	%		11,874	3.3	%
SUNDRY SERVICES		138	1.5	%		2,430	3.4	%		5,684	14.6	%		19,648	13.6	%		2,565	4.8	%		303	8.1	%		30,768	9.6	%		35,053	9.9	%
SUNDRY		3,025	32.3	%		3,552	5.0	%		623	1.6	%		9,278	6.4	%		2,278	4.2	%		71	1.9	%		18,827	5.8	%		21,273	6.0	%
Total		9,358	100.0	%		71,611	100.0	%		38,857	100.0	%		144,698	100.0	%		53,737	100.0	%		3,749	100.0	%		322,010	100.0	%		354,454	100.0	%

⁽¹⁾Including sureties, endorsements and credit commitments, netted from allowance for loan losses.

⁽²⁾ Comprises trade of fuel.

⁽³⁾From the 4th quarter of 20015, the BACEN Circular 3,770 has changed the Credit Conversion Factor (“Fator de Conversão de Crédito”) applied to some specific Endorsements and Sureties to 50%.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Remaining maturity of loan transactions

The table below presents the remaining maturity of operations with credit granting characteristics detailed by type of products:

Remaining maturities of loan transactions ⁽¹⁾															R$ million
	12/31/2015								9/30/2015
	up to 6		6 to 12		1 to 5				up to 6		6 to 12		1 to 5
	months		months		years		above 5 years		months		months		years		above 5 years
Individuals	60,514		5,415		58,294		65,496		58,984		5,226		56,566		68,019
Rural Loans		21		83		96		9		51		50		94		11
Real State		8		34		932		44,122		279		28		938		42,843
Payroll		290		895		24,970		19,209		276		761		21,395		23,606
Vehicle and Leasing		716		2,077		16,479		4		832		1,973		18,059		6
Credit card		52,815		-		-		-		49,953		-		-		-
Guarantees		204		109		162		300		120		186		148		300
Personal Loans (Other)		6,460		2,217		15,655		1,852		7,473		2,228		15,932		1,253
Companies		85,858		31,499		116,863		69,052		85,191		33,880		118,078		92,342
Rural Loans		3,938		3,142		1,810		295		3,799		3,692		1,617		257
Investments		6,130		6,198		35,503		17,974		5,519		7,352		37,817		17,827
Import and Export		13,652		4,845		16,098		4,264		15,194		4,339		16,475		5,274
Working Capital, Discount Bonds and Guaranteed Account		52,866		11,358		50,544		17,556		51,412		11,352		48,424		20,454
Endorsements and Sureties		9,171		5,812		10,129		28,238		9,173		6,968		10,747		48,120
Other		101		144		2,779		725		94		177		2,998		410
Total		146,372		36,914		175,157		134,548		144,175		39,106		174,644		160,361

⁽¹⁾ Do not include loan commitments.

Concentration on the Major Debtors

Concentration of Largest Clients with Credit Granting Characteristics													R$ million
	Prudential										Financial
	Exposure		% of portfolio			Exposure		% of portfolio			Exposure		% of portfolio
Loan, Lease and Other Credit Operations ⁽¹⁾	12/31/2015					9/30/2015					12/31/2014
Largest debtor		4,754		0.9	%		5,099		0.9	%		5,324		1.0	%
10 largest debtors		35,526		6.5	%		35,257		6.4	%		32,788		6.2	%
20 largest debtors		55,184		10.1	%		54,978		10.0	%		53,209		10.1	%
50 largest debtors		92,745		17.1	%		92,304		16.8	%		88,485		16.8	%
100 largest debtors		123,664		22.7	%		124,456		22.7	%		118,679		22.6	%

⁽¹⁾The amounts include endorsements and sureties. Do not include loan commitments.

Concentration of Major Clients with Credit Granting Characteristics													R$ million
	Prudential										Financial
	Exposure		% of portfolio			Exposure		% of portfolio			Exposure		% of portfolio
Loan, Lease and Other Credit Operations and Securities of Companies and Financial Institutions⁽¹⁾	12/31/2015					9/30/2015					12/31/2014
Largest debtor		8,051		1.3	%		8,014		1.2	%		5,507		0.9	%
10 largest debtors		51,672		8.1	%		52,285		8.0	%		41,262		6.8	%
20 largest debtors		82,208		12.8	%		83,505		12.8	%		68,924		11.3	%
50 largest debtors		134,405		21.0	%		138,994		21.2	%		119,972		19.7	%
100 largest debtors		175,681		27.4	%		184,116		28.1	%		160,805		26.5	%

⁽¹⁾The amounts include endorsements and sureties. Do not include loan commitments.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Overdue Amounts

The table below presents the balance of overdue amounts:

Overdue Amounts: by Brazil Regions and Countries																	R$ million
	12/31/2015										9/30/2015
			61 to 90		91 to 180		181 to 360		Above 360				61 to 90		91 to 180		181 to 360		Above 360
	15 to 60 days		days		days		days		days		15 to 60 days		days		days		days		days
Southeast		5,531		1,808		4,545		4,866		347		7,057		1,731		4,398		5,123		252
South		994		363		820		914		66		1,119		337		812		826		56
North		303		92		214		247		24		312		85		194		261		16
Northeast		865		367		982		1,241		84		1,053		366		909		1,052		56
Midwest		566		223		452		524		44		582		193		413		487		33
Brazil		8,259		2,853		7,013		7,792		565		10,123		2,712		6,726		7,749		413
Foreign		927		133		269		212		71		950		165		293		289		53
Total		9,186		2,986		7,282		8,004		636		11,073		2,877		7,019		8,038		466

Overdue Amounts: by Economic Sector																	R$ million
	12/31/2015										9/30/2015
			61 to 90		91 to 180		181 to 360		Above 360				61 to 90		91 to 180		181 to 360		Above 360
	15 to 60 days		days		days		days		days		15 to 60 days		days		days		days		days
Public Sector		-		-		-		-		-		-		-		-		-		-
Private Sector		9,186		2,986		7,282		8,004		636		11,073		2,877		7,019		8,038		466
Companies		3,309		844		2,474		2,209		197		4,578		842		2,229		2,914		140
Industry and Commerce		1,376		496		1,168		1,199		126		2,067		412		1,232		1,543		87
Services		1,495		322		1,036		650		44		2,234		359		585		1,187		42
Primary		423		24		265		350		26		262		69		403		178		11
Other		15		2		5		10		1		15		2		9		6		-
Individuals		5,877		2,142		4,808		5,795		439		6,495		2,035		4,790		5,124		326
Total		9,186		2,986		7,282		8,004		636		11,073		2,877		7,019		8,038		466

Allowance for Loan Losses

In order to be hedged against losses arising from loan operations, Itaú Unibanco takes into consideration all the aspects that determine the client’s credit risk to determine the provision level that is appropriate to the risk incurred in each operation. For each operation, the assessment and the client or economic group rating, the operation rating, and the possible existence of past due amounts are taken into account and the volume of the regulatory provision is determined.


Allowance for Loan Losses - Quarterly evolution																				R$ million
	12/31/2015											9/30/2015
				Necessary											Necessary
	Opening Balance			accounting net provisions			Write-Off		Final Balance			Opening Balance			accounting net provisions			Write-Off		Final Balance
Public Sector		(1	)		-			-		(1	)		(2	)		1			-		(1	)
Private Sector		(33,673	)		(5,699	)		5,852		(33,520	)		(27,652	)		(10,192	)		4,171		(33,673	)
Companies		(16,135	)		(2,215	)		3,174		(15,176	)		(12,232	)		(5,451	)		1,548		(16,135	)
Industry and Commerce		(6,437	)		(1	)		1,124		(5,314	)		(5,429	)		(1,910	)		902		(6,437	)
Services		(7,784	)		(2,322	)		1,920		(8,186	)		(5,882	)		(2,449	)		547		(7,784	)
Primary		(1,891	)		106			128		(1,657	)		(898	)		(1,089	)		96		(1,891	)
Other		(23	)		2			2		(19	)		(23	)		(3	)		3		(23	)
Individuals		(17,538	)		(3,484	)		2,678		(18,344	)		(15,420	)		(4,741	)		2,623		(17,538	)
Total		(33,674	)		(5,699	)		5,852		(33,521	)		(27,654	)		(10,191	)		4,171		(33,674	)

Itaú Unibanco

Risk and Capital Management – Pillar 3

Mitigating Instruments

Itaú Unibanco uses guarantees aiming at increasing resiliencies in operations with credit risk. The using guarantees can be personal guarantees, secured guarantees, legal structures with mitigating power and netting arrangements.

When used for managerial purposes, to be considered as credit risk mitigation instrument, the guarantees need to comply with requirements and determinations of the regulations that govern the guarantees, whether internal or external and are legally valid (effective), enforceable and regularly evaluated. In the case of tangible collateral, legal structures with mitigating effects and set-off agreements, mitigation depends on established methods jointly approved by the business units responsible for managing credit risk and the central credit risk control area. Such methods take into account factors relating to the legal enforcement of the security, the costs involved in the process and the expected execution value, considering market volatility and liquidity. Additionally, fiduciary guarantees and the purchase of protection through credit derivatives mitigate credit risk by substituting the taker’s risk parameters with those of the guarantor.

Itaú Unibanco uses credit derivatives, such as single name CDS, to mitigate the credit risk of its portfolios of securities. These instruments are priced based on models that use the fair value of market inputs, such as credit spreads, recovery rates, correlations and interest rates.

The credit limits are continuously monitored and changed according to client behavior. Thus, the potential loss values represent a fraction of the amount available.

The table below presents the total amount mitigated by risk mitigating instruments (personal and secured guarantees) as defined in BACEN Circular 3,644, Art. 36, 3rd paragraph.

It is worth noting that purchase and sale commitments and residential real estate or first mortgage-backed loan operations are considered when determining risk weights assets.

Total Mitigation					R$ million
	Prudential				Financial
	12/31/2015		9/30/2015		12/31/2014
Demand and time deposits, savings and own financial credit bills		318,628		287,112		308,239
FPR 0%		318,628		287,112		308,239
Securities		14,360		12,748		42,530
FPR 0%		14,360		12,748		42,530
Personal Guarantee		35,665		36,036		30,774
FPR 0%		3,647		3,972		2,646
FPR 50%		32,017		32,064		28,128

Itaú Unibanco

Risk and Capital Management – Pillar 3

Counterparty Credit Risk

Itaú Unibanco sees the counterparty credit risk as a possibility of noncompliance, by a given counterparty, with obligations related to the settlement of transactions that involve the trading of financial assets with a bilateral risk, including those related to the settlement of derivative financial instruments. Additionally, Itaú Unibanco includes the risk of deterioration of the credit quality of the counterparty in its risk assessment.

Itaú Unibanco’s structure for managing, monitoring and controlling the counterparty credit risk arising from derivative financial instruments and other financial instruments, is inserted in the credit risk management framework.

For management purposes, counterparty credit risk is managed and measured by considering the potential credit risk (RCP) of transactions using an internal model with a 95% confidence level. The RCP is the value of the potential financial exposure that a transaction can attain upon maturity, and it is used to define utilization of credit risk limits attributed to counterparties. During the life of a derivatives contract, the adjustments on marking the transaction to market and the credit risk spread attaching to over-the-counter trades are the chief instruments used to measure possible losses in respect of Counterparty Credit Risk. After the maturity of a derivatives contract, Itaú Unibanco’s practice is to set up a provision for the amounts receivable on these instruments.

The table below presents the notional value of the contracts subject to the counterparty credit risk. According to Circular No. 3,644, for the calculation of the net global exposure to the counterparty credit risk arising from operations with derivative financial instruments, the application of the Future Potential Exposure Factor (FEPF) is considered. In the case of unsettled operations, the application of the Unsettled Operation Credit Conversion Factor (FCL) is considered. The application of these factors reduces the final exposure of the operations subject to the counterparty credit risk.

Notional Amount of Contracts Subject to the Counterparty Credit Risk					R$ million
	Prudential				Financial
	12/31/2015		9/30/2015		12/31/2014
Notional Amount		1,978,818		1,976,414		1,582,323
Settled in Settlement Systems (Stock Exchange) ⁽¹⁾		768,410		805,968		359,916
Not Settled in Settlement Systems (Over-The-Counter)		1,210,408		1,170,446		1,222,407
With Guarantees		561,251		476,557		507,606
Without Guarantees		649,157		693,889		714,800

⁽¹⁾amounts related to contracts settled in the settlement system of a clearing house for the financial settlement of operations in which the house operates as the central counterparty.

The tables below presents the gross positive amount and the amount of the guarantees of the contracts subject to the counterparty credit risk.

Gross Positive Amount of Contracts Subject to the Counterparty Credit Risk					R$ million
	Prudential				Financial
	12/31/2015		9/30/2015		12/31/2014
Total Gross Positive Amount		604,210		540,349		536,891
Repurchase agreements		567,890		483,875		513,208
Others		36,320		56,474		23,683

Guarantees of Contracts Subject to the Counterparty Credit Risk

R$ million

Prudential

Financial

12/31/2015

9/30/2015

12/31/2014

Gross Amount of the Guarantees

561,251

476,557

507,606

The table below presents the net global exposure to the credit risk of the counterparty, calculated in accordance with the criteria of Circular No. 3,664 and applying the Future Potential Exposure and Unsettled Operation Credit Conversion factors.

Exposure to the Counterparty Credit Risk

R$ million

Prudencial

Operacional

12/31/2015

9/30/2015

12/31/2014

Net Global Exposure to the Counterparty Credit Risk

35,948

44,885

32,376

Itaú Unibanco

Risk and Capital Management – Pillar 3

Acquisitions, Sale or Transfer of Financial Assets

The acquisition of financial assets follows the same policies and the same credit governance established for the portfolios originated at Itaú Unibanco, where decision-making is based on the objective assessment of the borrowers’ credit risk. Financial asset acquisitions can aim at increasing loan portfolio diversification or meeting the clients’ demands for liquidity. The purpose of the sale and transfer of financial assets is to meet investor demand for credit assets and be used as a portfolio credit risk management instrument.

Credit assignments (transfers of receivables) carried out through December 2011 were recorded in accordance with current regulation together with income recognition at the time of the assignment, regardless of the risks and benefits being retained or not.

Since beginning January 2012, as provided for by CMN Resolution No. 3,533 and supplementary regulation, accounting records take into consideration the retention or non-retention of risks and benefits on sale or transfers of financial assets.

Sale or Transfer of Financial Assets					R$ million
	Prudential				Financial
	12/31/2015		9/30/2015		12/31/2014
Balance of exposures assigned with significant withholding of risks and benefits		171		183		222
Balance of sale of exposure with substantial retention of risks and benefits		5,497		5,591		4,337
Credit rights Investments Fund (FIDC)		-		-		-
Securitization Companies		5,474		5,564		4,337
Financial institutions		23		27		-
Specific Purpose Company (SPE)		-		-		-
Balance of sale of exposure without substantial transfer or retention of risks and benefits		-		-		-

Sale or Transfer of Financial Assets									R$ million
	Prudential								Financial
	4th quarter		3rd quarter		2nd quarter		1st quarter		4th quarter
	2015		2015		2015		2015		2014
Flow of sale exposure in the quarter with substantial transfer of risks and rewards		946		50		442		206		1,248
Credit rights Investments Fund (FIDC)		-		2		-		-		25
Securitization Companies		675		5		442		173		1,174
Financial institutions		15		43		-		33		-
Specific Purpose Company (SPE)		-		-		-		-		-
Other⁽¹⁾		256		-		-		-		49
Total exposures assigned honored, repurchased, or written-off		117		151		141		175		178

⁽¹⁾ Transfer of college credits held with the public sector.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Acquisition of Financial Assets					R$ million
	Prudential				Financial
	12/31/2015		9/30/2015		12/31/2014
Acquisitions of loan portfolios WITH the retention of assignor's risks and rewards
a) By type of exposure		3,692		3,932		5,390
Individuals - Payroll		-		1		14
Individuals - Vehicle and Leasing		2,592		2,932		3,274
Companies -Loans (CCB)		1,086		981		2,067
Companies - Other		14		18		35
b) By type of assignor		3,692		3,932		5,390
Credit rights Investments Fund (FIDC)		-		-		-
Securitization Companies		-		-		-
Financial institutions		3,692		3,932		5,390
Specific Purpose Company (SPE)		-		-		-

Acquisition of Financial Assets					R$ million
	Prudential				Financial
	12/31/2015		9/30/2015		12/31/2014
Acquisitions of loan portfolios with NO retention of assignor's risks and rewards
a) By type of exposure		6,542		7,537		10,669
Individuals – Payroll		6,542		7,537		10,669
b) By type of assignor		6,542		7,537		10,669
Credit rights Investments Fund (FIDC)		-		-		-
Securitization Companies		-		-		-
Financial institutions		6,542		7,537		10,669
Specific Purpose Company (SPE)		-		-		-

Operations of Securitization

Itaú Unibanco’s portfolio includes securities arising from securitization processes. The portfolio is made up of Securitized Real Estate Loans (CRI), quotas of Credit Rights Investment Funds (FIDC) and Agribusiness Receivables Certificate (CRA).

The CRIs are backed by real estate loans and predominantly are not subordinated. The quotas of FIDCs are usually senior and backed by receivables, such as trade notes, promissory notes. The CRAs are backed by receivables linked to agribusiness.

Itaú Unibanco classifies securities arising from securitization processes based on the governance of products determined, and the credit is approved at the proper authority levels. The balances of these operations are presented below.

Securitization Exposures ⁽¹⁾					R$ million
	Prudential				Financial
	12/31/2015		9/30/2015		31/12/2014
CRI		17,694		18,053		16,071
Mortgage Loans		17,694		18,053		16,071
Single-Tranche		15,660		15,982		13,548
Senior		-		-		-
Subordinated		2,034		2,071		2,523
CRA		25		33		53
Credit Related to Agribusiness		25		33		53
Single-Tranche		25		33		53
Senior		-		-		-
Subordinated		-		-		-
FIDC		-		9		47
Credit Rights		-		9		47
Single-Tranche		-		-		-
Senior		-		9		47
Subordinated		-		-		-
Total		17,719		18,095		16,171

⁽¹⁾ values of traditional securitization.

Itaú Unibanco follows risk retention guidelines as defined at Resolutions 3,533 of the CMN.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Then there is the summary of the securitization activity in the period:

Securitization Activities in the Period⁽¹⁾					R$ million
	Prudential				Financial
	4th quarter 2015		3^rd quarter 2015		4^th quarter 2014
CRI		266		47		1,380
Mortgage Loans		266		47		1,380
FIDC		-		-		-
Credit Rights		-		-		-
FII		-		397		-
Real estate credit bills		-		397		-
CRA		675		-		834
Credit Rights		675		-		834
Total		941		444		2,214

⁽¹⁾ values of traditional securitization.

Credit Derivatives

Itaú Unibanco buys and sells credit protection mainly related to securities of the Brazilian government and securities of Brazilian listed companies in order to meet the needs of its customers. When Itaú Unibanco sells contracts for credit protection, the exposure for a given reference entity may be partially or totally offset by a credit protection purchase contract of another counterparty for the same reference entity or similar entity. The credit derivatives for which Itaú Unibanco is protection seller are credit default swap (CDS) and total return swap (TRS).

CDS is credit derivative in which, upon a credit event related to the reference entity pursuant to the terms of the contract, the protection buyer is entitled to receive, from the protection seller, the amount equivalent to the difference between the face value of the CDS contract and the fair value of the liability on the date the contract was settled, also known as the recovered amount. The protection buyer does not need to hold the debt instrument of the reference entity for it to receive the amounts due pursuant to the CDS contract terms when a credit event occurs.

TRS is a transaction in which a party swaps the total return of a reference entity or of a basket of assets for regular cash flows, usually interest and a guarantee against capital loss. In a TRS contract, the parties do not transfer the ownership of the assets.

The maximum potential loss that may be incurred with the credit derivative is based on the notional amount of the derivative. Itaú Unibanco believes that, based on its historical experience, the maximum potential loss does not represent the expected loss. It happens because, when a loss event occurs, the amount of maximum potential loss should be reduced from the notional amount by the recoverable amount.

The credit derivatives sold are not covered by guarantees, and during the fourth quarter of 2015, Itaú Unibanco has not incurred any loss related to credit derivative contracts.

The table below shows the nominal value of purchased credit derivatives that are identical to those that Itaú Unibanco acts as seller of protection underlying values.

Notional Amount of Credit Derivatives Held in Portfolio							R$ million
	Prudential						Financial
	12/31/2015			9/30/2015			12/31/2014
Risk Transferred		3,863			3,835			2,661
Credit Default Swap (CDS)		3,863			3,835			2,661
Total Return Swap (TRS)		-			-			-
Risk Received		(8,799	)		(9,050	)		(8,500	)
Credit Default Swap (CDS)		(8,799	)		(9,050	)		(6,829	)
Total Return Swap (TRS)		-			-			(1,671	)
Total		(4,936	)		(5,215	)		(5,839	)
Required capital of Risk Received		(467	)		(461	)		(360	)

Itaú Unibanco

Risk and Capital Management – Pillar 3

Market Risk

6.1

Framework and Treatment

Market risk is the possibility of losses resulting from fluctuations in the market values of positions held by a financial institution, usually the risks caused by variations in foreign exchange rates, interest rates, price indexes, equity and commodity prices, with various indexes based on these risk factors.

At Itaú Unibanco, market risk management is the process by which management monitors and controls risk of variations in the financial instruments, due to market movements, while aiming to optimize the risk-return ratio through an adequate limits structure, alerts, effective risk management models and related management tools.

Itaú Unibanco’s institutional policies and general market risk management framework are in line with the principles of CMN Resolution No. 3,464, and subsequent amendments. These principles guide the institution’s approach to market risk control and management across all business units and legal entities of Itaú Unibanco.

The document that details the market risk control institutional policy is on the Investor Relations website www.itau.com.br/investor-relations, in the route: Corporate Governance, Rules and Policies, Public Access Report - Market Risk.

Itaú Unibanco’s market risk management strategy is aimed at balancing corporate business goals, taking into account, among other things:

Political, economic and market conditions;

The profile of Itau Unibanco’s portfolio; and

Expertise within the group to support operations in specific markets.

Itaú Unibanco’s market risk management framework is subject to the governance and hierarchy of committees and to a structure of limits and alerts, with specific limits assigned to different levels and classes of market risk (such as interest rate risk, foreign exchange risk, among others). This structure of limits and alerts covers from aggregated risk indicators at the portfolio level, to more granular limits at the individual desk level. The market risk limits framework extends to the risk factor level, with specific limits and is aim to improve the process of risk monitoring and understanding as well as prevent risk concentration. Limits and alerts are calibrated based on projections of future balance sheets, stockholders’ equity, liquidity, complexity and market volatility and the Itaú Unibanco’s risk appetite. Limits are monitored on a daily basis and breaches and potential breaches of limits are reported and discussed in accordance with the following procedure:

within one business day, for management responsible for the business units and executives in the risk control area and business areas; and

within one month, for the competent committees.

Daily risk reports used by the business and control areas are distributed to the executives officers. In addition, Itaú Unibanco’s market risk management and control process is subject to periodic reviews.

The structure of limits and alerts follows Board of Directors guidelines. These are approved by committees. The process for defining limit levels and reporting violations is subject to the approval governance of Itaú Unibanco institutional policies. The established information flow is intended to provide this information to the various executive levels of the institution, including members of the Board of Directors through the committees responsible for risk management.

The key principles underlying Itaú Unibanco’s market risk control structure are as follows:

Provide visibility and comfort for all senior management levels that market risks assumed must be in line with our risk-return objectives;

Provide disciplined and informed dialogue of the overall market risk profile and its evolution over time;

There must be transparency as to how the business works to optimize results;

The market risk control structure must provide early warning mechanisms to facilitate effective risk management, without obstructing the business objectives; and

Concentration of risks must be monitored and avoided.

Market risk management and control process is subject to periodic reviews, to ensure it reflects alignment with best market practices, and continuous improvement over time.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Market risk is controlled by an area independent of the business units, which is responsible for the following daily activities: (i) measuring and assessing risk, (ii) monitoring stress scenarios, limits and alerts, (iii) applying, analyzing and testing stress scenarios, (iv) reporting risk to the individuals responsible in the business units, in compliance with Itaú Unibanco´s governance, (v) monitoring the measures needed to adjust positions and/or risk levels to make them viable, and (vi) supporting the secure launch of new financial products. For this, there is a structured process of communication and information flow, which provides information to committees and ensures compliance with the requirements of Brazilian and foreign regulatory agencies.

Itaú Unibanco hedges transactions with clients and proprietary positions, including its foreign investments, in order to mitigate risk arising from fluctuations in market risk factors and maintain the positions on the breaching limits. Derivatives are commonly used for these hedging activities. When these transactions are classified as hedges for accounting purposes, specific supporting documentation is provided, including ongoing follow-up of hedge effectiveness (retrospective and prospective) and other changes in the accounting process. The accounting and managerial hedging procedures are governed by the institutional polices of Itaú Unibanco.

Hedge accounting considerations are presented in detail in explanatory Note 7g V – “Accounting hedge” of the Complete Financial Statements, that can be found on the website www.itau.com.br/investor-relations.

Market risk framework categorizes transactions as part of either the Banking Book or the Trading Book, in accordance with general criteria established by CMN Resolution No. 3,464 and BACEN Circular No. 3,354.

Trading Book is composed of all trades with financial and commodity instruments (including derivatives) undertaken with the intention of trading them.

Banking Book is predominantly characterized by portfolios originated from the banking business and operations related to the management of the institution’s balance sheet. As a general rule, this book’s portfolios are intended to be either held to maturity, or sold in the medium and in the long run.

Market risk exposures inherent in various financial instruments, including derivatives, are composed of various risk factors that refer to a market parameter whose variation impacts a position’s valuation. The main risk factors measured by Itaú Unibanco are as follow:

Interest rates: the risk of losses from transactions subject to interest rates variation;

Other foreign interest rates: the risk of losses from transactions subject to foreign interest rates variations;

FX Rates: the risk of losses from positions subject to foreign exchange rate variation (e.g., foreign currency positions);

Brazilian inflation indexes: the risk of losses from transactions subject to the variations in inflation-linked;

Equities and Commodities: the risk of losses from transactions subject to equity or commodities price variations.

The CMN has regulations establishing the segregation of market risk exposure at a minimum into the following categories: interest rates, FX rates, equities and commodities. Brazilian inflation indexes are treated as a group of risk indicators and receive the same treatment of the others risk indicators, such as interest rates and FX rates and follows the governance and risk limits framework adopted by Itaú Unibanco for market risk management.

Market risk is analyzed based on the following key metrics:

Value at Risk: a statistical metric that quantifies the maximum potential economic loss expected in normal market conditions, considering a defined holding period and confidence level;

Losses in Stress Scenarios (Stress Testing): a simulation technique to evaluate the impact, in the assets, liabilities and derivatives of the portfolio, of various risk factors in extreme market situations (based on prospective and historic scenarios);

Stop Loss: metrics that trigger a management review of positions, if the accumulated losses in a given period reach specified levels;

Concentration: cumulative exposure of certain financial instrument or risk factor calculated at market value ("MtM - Mark to Market"); and

Stressed VaR: statistical metric derived from VaR calculation, aimed at capturing the biggest risk in simulations of the current portfolio, taking into consideration the observable returns in historical scenarios of extreme volatility.

In addition to the risk metrics described above, sensitivity and loss control measures are also analyzed. They include:

Gap Analysis: accumulated exposure of the cash flows by risk factor, which are marked-to-market and positioned by settlement dates;

Sensitivity (DV01 – Delta Variation Risk): impact on the market value of cash flows when a 1 basis point change is applied to current interest rates or on the index rates;

Itaú Unibanco

Risk and Capital Management – Pillar 3

Sensitivities to Various Risk Factors (Greeks): partial derivatives of a portfolio of options on the prices of the underlying assets, implied volatilities, interest rates and time.

Itaú Unibanco

Risk and Capital Management – Pillar 3

6.2

Portfolio Analysis

Interest rate risk in the non-trading book

Interest rate risk corresponds to the potential loss associated with changes in market interest on index, maturity and investment and funding mismatches. The interest rate risk management process of transactions classified in the non- trading book is consistent with the corporate bodies governance and hierarchy, and the limits approved for risk market management. A mark-to-market methodology is adopted for the different products by calculating the sensitivity to the changes in interest rates, the value at risk (VaR), and stress tests are conducted to the entire book, as established in Itaú Unibanco’s institutional policies.

In treating the loan portfolios with material early settlements, the original maturities of the transactions are adjusted for the monthly revisions of their parameters, estimated from their historic bases, which accelerate the decrease of the originally contracted payment flows to better reflect the expected client behavior.

Remainders of products with no definite expiry date, such as demand deposits and savings accounts, are included in the statistics on the basis of past and seasonal experience. The core portion is distributed over time, thus generating an exposure to changes in interest rates, pursuant to internally approved methodologies.

The table below shows the sensitivity of the amount of the non-trading book positions to changes in interest rate curves, using the methodology and stress scenarios adopted to manage this book’s risks at Itaú Unibanco for the fourth quarter of 2015.

Sensibility of Banking Position ⁽¹⁾								R$ million
		Prudential
	Exposures	12/31/2015
Risk factors	Risk of variation in:	Scenario I			Scenario II			Scenario III
Interest Rate	Fixed Income Interest Rates in reais		(4	)		(1,498	)		(2,867	)
Foreign Exchange Linked	Foreign Exchange Linked Interest Rates		1			(16	)		(12	)
Price Index Linked	Interest of Inflation coupon		(2	)		(297	)		(528	)
TR	TR Linked Interest Rates		1			(225	)		(492	)

⁽¹⁾ Amounts net of tax effects.

In order to measure these sensitivities, the following scenarios are used:

· Scenario I: Shocks of 1 base point in interest fixed rates, currency coupon, inflation, interest rate indexes;

· Scenario II: Shocks of 25 percent in interest fixed rates, currency coupon, inflation, interest rate indexes, both for growth and fall, considering the largest resulting losses per risk factor;

· Scenario III: Shocks of 50 percent in interest fixed rates, currency coupon, inflation, interest rate indexes, both for growth and fall, considering the largest resulting losses per risk factor.

As required by CVM Regulatory Instruction 475, Itaú Unibanco conducts sensitivity analysis against exceptional scenarios for market risk factors considered relevant. The results can be found at Note 7j – “Sensitivity analysis (trading and banking portfolios)” of the Complete Financial Statements – BRGAAP, on the website www.itau.com.br/investor-relations.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Evolution of the Trading Portfolio

The evolution of the Trading Portfolio, broken down by major risk factors, is tabulated below:

Total Value of Trading Position													R$ million
	Prudential										Financial
	12/31/2015					9/30/2015					12/31/2014
	Long		Short			Long		Short			Long		Short
Interest Rates		121,109		(129,064	)		174,293		(178,690	)		210,353		(182,630	)
Foreign Exchange Rates		101,968		(91,090	)		138,814		(142,237	)		123,089		(120,687	)
Equities		1,376		(1,367	)		1,840		(1,942	)		18,936		(18,947	)
Commodities		20		(8	)		37		(9	)		23		(25	)

Evolution of the Derivatives Portfolio

The main purpose of the derivative positions in the Banking Portfolio is to manage risks in this portfolio and in the corresponding risk factors. The evolution of Itaú Unibanco’s derivatives portfolio, broken down by group of risk factor, by the existence or absence of a central counterparty (exchange or over-the-counter market) and whether it is in Brazil or abroad, is presented below for both Trading and Banking Portfolios:

Derivatives: Trades in Brazil - Trading + Banking - With Central Counterparty													R$ million
	Prudential										Financial
	12/31/2015					9/30/2015					12/31/2014
	Long		Short			Long		Short			Long		Short
Interest Rates		329,309		(432,361	)		224,598		(434,051	)		288,018		(368,455	)
Foreign Exchange Rates		144,922		(132,980	)		150,413		(127,928	)		80,818		(63,819	)
Equities		1,656		(1,771	)		3,153		(2,857	)		4,021		(3,994	)
Commodities		648		(326	)		794		(606	)		101		(61	)

Derivatives: Trades in Brazil - Trading + Banking - Without Central Counterparty													R$ million
	Prudential										Financial
	12/31/2015					9/30/2015					12/31/2014
	Long		Short			Long		Short			Long		Short
Interest Rates		309,375		(309,656	)		292,944		(292,995	)		164,172		(175,393	)
Foreign Exchange Rates		262,301		(295,018	)		241,998		(284,406	)		51,336		(72,681	)
Equities		20,187		(20,446	)		23,306		(23,545	)		20,751		(20,959	)
Commodities		157		(472	)		119		(275	)		167		(204	)

Derivatives: Foreign Trades - Trading + Banking - With Central Counterparty													R$ million
	Prudential					Prudential					Financial
	12/31/2015					9/30/2015					12/31/2014
	Long		Short			Long		Short			Long		Short
Interest Rates		0		(723	)		62		(668	)		82		(3,659	)
Foreign Exchange Rates		156,102		(155,786	)		154,243		(153,669	)		148,094		(143,097	)
Equities		451		(207	)		336		(642	)		141		(153	)
Commodities		17		(17	)		17		(10	)		289		(293	)

Derivatives: Foreign Trades - Trading + Banking - Without Central Counterparty													R$ million
	Prudential					Prudential					Financial
	12/31/2015					9/30/2015					12/31/2014
	Long		Short			Long		Short			Long		Short
Interest Rates		110,037		(113,171	)		108,756		(116,380	)		91,059		(89,343	)
Foreign Exchange Rates		531,271		(527,912	)		515,656		(506,890	)		260,641		(261,010	)
Equities		1,284		(1,284	)		1,469		(1,469	)		267		(267	)
Commodities		-		-			-		-			-		-

Itaú Unibanco

Risk and Capital Management – Pillar 3

VaR – Consolidated Itaú Unibanco

The methodology for the calculation of Itaú Unibanco’s Consolidated VaR uses a Historical Simulation approach. This methodology carries out the full repricing of all positions, using the real historical distribution of assets.

The table below shows the Consolidated Total VaR, comprising both the Banking and Trading Book of Itaú Unibanco, and its subsidiaries abroad, showing where there are higher concentrations of market risk (subsidiaries abroad: Itau BBA International plc, Banco Itaú Argentina S.A., Banco Itaú Chile S.A., Banco Itaú Uruguay S.A., Banco Itaú Paraguay S.A. and Itaú BBA Colombia S.A. - Corporación Financiera).

VaR - Itaú Unibanco Holding ⁽¹⁾								R$ million
VaR per Risk Factor Group		12/31/2015			9/30/2015			12/31/2014
	Brazilian Interest rates		121.2			212.9			124.8
	Other Foreign Interest rates		108.6			122.0			83.6
Itaú Unibanco	FX rates		13.1			33.3			26.5
	Brazilian Inflation Indexes		108.9			233.9			115.7
	Equities and Commodities		59.3			34.1			22.5
	Itau BBA International ⁽⁴⁾		3.0			9.1			1.6
	Banco Itaú Argentina ⁽²⁾		7.8			9.1			1.9
Itaú Unibanco Foreign	Banco Itaú Chile ⁽²⁾		4.7			9.5			5.3
Units	Banco Itaú Uruguai ⁽³⁾		2.6			2.8			2.1
	Banco Itaú Paraguai ⁽⁴⁾		7.6			1.9			3.5
	Banco Itaú BBA Colômbia ⁽²⁾		0.4			1.4			0.5
	Diversification effect		(233.3	)		(353.6	)		(194.9	)
	Total VaR		204.0			316.3			193.1
	Maximum Total VaR of the Quarter		327.6			340.7			227.7
	Average Total VaR of the Quarter		213.6			214.1			176.0
	Minimum Total VaR of the Quarter		170.8			152.3			131.1

⁽¹⁾ Considers one-day holding period and 99% confidence level.

⁽²⁾VaR calculated using historical simulation as from the first quarter of 2015.

⁽³⁾VaR calculated using historical simulation as from the third quarter of 2015.

⁽⁴⁾VaR calculated using historical simulation as from this quarter.

Itaú Unibanco maintained its conservative and diversification management style, having operated within low limits in relation to its capital through the period. The Total Average VaR for the quarter remained below 1% of Itaú Unibanco’s consolidated stockholders’ equity.

Decreases in Total VaR over the previous quarter are mainly due to changes in market volatility levels and reductions in the position.

VaR - Trading Portfolio

Our Trading Portfolio VaR, based on the “historical simulation” methodology, is presented below.

VaR - Itaú Unibanco - Trading Portfolio ⁽¹⁾							R$ million
VaR per Risk Factor Group	12/31/2015			9/30/2015			12/31/2014
Brazilian Interest rates		22.9			40.6			16.6
Other Foreign Interest rates		14.0			21.3			3.6
FX rates		12.9			16.8			10.7
Brazilian Inflation Indexes		7.7			13.5			8.1
Equities and Commodities		6.6			8.6			4.3
Diversification effect		(43.2	)		(63.9	)		(26.4	)
Total VaR		20.8			37.0			16.9
Maximum Total VaR of the Quarter		42.3			49.4			53.0
Average Total VaR of the Quarter		23.7			28.8			22.1
Minimum Total VaR of the Quarter		10.6			13.0			13.1

⁽¹⁾VaR Historical Simulation approach. Amounts reported consider one-day holding period and 99% confidence level.

⁽²⁾ External Units are not cosidered.

Itaú Unibanco

Risk and Capital Management – Pillar 3

VaR - Foreign Units

Itaú Unibanco’s foreign units are financial institutions based in different countries that operate with local treasuries, with market risk exposures monitored by local risk control groups. These local treasury and risk control groups are subject to oversight by the equivalent structures of Itaú Unibanco at Group level. The foreign units are Itau BBA International, Banco Itaú Argentina, Banco Itaú Chile, Banco Itaú Uruguai, Banco Itaú Paraguai and Itaú BBA Colombia S.A. Corporación Financiera.

The consolidated exposure of market risk of the foreign units in the fourth quarter, when compared to the previous one, reflected a decrease as can be seen in the table below.

The Total consolidated VaR of all the foreign units represents less than 1% of Itaú Unibanco’s net equity.

VaR - Itaú Unibanco Foreign Units ⁽¹⁾								R$ million
VaR per Risk Factor		12/31/2015			9/30/2015			12/31/2014
	Euribor		0.1			0.4			0.2
	Libor + Dollar linked interest rate		3.2			7.8			0.3
*Itau BBA*	FX rate		0.5			1.0			0.5
*International ⁽³⁾*	Equities		-			0.0			0.0
	Others		0.3			0.1			1.0
	Diversification effect		(1.1	)		(0.3	)		(0.4	)
	Total VaR IBBA International		3.0			9.1			1.6
	Fixed income interest rate (Argentine peso)		3.0			1.4			2.0
	Inflation index linked interest rate		-			0.0			0.0
	Badlar		1.1			0.7			0.4
*Banco Itaú Argentina ⁽¹⁾*	FX + interest rate - Dollar		8.0			8.7			1.3
	FX + interest rate - Other currencies		1.7			2.4			-
	Diversification effect		(5.9	)		(4.1	)		(1.8	)
	Total VaR Itaú Argentina		7.8			9.1			1.9
	Fixed income interest rate (Chilean peso)		0.7			1.6			0.3
	Inflation index linked interest rate		5.1			10.8			4.4
*Banco Itaú Chile ⁽¹⁾*	FX + interest rate - Dollar		0.7			1.2			1.6
	FX rate - Other currencies		-			0.3			-
	Diversification effect		(1.8	)		(4.4	)		(1.0	)
	Total VaR Itaú Chile		4.7			9.5			5.3
	Fixed income interest rate (Uruguayan peso)		0.5			0.6			0.2
	Inflation index linked interest rate		2.3			1.4			1.1
*Banco Itaú Uruguai ⁽²⁾*	Dollar linked interest rate		2.5			1.6			2.1
	FX rate		0.6			0.3			0.1
	Diversification effect		(3.2	)		(1.1	)		(1.3	)
	Total VaR Itaú Uruguai		2.6			2.8			2.1
	Fixed income interest rate (guarani)		1.0			1.4			2.6
	Dollar linked interest rate		7.6			1.1			2.8
*Banco Itaú Paraguai ⁽³⁾*	FX rate		0.1			0.3			0.0
	Diversification effect		(1.2	)		(1.0	)		(1.9	)
	Total VaR Itaú Paraguai		7.6			1.9			3.5
	Fixed Income Interest Rate		0.4			1.4			0.1
*Banco Itaú BBA*	Dollar linked interest rate		-			-			-
*Colômbia ⁽¹⁾*	FX rate		-			-			0.5
	Diversification effect		0.0			0.0			(0.1	)
	Total VaR Itaú BBA Colômbia		0.4			1.4			0.5
	Total VaR		26.1			33.7			14.9

⁽¹⁾VaR calculated using historical simulation as from the first quarter of 2015.

⁽²⁾VaR calculated using historical simulation as from the third quarter of 2015.

⁽³⁾VaR calculated using historical simulation as from this quarter.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Backtesting

The effectiveness of the VaR model is validated by the use of backtesting techniques that compare hypothetic daily results with the estimated daily VaR. The number of exceptions to the VaR pre-established limits should be consistent, within an acceptable margin, with the hypothesis of 99% confidence level (i.e., there is a 1% probability that financial losses could be greater than the losses estimated by the model), considering a range of 250 business days (ending on December 31, 2015). The backtesting analysis presented below takes into consideration the ranges suggested by the Basel document “Supervisory Framework for the use of backtesting in conjunction with the internal models approach to market risk capital requirements.” The ranges are divided into:

Green (0 to 4 exceptions): corresponds to backtesting results that do not suggest any problems with the quality or accuracy of the models adopted;

Yellow (5 to 9 exceptions): refers to an intermediate range group, which indicates the need to pay attention and/or monitoring and may indicate the need of reviewing the model; and

Red (10 or more exceptions): demonstrate the need for improvement action.

The exposure graph below illustrates the reliability of risk measures generated from the models used by Itaú Unibanco in the Trading Portfolio (International Units are not included in these graph, given the immateriality of amounts involved).

The graph shows the adequacy level of the market risk models used by Itaú Unibanco, presenting the risk (absolute value) x return for the period considered.

Since the diagonal line represents the threshold where risk equals results, all the dots below this line indicate exceptions to the estimated risk.

For the exposure of the Trading Portfolio the hypothetic losses exceeded the VaR estimated by the model in 3 days in the period.

Backtesting - Trading Portfolio⁽¹⁾

R$ millions

⁽¹⁾ Foreign units are not considered

Itaú Unibanco

Risk and Capital Management – Pillar 3

Operational Risk

7.1

Framework and Treatment

For Itaú Unibanco the operational risk is defined as the possibility of losses arising from failure, deficiency or inadequacy of internal process, people or systems or from external events that affect the achievement of strategic, tactical or operational objectives. It includes legal risk associated with inadequacy or deficiency in contracts signed by the institution, as well as penalties due to noncompliance with laws and punitive damages to third parties arising from the activities undertaken by the Institution.

Itaú Unibanco internally classifies its risk events in:

Internal fraud;

External fraud;

Labor demands and deficient security in the workplace;

Inadequate practices related to clients, products and services;

Damages to own physical assets or assets in use by Itaú Unibanco;

Interruption of Itaú Unibanco’s activities;

Failures in information technology systems;

Failures in the performance, compliance with deadlines and management of activities at Itaú Unibanco.

In line with the principles of the CMN Resolution 3,380 and BACEN Circular 3,647, Itaú Unibanco has an operational risk management structure and institutional policy, which are annually approved by the Board of Directors and are applicable to its local and foreign companies and subsidiaries.

Operational risk management is the process composed of operational risk management and control activities, which objective is to support the institution in decision making processes, always searching for the proper identification and assessment of risks, the creation of value for stockholders and the protection of Itaú Unibanco’s assets and image.

Itaú Unibanco has a governance process that is structured through forums and corporate bodies composed of senior management, which, in turn, report to the Board of Directors, and by well-defined roles and responsibilities in order to reinforce the segregation of the business and management and control activities, ensuring independence between the areas and, consequently, well-balanced decisions with respect to risks. This is reflected in the risk management process carried out on a decentralized basis under the responsibility of the business areas and by a centralized control carried out by the internal control, compliance and operational risk department by means of methodologies, training and certification of the control environment on an independent basis and providing tools for monitoring them.

The management structure seeks to identify, prioritize and manage any operational risks, and to monitor and report management activities, for the purpose of ensuring the quality of the control environment in accordance with the internal guidelines and regulation in effect.

The executive areas managers use corporate methodologies that are built and made available by the internal control, compliance and operational risk department. Among the methodologies and tools used are the self-evaluation and the map of the organization’s prioritized risks, the approval of processes and products, the monitoring of key risk indicators that and the database of operational losses. Therefore, Itaú Unibanco’s operational risk framework ensures a conceptual exclusive basis for the management of processes, systems, projects and new products and services.

Within the governance of the management process, there are specific operational risk, internal control and compliance forums where the consolidated reports on risk monitoring, controls, action plans and operational losses are regularly presented to the business area executives.

It is worth noting that the dissemination of the risk and control culture to the employees by means of training is an important pillar of the operational risk agenda, aimed at providing a better understanding of the matter and playing a relevant role in its mitigation.

A summarized version of the institutional operational risk management policy can be found on the website www.itau.com.br/investor-relations under Corporate Governance, Regulations and Policies, Public Access Report – Operational Risk.

Itaú Unibanco

Risk and Capital Management – Pillar 3

7.2

Crisis Management and Business Continuity

The purpose of Itaú Unibanco’s Business Continuity Program is to protect its employees, ensure the continuity of the critical functions of its business lines, safeguard revenue and sustain both a stable financial market in which it operates and the trust of its clients and strategic partners in the provision of services and products.

It is composed of procedures for relocating and/ or recovering operations in response to a variety of interruption levels, and can be divided into two key elements:

Crisis Management: centralized communication and response processes to manage business interruption events and any other types of threats to the image and reputation of its identity before its employees, clients, strategic partners and regulators. The structure has a command center that constantly monitors the daily operations, as well as the media channels in which Itaú Unibanco is mentioned. The success of Crisis Management takes place through the Focal Agent Network, who are the representatives appointed by the business areas and that work in the monitoring of potential problems, resolution of crisis, resumption of business, improvement of processes and search for prevention actions;

Business Continuity Plans (PCN): document with procedures and information, developed, consolidated and maintained available for use during possible incidents, allowing the resumption of critical activities in acceptable terms and conditions. For the quick and safe resumption of the operations, Itaú Unibanco has established, in its PCN, corporate wide and customized actions for its line of business by means of:

	–	Disaster Recovery Plan: focused on the recovery of its primary data center, ensuring the continuity of the processing of critical systems within minimum pre-established periods;
	–	Workplace Contingency Plan: employees responsible for carrying out critical business functions have alternative facilities to perform their activities in the event the buildings in which they usually work become unavailable. There is approximately 2,000 contingency dedicated seats that are fully equipped to meet the needs of the business areas in emergency situations.
	–	Emergency Plan: procedures aimed at minimizing the effects of emergency situations that may impact Itaú Unibanco’s facilities, with a preemptive focus;
	–	Processes Contingency Plan: alternatives (Plan B) to carry out the critical processes identified in the business areas.

In order to keep the continuity solutions aligned with the business requirements (processes, minimum resources, legal requirements, etc) the Program applies the following tools to understand the organization:

	–	Business Impact Analysis (BIA): evaluates the criticality and resumption requirement of the processes that support the delivery of products and services. Through this analysis the businesses’ resumption priorities are defined.
	–	Risk Assessment (RA): evaluates the processes and the effectiveness of the controls in place to mitigate the inherent risks of interruption as well as to implement actions to the gaps eventually identified in the business;
	–	Threats and Vulnerabilities Analysis (AVA): identification of threats to the locations where Itaú Unibanco buildings are located. The control’s efficiency is evaluated against the potential threats in order to eventually identify vulnerabilities so that controls are adjusted or implemented to enhance the resilience level of the firm’s critical facilities.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Liquidity Risk

8.1

Framework and Treatment

Liquidity risk is defined as the likelihood of the institution not being able to effectively honor its expected and unexpected obligations, current and future, including those from guarantees commitment, not affecting its daily operations and not incurring significant losses.

The liquidity control risk is carried out by an independent group of the business units and is responsible for determining the composition of the reserve, proposing assumptions for the performance of cash flows in different timeframes, proposing liquidity risk limits in accordance with the group risk appetite, communicating any mismatches, considering liquidity risk on an individual basis in the countries where Itaú Unibanco operates, simulating the behavior of cash flows in stress conditions, assessing and reporting in advance the risks inherent to new products and operations and reporting on the information required by the regulatory agencies. All activities are subject to assessment by the independent validation, internal controls and audit departments.

The liquidity risk measurement has to comprise all financial trades of the companies of Itaú Unibanco, as well as possible contingent and unexpected exposures, such as those derived from settlement services, provision of sureties and guarantees, credit lines contracted and not used.

The liquidity policies of management and associated limits are established based on prospective scenarios, reviewed periodically and based on definitions from senior management.

The document that details the liquidity risk control institutional policy is on the Investor Relations website www.itau.com.br/investor-relations, in the route: Corporate Governance, Rules and Policies, Public Access Report - Liquidity Risk.

Pursuant to the requirements of CMN Resolutions No. 4,090 and BACEN Circular No. 3,749, Itaú Unibanco makes monthly delivery of its Liquidity Risk Statements (DLR) to BACEN and the following items are regularly prepared and submitted to the senior management for monitoring and decision support:

Different scenarios for liquidity projections;

Contingency plans for crisis situations;

Reports and charts to enable monitoring risk positions;

Assessment of funding costs and alternatives;

Tracking the sort of funding sources through a continuous control of funding sources considering counterparty type, maturity and other aspects.

8.2

Primary sources of funding

Itaú Unibanco has different sources of funding, with the main source arising from retail segment.

Primary sources of funding																			R$ million
	Prudential														Financial
	12/31/2015							9/30/2015							12/31/2014
Funding	0 to 30 days		Total		%			0 to 30 days		Total		%			0 to 30 days		Total		%
Deposits		195,103		298,320		50	%		194,401		306,903		54	%		198,856		310,831		55	%
Demand deposits		65,843		65,843		11	%		62,208		62,208		11	%		64,015		64,015		11	%
Savings deposits		111,319		111,319		19	%		111,451		111,451		20	%		118,449		118,449		21	%
Time deposits		13,465		106,189		18	%		17,730		114,855		20	%		11,705		109,242		19	%
Other		4,476		14,969		3	%		3,012		18,389		3	%		4,687		19,125		3	%
Funds from acceptances and issuance of securities⁽¹⁾		4,128		75,596		13	%		3,140		59,484		10	%		3,959		59,656		10	%
Funds from own issue ⁽²⁾		2,863		154,682		26	%		1,563		137,469		24	%		2,840		142,687		25	%
Subordinated debt		4,722		65,785		11	%		421		65,911		12	%		174		55,617		10	%
Total		206,816		594,383		100	%		199,525		569,767		100	%		205,829		568,791		100	%

⁽¹⁾Includes mortgage notes, real estate credit bills, agribusiness and financial credit bills recorded in interbank and institutional market debts and liabilities for issue of debentures and foreign borrowings and securities recorded in funds from institutional markets.

⁽²⁾ Refer to deposits received under securities repurchase agreements with securities from own issue.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Other Risks

Insurance products, pension plans and capitalização risks

Products that compose portfolios of insurance companies of Itau Unibanco are related to life and elementary insurance, as well as pension plans and capitalização. Accordingly, Itaú Unibanco understands that the main risks inherent to these products are:

Underwriting Risk is the possibility of losses arising from insurance products, pension plans and capitalização that go against company’s expectations, directly or indirectly associated with technical and actuarial bases used for calculating premiums, contributions and technical provisions;

Market Risk is the possibility of losses resulting from fluctuations in market values of assets and liabilities that comprise technical actuarial reserves;

Credit Risk is the possibility of noncompliance, by a given debtor, with obligations related to the settlement of operations that involve the trading of financial assets of reinsurance;

Operational risk is the possibility of the occurrence of losses arising from the failure, deficiency or inadequacy of internal processes, people and systems, or from external events that affect the achievement of the strategic, tactical or operational objectives of the insurance, pension and capitalização operations;

Liquidity risk in insurance operations is the possibility of the institution not be able to honor timely its obligations to policyholders and beneficiaries due to lack of liquidity of the assets comprising the actuarial technical reserves.

In line with good national and international practices and to ensure that risks arising from insurance products, pension plans and capitalização are properly identified, measured, evaluated, reported and approved in relevant forums, Itau Unibanco has a risk management framework, whose guidelines are established in institutional normative, approved by the Board, applicable to companies and subsidiaries at risk from insurance products, pension plans and capitalização, in Brazil and abroad.

The process of risk management for insurance, pensions and special savings plans is based on defined responsibilities distributed between the control and business areas, ensuring that they are independent of each other and focusing on the special nature of each risk, as per the guidelines established by Itaú Unibanco.

As part of the risk management process, there is a governance structure where decisions may be taken by committees, thus ensuring compliance with several regulatory and internal requirements, as well as balanced decisions relative to risks.

The aim of Itaú Unibanco is to ensure that assets serving as collateral for long-term products, with guaranteed minimum returns, are managed according to the characteristics of the liabilities, so that they are actuarially balanced and solvent over the long term.

Each year, liabilities for long-term products, which result in projected future benefits flows, are mapped using actuarial premises. This mapping enables Asset Liability Management models to be created, and these are used to define the best makeup of the asset portfolio to neutralize the risk of this type of product, taking into account their economic and financial viability over the long term. Portfolios of collateral assets are rebalanced periodically according to changes in market prices, the company’s liquidity requirements and the changes in the characteristics of the liabilities.

Social and Environmental Risk

In business management, Itaú Unibanco continuously takes into consideration the potential of the risk of losses due to exposure to social and environmental events arising from the performance of its activities. These events arise from the direct operation of Itaú Unibanco which, on its own, has an impact on the environment or human health. Accordingly, the institution sees the social and environmental risk as the risk of losses arising from social and environmental losses caused by Itaú Unibanco in the development of its activities or by its actions, being its management structured by specific governance and formalized by means of policies. For the purpose of mitigating the exposure to these risks, the institution incorporated the social and environmental variable into its own activities and in its business that could, somehow, trigger financial losses.

In the governance of social and environmental issues, Itaú Unibanco has the Social and Environmental Risk Committee whose purpose is to establish the governance for social and environmental risk issues for the entire institution. Additionally, the social and environmental risk is managed by the first line of defense in its daily activities with the support of the legal department and social and environmental risk analysis units dedicated to the business. The business units also have the governance of approval of new products, which assesses the social and environmental risk, thus ensuring compliance with this requirement in all products and processes of the institution.

Itaú Unibanco

Risk and Capital Management – Pillar 3

To this end, Itaú Unibanco has been developing many internal processes aimed at the management, control and mitigation of events that may lead to the occurrence of social and environmental risk, accordingly, the institution has been incorporating the social and environmental variable into different processes.

Itaú Unibanco consistently seeks to evolve in the management of social and environmental risk, always paying attention to the challenges so as to monitor the changes in and demands of society. Therefore, among other actions, we have assumed and incorporated into our internal processes a number of national and international voluntary commitments and pacts aimed at integrating social, environmental and governance aspects into our business. The main ones are the Principles for Responsible Investment (PRI), the Charter for Human Rights – Ethos, the Equator Principles (EP), the Global Impact, the Carbon Disclosure Project (CDP), the Brazilian GHG Protocol Program, the Pacto Nacional para Erradicação do Trabalho Escravo (National Pact for Eradicating Slave Labor), among others. Our efforts to increase the knowledge of the assessment of the social and environmental criteria have been recognized as models in Brazil and abroad, as shown by the recurring presence of the institution in the major sustainability indexes abroad, such as the Dow Jones Sustainability Index, and in Brazil, such as the Corporate Sustainability Index, in addition to the many awards we have received.

Regulatory Risk

Regulatory risk is considered at Itaú Unibanco as the risk arising from losses due to fines, sanctions and other penalties applied by regulatory agencies resulting from noncompliance with regulatory requirements. The regulatory risk is managed through a structured process aimed at identifying changes in the regulatory environment, analyzing their impacts on the departments of the institution and monitoring the implementation of actions directed at adherence to the regulatory requirements.

Itaú Unibanco has a structured and consistent flow for addressing rules, covering the stages of recognition, distribution, monitoring and compliance, and all of these processes are established in internal policies. The structure and flow for addressing the regulatory risk are composed of: (i) monitoring of legislative bills, notices and public consultation; (ii) recognition of new rules for determining action plans; (iii) relationship with regulators; (iv) monitoring of action plans; (v) prioritization of risks; and (vi) control of compliance with legal decisions on class actions and with the Conduct Adjustment Instrument (TAC).

Model Risk

Itaú Unibanco’s risk management already has proprietary models for risk management that are continuously monitored, and reviewed whenever necessary, aiming at ensuring effectiveness in strategic and business decisions.

Model risk is defined as the risk that arises from the models used by Itaú Unibanco not reflecting, on a consistent basis, the relationships of variables of interest, creating results that systematically differ from those observed. This risk may materialize mainly as a result of methodological inadequacies during its development or the use in different situations from those modeled.

Itaú Unibanco uses the best market practices to manage the model risk to which it is exposed during the entire lifecycle of a model and the stages of which may be classified into four main ones: development, implementation, validation and use. The best practices that mark the model risk control at the institution include: (i) certification of the quality of the database used; (ii) application of a list of essential steps to be taken during the development; (iii) conservatism in judgmental models (iv) use of external benchmarks; (v) approval of results generated in implementation; (vi) independent technical validation; (vii) assessments of use; (viii) assessments of the impact in the use; (ix) monitoring of performance; and (x) monitoring of the distribution of the explanatory variables and final score.

Country Risk

Country risk is defined as the risk of losses arising from noncompliance with the financial obligations in the terms agreed upon by borrowers, issuers, counterparties or guarantors as a result of actions taken by the government of the country where the borrower, issuer, counterparty or guarantor is located or of political, economic and social events related to that country.

Itaú Unibanco is present in many other countries in addition to Brazil. In addition to the foreign units, we have a relationship with borrowers, issuers, counterparties and guarantors from many places in the world, regardless of whether we have a foreign unit in the place where the borrower, issuer, counterparty or guarantor is located.

Itaú Unibanco

Risk and Capital Management – Pillar 3

In order to properly address the country risk, Itaú Unibanco has a specific and a process structure aimed at ensuring that the risk is managed and controlled. These processes include: (i) country risk governance; (ii) establishment of country ratings; (iii) determination of limits for countries; and (iv) monitoring of limits and treatment of noncompliance.

Business and Strategy Risk

Itaú Unibanco defines the business and strategy risk as the risk of a negative impact on the results or capital as a consequence of a faulty strategic planning, the making of adverse strategic decisions, the inability of Itaú Unibanco to implement the proper strategic plans and/or changes in its business environment.

Since the business and strategic risk can directly affect the creation of value and even the feasibility of the institution, Itaú Unibanco has implemented many mechanisms that ensure that both the business and the strategic decision-making processes follow proper governance standards, have the active participation of executives and the Board of Directors, are based on market, macroeconomic and risk information and are aimed at optimizing the risk-return ratio.

In order to treat risk properly, Itaú Unibanco has the governance standards and processes listed below that fully involve the senior management and the risk control and management department in business and strategic decisions so as to ensure that the risk is managed and that the decisions are sustainable. Therefore, there is:

Governance that has qualified decision-makers who, at the same time, are properly motivated;

Budgeting process with the active participation of the risk control and management department;

Process for the assessment of new products before they are sold;

Specific structure for the assessment and prospection of mergers and acquisitions.

Reputational Risk

Itaú Unibanco defines reputational risk as the risk arising from internal practices, risk events and external factors that may generate a negative perception of the institution among clients, counterparties, stockholders, investors, supervisors, commercial partners, among others, resulting in impacts on the value of the brand and financial losses, in addition to adversely affecting Itaú Unibanco’s capability to maintain existing commercial relations, start new businesses and continue to have access to financing sources.

Since the reputational risk directly or indirectly permeates all operations and processes of the institution, Itaú Unibanco’s governance is structured in a way to ensure that potential reputational risks are identified, analyzed and managed still in the initial phases of its operations and the analysis of new products.

Itaú Unibanco believes that our reputation is extremely important for us to achieve our long-term goals and this is why we try to align our speech with ethical and transparent practice and work, which is essential to raise the confidence of our stakeholders.

For the purpose of avoiding negative impacts on the perception of Itaú Unibanco’s image by the many stakeholders, the treatment given to reputational risk is structured by means of many processes and internal initiatives, which, in turn, are supported by internal policies, and their main purpose is to provide mechanisms for the monitoring, management, control and mitigation of the main reputational risks to which the institution is, or might be, exposed. Among them are:

Risk appetite framework;

Process for the prevention and fight against the use of Itaú Unibanco in unlawful acts;

Crisis management process and business continuity;

Processes and guidelines of the governmental and institutional relations;

Corporate communication process;

Brand management process;

Ombudsman offices initiatives and commitment to customer satisfaction;

Ethics guidelines and prevention of corruption.

For the purpose of preventing and combating unlawful acts, including money laundering, corruption, terrorism financing and fraud, Itaú Unibanco has established a corporate policy for preventing and combating unlawful acts.

In order to enable compliance with the guidelines of this policy and prevent its products and services from being used in unlawful activities, Itaú Unibanco has adopted a program to prevent and combat money laundering and terrorism financing based on the following pillars:

Client Identification Process;

Know Your Client (KYC) Process;

Itaú Unibanco

Risk and Capital Management – Pillar 3

Know Your Partner (KYP) Process;

Know Your Supplier (KYS) Process;

Know Your Employee (KYE) Process;

Assessment of New Products and Services from the unlawful activity prevention standpoint;

Monitoring of Transactions;

Communication of Suspicious Transactions to the Regulatory Bodies; and

Training and Awareness Raising.

This program applies to the entire Itaú Unibanco Group, including subsidiaries and affiliates in Brazil and abroad. Governance on preventing and combating unlawful acts is carried out by the Board of Directors and committees. The document that presents the guidelines established in the program to prevent and combat unlawful acts may be seen on the www.itau.com.br/investor-relations website in the section Corporate Governance, Regulations and Policies, corporate policy to prevent and combat unlawful acts.

In addition to the program to prevent, detect and combat unlawful acts, Itaú Unibanco is committed to protecting corporate information and ensuring the privacy of clients in any operations. To this end, Itaú Unibanco is guided by the Information Security Corporate Policy whose purpose is to ensure the application of the principles and guidelines for the protection of information and intellectual property of the organization, clients and general public.

To ensure that the processed information is properly protected, Itaú Unibanco has a process monitoring and control structure that covers technology, business areas and international units. Additionally, a Security Operation Center (SOC) that works 24/7 contributes to the monitoring of operations and minimization of the risk of a security incident.

Awareness raising campaigns to prevent corruption, money laundering, fraud and other unlawful acts are regularly carried out using the many communication channels existing with Itaú Unibanco´s employees. The actions include lectures, campaigns and in-person training and e-learning courses on the many topics. Besides lectures and campaigns, Itaú Unibanco offers a website with guidelines on security in the digital and physical world, for the general public.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Enterprise Risk Management and Alignment of Incentives

In accordance with the scope and complexity of its operations, Itaú Unibanco established processes for effectively identifying, assessing, monitoring and controlling risks, besides adequately allocating the capital to segments. In addition, Itaú Unibanco established processes, which enables the Executives and Board of Directors to hold a global view about the institution´s risk exposures, as well as a prospective view about the adequacy of its capital, besides promoting the alignment of incentives. We describe some of these processes below:

Risk Appetite

Itaú Unibanco’s risk appetite is a set of guidelines and limits approved by the Board of Directors that determine the risk levels that are acceptable for Itaú Unibanco. Divided into four levels, they combine additional ways to measure risks, seeking a broad view of the exposures incurred by the institution.

The capitalization level reflects the level of protection of the bank against significant losses, defining capitalization limits that consider the current scenarios expected and the stress scenario. This level establishes the minimum capitalization guidelines of Itaú Unibanco in relation to its risks, according to which management uses the bank’s capital in accordance with acceptable leverage levels and funding costs.

The liquidity level reflects the level of protection of the bank against a long period of funding stress, which could lead to a lack of liquidity. This level establishes the guidelines regarding the minimum liquidity levels, acceptable levels of mismatch of terms and funding structure.

The business composition level, meanwhile, seeks to ensure, by means of concentration limits, proper portfolio composition, aiming at low volatility and sustainability of the business.

Last, the franchise level addresses risks that may impact the value of the brand and reputation of Itaú Unibanco with stakeholders.

The determination of acceptable risk levels includes aspects of the organization’s strategy, as well as the regulatory environment. The monitoring of the risk appetite takes into consideration the current and prospective situation. The risk appetite and its monitoring are determined at the executive levels of the Board of Directors, and they are, therefore, an important instrument for the supervision of Itaú Unibanco’s risk management.

Stress Test

The stress test performed by Itaú Unibanco is aimed at evaluating the solvency of the institution in extreme stress situations, as well as identifying areas that are more susceptible to stress impact that may undergo risk mitigation. It is based on stressed projections of macroeconomic and credit variables, with the purpose of analyzing the added effect on income, capital and liquidity of the institution, consistent with the financial industry’s standards. The test is performed on the main bank portfolios, simulating the impact on each business area through the calculation of stressed financial statements, under different scenarios approved by the Board of Directors, considering a horizon of two to three years.

The test results are reported to the senior management and the Board of Directors supporting strategic decisions. They are also included in the ICAAP report submitted to BACEN.

Risk-adjusted Compensation

The Compensation guidelines of Itaú Unibanco are aimed at attracting, retaining and compensating on merit its collaborators, encouraging prudent risk exposure levels in short-, medium- and long-term strategies, in line with the interests of its shareholders and regulatory authorities and line with the organization’s culture. The governance structure of compensation and incentive to the prudent risk taking has been consolidating in line with the best international compensation and governance practices. The Compensation Committee, in accordance with the CMN Resolution No. 3,921 and reporting to the Board of Directors is responsible for setting out the guidelines on models of compensation to collaborators and the policy on compensation of management members of the Conglomerate companies.

Compensation in Itaú Unibanco takes into account the strategy of the institution, the general and specific legislation that should be adopted for each business or region of operation, and the adequate risk management over time. The variable compensation considers the current and potential risks, giving incentive to the achievement of sustainable results and discouraging decisions that involve excess risks. The calculation of the aggregate and individual amounts considers, among others, long-term sustainable financial bases, adjustments to future payments in view of assumed risks, the results of the institution and/or of the area, when applicable, and the ratio between performance and risks incurred.

Itaú Unibanco

Risk and Capital Management – Pillar 3

In accordance with the CMN Resolution No. 3,921, a portion of the variable compensation of statutory officers is paid in stocks (at least 50%) and a percentage is deferred for three years (at least 40% of variable compensation). The deferred and unpaid portions must be reversed in case the institution has an unsatisfactory performance and the business unit has a negative performance.

Reflecting its concern with sustainable performance, Itaú Unibanco implements specific variable compensation practices for collaborators which roles and responsibilities have material impact on the risk of the bank, although they are not subject to the requirements of CMN Resolution No. 3,921. For such collaborators, mechanisms are provided for making adjustments to bonus arising from compliance, risk as well as deferral events.

For more information about remuneration in Itaú Unibanco, see Note 16 – “Shareholders’ Equity” in the full Financial Statements, which are shown on the website www.itau.com.br/investor-relations.

Itaú Unibanco

Risk and Capital Management – Pillar 3

Appendix I

	Breakdown of the Referential Equity and Information on its adequacy	12/31/2015
		Value			Temporary Treatment		Balance
		(R$ Thousand)			(R$ Thousand)		Sheet Reference
	Core Capital: instruments and reserves
1	Instruments Eligible for the Core Capital		85,148,000				(k)
2	Revenue reserves		28,348,476			-	(l)
3	Other revenue and other reserve		1,002,336			-	(m)
4	Instruments that are authorized to compose the Core Capital before Resolution No. 4,192 of 2013 comes into effect
5	Non-controlling interest in subsidiaries that are part of the conglomerate, non-deductible from the Core Capital¹		763,807			228,269	(j)
6	Core Capital before prudential adjustments		115,262,619
	Core Capital: prudential adjustments
7	Prudential adjustments related to the pricing of financial instruments		431,902			-
8	Goodwill paid upon the acquisition of investments based on the expectation of future profitability		2,926,367			4,389,551	(e)
9	Intangible assets		4,006,095			1,616,902	(h) / (i)
10	Tax credits arising from income tax losses and social contribution tax loss carryfowards and those originating from this contribution related to determination periods ended until December 31, 1998²		2,389,134			3,583,701	(b)
11	Adjustments related to the market value of derivative financial instruments used to hedge the cash flows of protected items whose mark-to-market adjustments are not recorded in the books.		-			-
12	Downward difference between the amount recognized as a provision and the expected loss for institutions using the IRB		-			-
13	Gains arising from securitization operations
14	Gains or losses arising from the impact of changes on the credit risk of the institution on the fair value assessment of liability items
15	Actuarial assets related to defined benefit pension funds		35,237			52,855	(d)
16	Shares or other instruments issued by the bank authorized to compose the Core Capital, acquired directly, indirectly or synthetically		4,353,380			-	(n)
17	Investments crossed with instruments eligible for the Core Capital
18	Added value of investments lower than 10% of the capital of companies that are similar to non-consolidated financial institutions, insurance companies, reinsurance companies, capitalization companies and sponsored pension fund entities, that exceeds 10% of the amount of the Core Capital, disregarding specific deductions.		-			-
19	Investments higher than 10% of the capital of companies that are similar to non-consolidated financial institutions, insurance companies, reinsurance companies, capitalization companies and sponsored pension fund entities		-			-
20	Mortgage servicing rights
21	Tax credits arising from temporary differences that depend on the generation of income or future taxable income for their realization, above the limit of 10% of the Core Capital, disregarding specific deductions		1,256,668			1,885,001	(c)
22	Amount that exceeds 15% of the Core Capital		1,749,248			2,378,061
23	of which: arising from investments in the capital of companies that are similar to non-consolidated financial institutions, insurance companies, reinsurance companies, capitalization companies and open ended pension entities		858,607			1,042,100	(a) / (f)
24	of which: arising from mortgage servicing rights
25	of which: arising from tax credits resulting from temporary differences that depend on the generation of income or future taxable income for their realization²		890,641			1,335,961	(c)
26	National regulatory adjustments		(2,840,107	)		-
26.a	Deferred permanent assets		88,053			-	(g)
26.b	Investment in dependence, financial institution abroad or non-financial entity that is part of the conglomerate, with respect to which the Central Bank of Brazil does not have access to information, data and documents		-			-
26.c	Funding instruments eligible for the Core Capital issued by an institution that is authorized to operate by the Central Bank of Brazil or by a financial institution abroad, and that is not part of the conglomerate		-			-
26.d	Increase of unauthorized capital		-			-
26.e	Excess of the amount adjusted of Core Capital		-			-
26.f	Deposit to cover capital deficiency		-			-
26.g	Amount of intangible assets established before Resolution No. 4,192 of 2013 comes into effect		2,928,160			-	(i)
26.h	Excess of resources invested on permanent assets		-
26.i	PR emphasis		-
26.j	Other residual differences concerning the Core Capital calculation methodology for regulatory purposes		-
27	Regulatory adjustments applied to the Core Capital due to the Insufficiency of Additional Capital and Tier II Capital to cover deductions		-			-
28	Total regulatory deductions from the Core Capital		14,307,923
29	Core Capital		100,954,697
	1 - Considers prudential adjustments corresponding to deduction of non-controlling interest.
	2 - Considers the deduction of deferred tax liabilities.
	3 - Calculated according to article 9 of Bacen Resolution No. 4,192.
	4 - Calculated according to article 29 of Resolution No. 4,192.

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Risk and Capital Management – Pillar 3

	Breakdown of the Referential Equity and Information on its adequacy	12/31/2015
		Value		Temporary Treatment		Balance
		(R$ Thousand)		(R$ Thousand)		Sheet Reference
	Additional Capital: instruments
30	Instruments eligible for the Additional Capital		-		-
31	of which: classified as core capital in accordance with the accounting rules		-		-
32	of which: classified as liabilities in accordance with the accounting rules		-		-
33	Instruments that are authorized to compose the Additional Capital before Resolution No. 4,192 of 2013 comes into effect		-		-
34	Non-controlling interest in subsidiaries that are part of the conglomerate, non-deductible from the Additional Capital³		45,987		68,981
35	of which: instruments issued by subsidiaries before Resolution No. 4,192 of 2013 comes into effect		-		-
36	Additional capital before regulatory deductions		45,987		-
	Additional Capital: regulatory deductions
37	Shares or other instruments issued by the bank authorized to compose the Additional Capital, acquired directly, indirectly or synthetically		-		-
38	Investments crossed with instruments eligible for the Additional Capital
39	Added value of investments lower than 10% of the capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad that are not part of the conglomerate and that exceeds 10% of the amount of the Additional Capital		-
40	Investments higher than 10% of the capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad that are not part of the conglomerate		-
41	National regulatory adjustments		-		-
41.a	Funding instruments eligible for the Additional Capital issued by an institution that is authorized to operate by the Central Bank of Brazil or by a financial institution abroad, and that is not part of the conglomerate, limited to the instruments held by third parties and issued until December 31, 2012		-		-
41.b	Non-controlling interest in Additional Capital		-		-
41.c	Other residual differences concerning the Additional Capital calculation methodology for regulatory purposes		-		-
42	Regulatory adjustments applied to the Additional Capital due to the insufficiency of Tier II Capital to cover deductions		-		-
43	Total regulatory deductions from the Additional Capital		-		-
44	Additional Capital		45,987
45	Tier I		101,000,684
	Tier II: instruments
46	Instruments eligible for Tier II Capital
47	Instruments that are authorized to compose Tier II Capital before Resolution No. 4,192 of 2013 comes into effect⁴		27,403,171		11,744,216
48	Non-controlling interest in subsidiaries that are part of the conglomerate, non-deductible from Tier II Capital³		61,297		91,946

49	of which: instruments issued by subsidiaries before Resolution No. 4,192 of 2013 comes into effect		61,297		91,946
50	Excess of provisions with respect to the loss expected in IRB		-		-
51	Tier II before regulatory deductions		27,464,468
	Tier II: regulatory deductions
52	Shares or other instruments issued by the bank authorized to compose Tier II Capital, acquired directly, indirectly or synthetically		-		-
53	Investments crossed with instruments eligible for Tier II Capital
54	Added value of investments lower than 10% of the capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad that are not part of the conglomerate and that exceeds 10% of the amount of Tier II Capital		-
55	Investments higher than 10% of the capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad that are not part of the conglomerate		-
56	National regulatory adjustments		-		-
56.a	Funding instruments issued by an institution that is authorized to operate by the Central Bank of Brazil or by a financial institution abroad, and that is not part of the conglomerate, limited to the instruments held by third parties and issued until December 31, 2012		-		-
56.b	Non-controlling interest in Tier II		-		-
56.c	Other residual differences concerning Tier II calculation methodology for regulatory purposes		-		-
57	Total regulatory deductions from Tier II Capital		-		-
58	Tier II		27,464,468
59	Referential Equity (Tier I + Tier II)		128,465,152
60	Total risk-weighted assets		722,467,645
	1 - Considers prudential adjustments corresponding to deduction of non-controlling interest.
	2 - Considers the deduction of deferred tax liabilities.
	3 - Calculated according to article 9 of Bacen Resolution No. 4,192.
	4 - Calculated according to article 29 of Resolution No. 4,192.

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Risk and Capital Management – Pillar 3

	Breakdown of the Referential Equity and Information on its adequacy	12/31/2015
		Value			Temporary Treatment		Balance
		(R$ Thousand)			(R$ Thousand)		Sheet Reference
	BIS Ratios and Additional Core Capital
61	Common Equity Tier 1		14.0	%
62	Tier I Ratio		14.0	%
63	BIS Ratio		17.8	%
64	Core Capital minimum requirement, including capital additions (% of RWA)		4.5	%
65	of which: additional for preserving capital		0.0	%
66	of which: countercyclical additional		0.0	%
67	of which: additional for institutions that are systemically important at global level (G-SIB)
68	Core Capital available to meet the requirement for Additional Core Capital (% of RWA)		9.5	%
	National Minimum
69	Core Capital Ratio, if different from that established in Basel III
70	Tier I Ratio, if different from that established in Basel III		6.0	%
71	BIS Ratio, if different from that established in Basel III		11	%
	Amounts below the limit for deduction (non-weighted by risk)
72	Added value of investments lower than 10% of the capital of companies that are similar to non-consolidated financial institutions, insurance companies, reinsurance companies, capitalization companies and sponsored pension fund entities		17,463
73	Investments higher than 10% of the capital of companies that are similar to non-consolidated financial institutions, insurance companies, reinsurance companies, capitalization companies and sponsored pension fund entities		6,973,745				(a) / (f)
74	Mortgage servicing rights
75	Tax credits arising from temporary differences, not deducted from the Core Capital		8,169,460				(c)
	Limits to the inclusion of provisions in Tier II
76	Generic provisions eligible for the inclusion in Tier II Capital related to exposures subject to the calculation of the capital requirement by means of a standardized approach
77	Limit for the inclusion of generic provisions in Tier II Capital for exposures subject to the standardized approach
78	Provisions eligible for the inclusion in Tier II Capital related to exposures subject to the calculation of the capital requirement by means of the IRB approach (before the application of the limit)		-
79	Limit for the inclusion of provisions in Tier II Capital for exposures subject to the IRB approach		-
	Instruments authorized to compose the Referential Equity before Resolution No. 4,192 of 2013 comes into effect (applicable between October 1, 2013 and January 1, 2022)
80	Current limit for instruments that are authorized to compose the Core Capital before Resolution No. 4,192 of 2013 comes into effect
81	Amount excluded from the Core Capital due to the limit
82	Instruments that are authorized to compose the Additional Capital before Resolution No. 4,192 of 2013 comes into effect		-			-
83	Amount excluded from the Additional Capital due to the limit		-			-
84	Instruments that are authorized to compose Tier II Capital before Resolution No. 4,192 of 2013 comes into effect⁴		27,403,171			-
85	Amount excluded from Tier II Capital due to the limit⁴		11,744,216			-
	1 - Considers prudential adjustments corresponding to deduction of non-controlling interest.
	2 - Considers the deduction of deferred tax liabilities.
	3 - Calculated according to article 9 of Bacen Resolution No. 4,192.
	4 - Calculated according to article 29 of Resolution No. 4,192.

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Risk and Capital Management – Pillar 3

Glossaries

12.1

Glossary of Acronyms

AVA - Avaliação de Vulnerabilidades e Ameaças (Threats and Vulnerabilities Analysis)

ARS - Argentine Peso

BACEN - Banco Central do Brasil (Central Bank of Brazil)

BIA - Business Impact Analysis

BM&FBOVESPA - Bolsa de Valores, Mercadorias e Futuros de São Paulo (São Paulo Stock, Mercantile and Future Exchange)

BRL - Brazilian Real

CCB – Cédula de Crédito Bancário

CDB - Certificado de Depósito Bancário (Bank Deposit Certificate)

CDI - Certificado de Depósito Interfinanceiro (Interbank Deposit Certificate)

CDS - Credit Default Swap

CER - Coeficiente de Estabilización de Referencia (Argentine inflation index linked interest rate)

CLN - Credit Linked Note

CLP - Chilean Peso

CMN - Conselho Monetário Nacional (National Monetary Council)

CNSP - Conselho Nacional de Seguros Privados (National Council of Private Insurance)

COPOM - Monetary Policy Committee

CRA - Agribusiness Receivables Certificate

CRI - Certificados de Recebíveis Imobiliários (Securitized Real Estate Loans)

CVM - Securities and Exchange Commission

DRL - Demonstrativo de Risco de Liquidez (Liquidity Risk Statements)

DV01 - Delta Variation Risk

EAD - Exposure at Default

FIDC - Fundo de Investimento em Direitos Creditórios (Credit Rights Investment Funds)

FII – Fundo de Investimento Imobiliário (Real Estate Investiment Fund)

FPRs - Fatores de Ponderação de Riscos (weighting factor)

GDP – Produto Interno Bruto (Gross Domestic Product)

ICAAP - Internal capital adequacy assessment process

IGPM – Índice Geral de Preços do Mercado (Brazilian consumer index)

IPCA - Índice de Preço ao Consumidor Amplo (Brazilian consumer index)

IT - Information Technology

LGD - Loss Given Default

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Risk and Capital Management – Pillar 3

MEP - Equity Method

MtM - Mark to Market

PCN - Planos de Continuidade de Negócios (Business Continuity Plans)

PD - Probability of default

PR - Patrimônio de Referência (Referential Equity)

PYG - Paraguayan Guarani

RA - Risk Assessment

RBAN - Referential equity calculated for covering the interest rate risk of trades of the Banking Portfolio

RCAP – Regulatory Consistency Assessment Programme

RCP - Risco de Crédito Potencial (Potential Credit Risk)

RWA - Risk Weighted Asset

RWA_ACS– Portion relating to exposures subjects to variations in equities prices and classified in the Trading Portfolio;

RWA_CAM– Portion relating the exposures in gold, foreign exchange rate and assets subject to foreign exchange rate variations;

RWA_COM– Portion relating to exposures subjects to variations in commodity prices

RWA_CPAD– Portion relating to exposures to credit risk

RWA_JUR- Portion relating to exposures subjects to variations of interest rates, interest coupons and coupon rates and classified in the Trading Portfolio

RWA_JUR1– Portion relating to exposures subject to fixed income interest rate denominated in reais

RWA_JUR2- Portion relating to exposures subject to variation in the foreign exchange linked interest rate

RWA_JUR3- Portion relating to exposures subject to variation in the price index linked interest rates

RWA_JUR4- Portion relating exposures subject to variation in the interest rate index linked interest rate

RWA_MPAD- Sum of the terms: RWA_CAM^,RWA_JUR,RWA_COM,RWA_ACS

RWA_OPAD- Portion relating to the calculation of operational risk capital requirements

SUSEP - Superintendência de Seguros Privados (Superintendence of Private Insurance)

TRS - Total Return Swap

TR - Taxa Referencial (Referential Rate)

TVM - Títulos de valores mobiliários (Securities)

UF - Chilean consumer index

UI - Uruguayan consumer index

U.S. - United States of America

UYU - Uruguayan Peso

VaR - Value at Risk

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Risk and Capital Management – Pillar 3

12.2

Glossary of Norms

BACEN Circular No. 3,354 of June 27^th, 2007

BACEN Circular No. 3,547, of July 07^th, 2011

BACEN Circular No. 3,635, of March 04^th, 2013

BACEN Circular No. 3,636, of March 04^th, 2013

BACEN Circular No. 3,637, of March 04^th, 2013

BACEN Circular No. 3,638, of March 04^th, 2013

BACEN Circular No. 3,639, of March 04^th, 2013

BACEN Circular No. 3,640, of March 04^th, 2013

BACEN Circular No. 3,641, of March 04^th, 2013

BACEN Circular No. 3,643, of March 04^th, 2013

BACEN Circular No. 3,644, of March 04^th, 2013

BACEN Circular No. 3,645, of March 04^th, 2013

BACEN Circular No. 3,647, of March 04^th, 2013

BACEN Circular No. 3,652, of March 26^th, 2013

BACEN Circular No. 3,675, of October 31^st, 2013

BACEN Circular No. 3,678, of October 31^st, 2013

BACEN Circular No. 3,679, of October 31^st, 2013

BACEN Circular No. 3,696, of January 03^rd, 2014

BACEN Circular No. 3,714, of August 20^th, 2014

BACEN Circular No. 3,716, of August 21^st, 2014

BACEN Circular No. 3,739, of December 17th, 2014

BACEN Circular No. 3,748, of February 26^th, 2015

BACEN Circular No. 3,749, of March 05^th, 2015

BACEN Circular No. 3,768, of October 29^th, 2015

BACEN Circular No. 3,769, of October 29^th, 2015

BACEN Circular No. 3,770, of October 29^th, 2015

BACEN Circular Letter No. 3,565 of September 06^th, 2012

CNSP Resolution No. 228 of December 06^th, 2010

CNSP Resolution No. 280, of January 30^th, 2013

CNSP Resolution No. 282, of January 30^th, 2013

CNSP Resolution No. 283, of January 30^th, 2013

CNSP Resolution No. 284, of January 30^th, 2013

CNSP Resolution No. 321, of July 15^th, 2015

CMN Resolution No. 3,380 of June 29^th, 2006

CMN Resolution No. 3,444 of February 28^th, 2007

CMN Resolution No. 3,464 of June 26^th, 2007

CMN Resolution No. 3,533 of January 31^st, 2008

CMN Resolution No. 3,721 of April 30^th, 2009

CMN Resolution No. 3,809 of October 28^th 2009

CMN Resolution No. 3,921 of November 25th, 2010

CMN Resolution No. 3,988 of June 30^th, 2011

CMN Resolution No. 4,090, of May 24^th, 2012

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Risk and Capital Management – Pillar 3

CMN Resolution No. 4,192, of March 1^st, 2013

CMN Resolution No. 4,193, of March 1^st, 2013

CMN Resolution No. 4,194, of March 1^st, 2013

CMN Resolution No. 4,195, of March 1^st, 2013

CMN Resolution No. 4,277, of October 31^st, 2013

CMN Resolution No. 4,278, of October 31^st, 2013

CMN Resolution No. 4,279, of October 31^st, 2013

CMN Resolution No. 4,280, of October 31^st, 2013

CMN Resolution No. 4,281, of October 31^st, 2013

CMN Resolution No. 4,311, of February 20^th, 2014

CVM Regulatory Instruction No. 475 of December 17^th, 2008

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