XML 90 R38.htm IDEA: XBRL DOCUMENT
v3.19.1

Risk and Capital Management | 12 Months Ended
--- | ---
Dec. 31, 2018
Text block1 [abstract] |
Risk and Capital Management | Note 32 – Risk and Capital Management
a) | Corporate Governance
ITAÚ UNIBANCO HOLDING invests in sound processes for risk and capital management that permeates the whole institution and are the basis of all strategic decisions to ensure business sustainability. These processes are aligned with the guidelines of the Board of Directors and Executives that, through corporate bodies, define the global objectives that are measured as goals and limits to the risk management units. Control and capital management units, in turn, support the ITAÚ UNIBANCO HOLDING management by monitoring and analyzing risk and capital. The Board of Directors is the main body responsible for establishing guidelines, policies, and approval levels for risk and capital management. The Capital and Risk Management Committee (CGRC), in turn, is responsible for supporting the Board of Directors in the performance of its assignments related to capital and risk management. In the executive level, collegiate bodies, presided over by the Chief Executive Officer (CEO) of ITAÚ UNIBANCO HOLDING, are responsible for capital and risk management and which decisions are monitored in the scope of CGRC. Additionally, the institution has panels collegiate bodies, which exercise the responsibilities delegated in capital and risk management, presided over by the Executive Vice-President of the Risk and Finance Department (ARF). To support this structure, ARF has specialized executive boards to ensure, on an independent and centralized basis, that the institution’s risks and capital are managed in compliance with policies and procedures established.
b) | Risk Management
Risk Appetite The risk appetite of ITAÚ UNIBANCO HOLDING is based on the Board of Director’s statement: “We are a universal bank, operating mainly in Latin America. Supported by our risk culture, we act with strict ethical standard and regulatory compliance, in search for high and increasing results, with low volatility, through long-lasting relationship with the client, correct risk pricing, pulverized funding and proper use of capital.” Based on this statement, five dimensions have been established, each dimension is made up of a set of metrics associated with the main risks involved, combining supplementary measurement methods, in search for a comprehensive vision of our exposures. The Board of Directors is responsible for approving guidelines and limits for risk appetite, exercising its activities with the support of CGRC and CRO - Chief Risk Officer. The limits for risk appetite are frequently monitored and reported to risk committees and to the Board of Directors, which will guide the preventive measures to be taken to ensure that exposures are aligned with the strategies of ITAÚ UNIBANCO HOLDING. The five dimensions of risk appetite are:
| • |  | Capitalization: establishes that ITAÚ UNIBANCO HOLDING must have capital sufficient to face any serious recession period or a stress event without the need to adjust its capital structure under unfavorable circumstances. It is monitored through the follow-up of ITAÚ UNIBANCO HOLDING’s capital ratios, both in normal and stress scenarios, and of the ratings of the institution’s debt issues.
| • |  | Liquidity: establishes that the liquidity of ITAÚ UNIBANCO HOLDING must withstand long stress periods. It is monitored through the follow-up of liquidity ratios.
| • |  | Composition of results: defines that business will be focused primarily in Latin America, where ITAÚ UNIBANCO HOLDING has a diversified base of clients and products, with low appetite for volatility of results and high risks. This dimension comprises aspects related to business and profitability, and market and credit risks. By adopting exposure concentration limits, such as industry sectors, counterparty quality, countries and geographical regions and risk factors, these monitored metrics seek to ensure the proper composition of portfolios, aimed at the low volatility of results and business sustainability.
| • |  | Operational risk: focuses on the control of operational risk events that may adversely impact the operation and business strategy, and is carried out by monitoring the main operational risk events and incurred losses.
| • |  | Reputation: addresses risks that may impact the institution’s brand value and reputation with clients, employees, regulatory bodies, investors and the general public. The risk monitoring in this dimension is carried out by the follow-up of client satisfaction and dissatisfaction and media exposure, in addition to monitoring the institution’s conduct.
Substantiation for risk appetite, risk management and guidelines for activities of employees of ITAÚ UNIBANCO HOLDING the day-to-day for decision-making purposes are as follows: Sustainability and client satisfaction: ITAÚ UNIBANCO HOLDING vision is to be the leading bank in sustainable performance and client satisfaction and, therefore, it is committed to creating shared value to employees, clients, stockholders, and society, ensuring the continuity of business. ITAÚ UNIBANCO HOLDING is committed to do business that is good both for the client and the institution itself;
• |  | Risk Culture: ITAÚ UNIBANCO HOLDING’s risk culture goes beyond policies, procedures or processes, as it strengthens the individual and collective responsibility of all employees so they do the right thing at the right moment and on the proper way, by respecting the ethical way of doing business;
• |  | Risk pricing: ITAÚ UNIBANCO HOLDING’s acts and assumes risks in business it knows and understands, avoiding risks that are unknown to the institution or that do not have a competitive edge, therefore carefully assessing the risk-return ratio;
• |  | Diversification: ITAÚ UNIBANCO HOLDING has low appetite to volatility in results and, therefore, it operates with a diversified base of clients, products and business, seeking to diversify risks and giving priority to lower risk business.
• |  | Operational excellence: It is the wish of ITAÚ UNIBANCO HOLDING to be an agile bank, with a robust and stable infrastructure to offer top services;
• |  | Ethics and respect for regulation: for ITAÚ UNIBANCO HOLDING, ethics is non-negotiable, and, therefore, the institute promotes an institutional environment that has integrity, guiding employees to cultivate ethics in relationships and business, and the respect for rules, as it cultivates the care for the institution’s reputation;
ITAÚ UNIBANCO HOLDING adopts several initiatives to disseminate risk culture, based on four principles: conscious risk-taking, discussion of the risks the institution faces, the corresponding action taken, and the responsibility of everyone to manage risks. These principles lay down the basis for ITAÚ UNIBANCO HOLDING guidelines by helping employees to consciously understand, identify, measure, manage and mitigate risks.
1. | Credit risk
Possibility of losses arising from the breach by the borrower, issuer or counterparty of the respective agreed-upon financial obligations, the devaluation of loan agreement due to downgrading of the borrower’s, the issuer’s, the counterparty’s risk rating, the reduction in gains or compensation, the advantages given upon posterior renegotiation and the recovery costs. There is a credit risk control and management structure, centralized and independent from the business units, that provides for operational limits and risk mitigating mechanisms, in addition to establishing processes and tools to measure, monitor and control the credit risk inherent in all products, portfolio concentrations and impacts of potential changes in the economic environment. The credit policy of ITAÚ UNIBANCO HOLDING is based on internal criteria such as: classification of clients, performance and portfolio evolution, default levels, return rate and economic capital allocated, among other external factors, such as interest rates, market default indicators, inflation, consumption variation, among others. For individual, small and middle-market companies, credit rating is attributed based on application statistical models (in the early phases of relationship with the client) and behavior score (used for clients with which ITAÚ UNIBANCO HOLDING already has a relationship). For large companies, the rating is based on information such as economic and financial condition of the counterparty, their cash-generating capability, the economic group to which they belong, and the current and prospective situation of the economic sector in which they operate. The credit proposals are analyzed on a case by case basis, through an approval-level mechanism. In compliance with CMN Resolution 4,557, of February 23, 2017, the document “Public Access Report – Credit Risk“, which includes the guidelines established by the institutional credit risk control policy can be viewed at www.itau.com.br/investor-relations, under Corporate Governance, Regulations and Policies. ITAÚ UNIBANCO HOLDING strictly controls the credit exposure of clients and counterparties, taking action to address situations in which the actual exposure exceeds the desired one. For this purpose, contractually provided actions can be taken, such as early settlement or requirement of additional collateral.
1.1 | Collateral and policies for mitigating credit risk
ITAÚ UNIBANCO HOLDING uses guarantees to increase its capacity for recovery in operations exposed to credit risk. The guarantees may be personal, secured, legal structures with mitigating power and offset agreements. For collateral to be considered instruments that mitigate credit risk, they must comply with the requirements and standards that regulate them, be them internal or external ones, be legally valid (effective), enforceable, and assessed on a regular basis. ITAÚ UNIBANCO HOLDING also uses credit derivatives, to mitigate credit risk of its portfolios of loans and securities. These instruments are priced based on models that use the fair value of market inputs, such as credit spreads, recovery rates, correlations and interest rates.
1.2 | Policy on the provision and Economic scenarios
Both the credit risk and the finance areas are responsible for defining the methodologies used to measure the allowance for loan losses and for assessing changes in the provision amounts on a recurring basis. These areas monitor the trends observed in expected credit loss by segment level, in addition to establishing an initial understanding of the variables that may trigger changes in the allowance for loan losses, the probability of default or the loss given default. Once the trends have been identified and an initial assessment of the variables has been made at the corporate level, the business areas are responsible for further analyzing these observed trends at a detailed level and for each portfolio, in order to understand the underlying reasons for the trends observed and for deciding whether changes are required in the credit policies. The provisions for expected losses are recognized considering the expected risk linked to contracts with similar characteristics and in anticipation of impairment signs, considering a loss horizon adequate to the remaining period of the contract termination. For contracts of products with no determined termination date, average results of impairment and default are used to determine the loss horizon. Additionally, information on economic scenarios and public information with internally developed information are used to determine and affect the expected credit loss, adjusting loss levels to expected macroeconomic realities.
1.3 | Classification of Stages of Credit Impairment
ITAÚ UNIBANCO HOLDING considers clients’ internal information, statistic models, days of default, and quantitative analysis in order to determine the credit status of portfolio agreements. Rules for change of stage consider lower and higher internal ratings (quantitative criteria), in addition to a relative variation of ratings since the initial recognition. Information on days of delay, used on an absolute basis, is an important factor for the classification of stages, and after a certain credit status of the agreement is determined, the classification in one of the three stages of credit deterioration is established. Based on this classification, rules for measurement of expected credit loss determined for each stage are used, as described in Note 2.4e. For Retail and middle business portfolios, ITAÚ UNIBANCO HOLDING classifies loan agreements which are over 30 days overdue in stage 2, except payroll loans for public bodies, which recognition is carried out after 45 overdue, due to the payment dynamics for product onlending. For the Wholesale business portfolio, information on delay is considered in the rating assessment. Default parameters are: 90 days with no payment record(*); debt restructuring; adjudication of bankruptcy; loss; and court-ordered reorganization.
(*) | For mortgage loan portfolio, 180 days without payment record are considered.
1.4 Maximum Exposure of Financial Assets to Credit Risk
|  | 12/31/2018 |  |  | 12/31/2017 |
| Brazil |  |  | Abroad |  |  | Total |  |  | Brazil |  |  | Abroad |  |  | Total |
Financial Assets |  |  | 1,027,193 |  |  |  | 303,535 |  |  |  | 1,330,728 |  |  |  | 967,703 |  |  |  | 263,711 |  |  |  | 1,231,414 |
At Amortized Cost |  |  | 756,993 |  |  |  | 237,766 |  |  |  | 994,759 |  |  |  | 702,672 |  |  |  | 203,057 |  |  |  | 905,729 |
Interbank deposits |  |  | 6,239 |  |  |  | 20,181 |  |  |  | 26,420 |  |  |  | 6,367 |  |  |  | 22,681 |  |  |  | 29,048 |
Securities purchased under agreements to resell |  |  | 279,353 |  |  |  | 783 |  |  |  | 280,136 |  |  |  | 243,917 |  |  |  | 790 |  |  |  | 244,707 |
Securities |  |  | 90,234 |  |  |  | 20,161 |  |  |  | 110,395 |  |  |  | 101,365 |  |  |  | 10,059 |  |  |  | 111,424 |
Loan operations and lease operations (*) |  |  | 345,501 |  |  |  | 190,590 |  |  |  | 536,091 |  |  |  | 327,501 |  |  |  | 170,218 |  |  |  | 497,719 |
Other financial assets |  |  | 61,875 |  |  |  | 13,215 |  |  |  | 75,090 |  |  |  | 53,787 |  |  |  | 5,781 |  |  |  | 59,568 |
(-) Provision for Expected Loss |  |  | (26,209 | ) |  |  | (7,164 | ) |  |  | (33,373 | ) |  |  | (30,265 | ) |  |  | (6,472 | ) |  |  | (36,737 | )
At Fair Value Through Other Comprehensive Income |  |  | 9,089 |  |  |  | 40,234 |  |  |  | 49,323 |  |  |  | 14,722 |  |  |  | 37,427 |  |  |  | 52,149 |
Securities |  |  | 9,089 |  |  |  | 40,234 |  |  |  | 49,323 |  |  |  | 14,722 |  |  |  | 37,427 |  |  |  | 52,149 |
At Fair Value Through Profit or Loss |  |  | 261,111 |  |  |  | 25,535 |  |  |  | 286,646 |  |  |  | 250,309 |  |  |  | 23,227 |  |  |  | 273,536 |
Securities |  |  | 252,819 |  |  |  | 10,361 |  |  |  | 263,180 |  |  |  | 238,200 |  |  |  | 12,493 |  |  |  | 250,693 |
Derivatives |  |  | 8,292 |  |  |  | 15,174 |  |  |  | 23,466 |  |  |  | 12,109 |  |  |  | 10,734 |  |  |  | 22,843 |
Financial liabilities - provision for expected loss |  |  | 3,355 |  |  |  | 437 |  |  |  | 3,792 |  |  |  | 4,513 |  |  |  | 409 |  |  |  | 4,922 |
Loan Commitments |  |  | 2,289 |  |  |  | 312 |  |  |  | 2,601 |  |  |  | 2,681 |  |  |  | 334 |  |  |  | 3,015 |
Financial Guarantees |  |  | 1,066 |  |  |  | 125 |  |  |  | 1,191 |  |  |  | 1,832 |  |  |  | 75 |  |  |  | 1,907 |
Off balance sheet |  |  | 300,522 |  |  |  | 49,173 |  |  |  | 349,695 |  |  |  | 280,032 |  |  |  | 43,797 |  |  |  | 323,829 |
Financial Guarantees |  |  | 53,443 |  |  |  | 12,662 |  |  |  | 66,105 |  |  |  | 60,062 |  |  |  | 10,427 |  |  |  | 70,489 |
Letters of credit to be released |  |  | 10,747 |  |  |  | 0 |  |  |  | 10,747 |  |  |  | 9,214 |  |  |  | — |  |  |  | 9,214 |
Loan commitments |  |  | 236,332 |  |  |  | 36,511 |  |  |  | 272,843 |  |  |  | 210,756 |  |  |  | 33,370 |  |  |  | 244,126 |
Mortgage loans |  |  | 3,403 |  |  |  | 0 |  |  |  | 3,403 |  |  |  | 3,218 |  |  |  | — |  |  |  | 3,218 |
Overdraft accounts |  |  | 110,454 |  |  |  | 0 |  |  |  | 110,454 |  |  |  | 93,284 |  |  |  | — |  |  |  | 93,284 |
Credit cards |  |  | 120,862 |  |  |  | 2,961 |  |  |  | 123,823 |  |  |  | 109,196 |  |  |  | 2,679 |  |  |  | 111,875 |
Other pre-approved limits |  |  | 1,613 |  |  |  | 33,550 |  |  |  | 35,163 |  |  |  | 5,058 |  |  |  | 30,691 |  |  |  | 35,749 |
Total |  |  | 1,324,360 |  |  |  | 352,271 |  |  |  | 1,676,631 |  |  |  | 1,243,222 |  |  |  | 307,099 |  |  |  | 1,550,321 |
(*) | In the composition of balance there are operations designated at Fair Value Through Profit or Loss, in the amount of R$ 102 at 12/31/2017.
Amounts exposed to credit risk presented are based on gross book value and do not consider any collateral received or other added credit improvements. The contractual amounts of financial collaterals and credit cards represent the maximum potential of credit risk in the event the counterparty does not meet the terms of the agreement. The vast majority of loan commitments (mortgage loans, overdraft accounts and other pre-approved limits) mature without being drawn, since they are renewed monthly and they may be cancelled unilaterally. As a result, the total contractual amount does not represent our effective future exposure to credit risk or the liquidity needs arising from such commitments.
1.4.1. | By business sector
Loan Operations and Lease Operations
|  | 12/31/2018 |  |  | % |  |  | 12/31/2017 |  |  | % |
Industry and commerce |  |  | 115,225 |  |  |  | 21.5 |  |  |  | 107,201 |  |  |  | 21.5 |
Services |  |  | 118,435 |  |  |  | 22.1 |  |  |  | 114,332 |  |  |  | 23.0 |
Other sectors |  |  | 30,440 |  |  |  | 5.7 |  |  |  | 29,047 |  |  |  | 5.8 |
Individuals |  |  | 271,991 |  |  |  | 50.7 |  |  |  | 247,139 |  |  |  | 49.7 |
Total |  |  | 536,091 |  |  |  | 100.0 |  |  |  | 497,719 |  |  |  | 100.0 |
Other financial assets (*)
|  | 12/31/2018 |  |  | % |  |  | 12/31/2017 |  |  | % |
Public sector |  |  | 330,730 |  |  |  | 43.9 |  |  |  | 327,932 |  |  |  | 46.5 |
Services |  |  | 92,562 |  |  |  | 12.3 |  |  |  | 84,191 |  |  |  | 11.9 |
Other sectors |  |  | 23,072 |  |  |  | 3.1 |  |  |  | 19,804 |  |  |  | 2.8 |
Financial |  |  | 306,556 |  |  |  | 40.7 |  |  |  | 273,747 |  |  |  | 38.8 |
Total |  |  | 752,920 |  |  |  | 100.0 |  |  |  | 705,674 |  |  |  | 100.0 |
(*) | Includes Financial Assets at Fair Value through Profit and Loss, Financial Assets at Fair Value through Other Comprehensive Income and Financial Assets at Amortized Cost, except for loan and finance lease operations.
The exposure of Off Balance financial instruments (Financial Collaterals and Loan Commitments) are neither categorized nor managed by business sector.
1.4.2 | By type and classification of credit risk
Operations and lease operations
|  | 12/31/2018
|  | Stage 1 |  | Stage 2 |  | Stage 3 |  | Total Consolidated of 3 stages
|  | Loan Operations |  | Loan commitments |  | Financial Guarantees |  | Total |  | Loan Operations |  | Loan commitments |  | Financial Guarantees |  | Total |  | Loan Operations |  | Loan commitments |  | Financial Guarantees |  | Total |  | Loan Operations (*) |  | Loan commitments |  | Financial Guarantees |  | Total
Individuals |  |  |  | 177,488 |  |  |  |  | 174,666 |  |  |  |  | 1,014 |  |  |  |  | 353,168 |  |  |  |  | 17,029 |  |  |  |  | 6,784 |  |  |  |  | — |  |  |  |  | 23,813 |  |  |  |  | 18,047 |  |  |  |  | 687 |  |  |  |  | — |  |  |  |  | 18,734 |  |  |  |  | 212,564 |  |  |  |  | 182,137 |  |  |  |  | 1,014 |  |  |  |  | 395,715 |
Credit card |  |  |  | 65,227 |  |  |  |  | 110,435 |  |  |  |  | — |  |  |  |  | 175,662 |  |  |  |  | 8,489 |  |  |  |  | 5,719 |  |  |  |  | — |  |  |  |  | 14,208 |  |  |  |  | 4,539 |  |  |  |  | 594 |  |  |  |  | — |  |  |  |  | 5,133 |  |  |  |  | 78,255 |  |  |  |  | 116,748 |  |  |  |  | — |  |  |  |  | 195,003 |
Personal loans |  |  |  | 14,125 |  |  |  |  | 64,201 |  |  |  |  | 1,014 |  |  |  |  | 79,340 |  |  |  |  | 4,427 |  |  |  |  | 1,064 |  |  |  |  | — |  |  |  |  | 5,491 |  |  |  |  | 10,991 |  |  |  |  | 93 |  |  |  |  | — |  |  |  |  | 11,084 |  |  |  |  | 29,543 |  |  |  |  | 65,358 |  |  |  |  | 1,014 |  |  |  |  | 95,915 |
Payroll loans |  |  |  | 44,156 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 44,156 |  |  |  |  | 1,024 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 1,024 |  |  |  |  | 1,698 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 1,698 |  |  |  |  | 46,878 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 46,878 |
Vehicles |  |  |  | 14,353 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 14,353 |  |  |  |  | 1,022 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 1,022 |  |  |  |  | 545 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 545 |  |  |  |  | 15,920 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 15,920 |
Mortgage loans |  |  |  | 39,627 |  |  |  |  | 30 |  |  |  |  | — |  |  |  |  | 39,657 |  |  |  |  | 2,067 |  |  |  |  | 1 |  |  |  |  | — |  |  |  |  | 2,068 |  |  |  |  | 274 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 274 |  |  |  |  | 41,968 |  |  |  |  | 31 |  |  |  |  | — |  |  |  |  | 41,999 |
Corporate |  |  |  | 90,716 |  |  |  |  | 16,054 |  |  |  |  | 45,361 |  |  |  |  | 152,131 |  |  |  |  | 2,222 |  |  |  |  | 83 |  |  |  |  | 1,681 |  |  |  |  | 3,986 |  |  |  |  | 9,705 |  |  |  |  | 143 |  |  |  |  | 4,148 |  |  |  |  | 13,996 |  |  |  |  | 102,643 |  |  |  |  | 16,280 |  |  |  |  | 51,190 |  |  |  |  | 170,113 |
Small and medium businesses |  |  |  | 57,099 |  |  |  |  | 40,105 |  |  |  |  | 2,472 |  |  |  |  | 99,676 |  |  |  |  | 5,875 |  |  |  |  | 1,834 |  |  |  |  | 69 |  |  |  |  | 7,778 |  |  |  |  | 5,838 |  |  |  |  | 185 |  |  |  |  | 94 |  |  |  |  | 6,117 |  |  |  |  | 68,812 |  |  |  |  | 42,124 |  |  |  |  | 2,635 |  |  |  |  | 113,571 |
Foreign loans - Latin America |  |  |  | 134,323 |  |  |  |  | 29,090 |  |  |  |  | 10,842 |  |  |  |  | 174,255 |  |  |  |  | 11,768 |  |  |  |  | 2,969 |  |  |  |  | 395 |  |  |  |  | 15,132 |  |  |  |  | 5,981 |  |  |  |  | 243 |  |  |  |  | 29 |  |  |  |  | 6,253 |  |  |  |  | 152,072 |  |  |  |  | 32,302 |  |  |  |  | 11,266 |  |  |  |  | 195,640 |
Total |  |  |  | 459,626 |  |  |  |  | 259,915 |  |  |  |  | 59,689 |  |  |  |  | 779,230 |  |  |  |  | 36,894 |  |  |  |  | 11,670 |  |  |  |  | 2,145 |  |  |  |  | 50,709 |  |  |  |  | 39,571 |  |  |  |  | 1,258 |  |  |  |  | 4,271 |  |  |  |  | 45,100 |  |  |  |  | 536,091 |  |  |  |  | 272,843 |  |  |  |  | 66,105 |  |  |  |  | 875,039 |
% |  |  |  | 59.0 | % |  |  |  | 33.3 | % |  |  |  | 7.7 | % |  |  |  | 100.0 | % |  |  |  | 72.8 | % |  |  |  | 23.0 | % |  |  |  | 4.2 | % |  |  |  | 100.0 | % |  |  |  | 87.7 | % |  |  |  | 2.8 | % |  |  |  | 9.5 | % |  |  |  | 100.0 | % |  |  |  | 61.3 | % |  |  |  | 31.1 | % |  |  |  | 7.6 | % |  |  |  | 100.0 | %
|  | 12/31/2017
|  | Stage 1 |  | Stage 2 |  | Stage 3 |  | Total Consolidated of 3 stages
|  | Loan Operations |  | Loan commitments |  | Financial Guarantees |  | Total |  | Loan Operations |  | Loan commitments |  | Financial Guarantees |  | Total |  | Loan Operations |  | Loan commitments |  | Financial Guarantees |  | Total |  | Loan Operations (*) |  | Loan commitments |  | Financial Guarantees |  | Total
Individuals |  |  |  | 161,364 |  |  |  |  | 159,533 |  |  |  |  | 1,016 |  |  |  |  | 321,913 |  |  |  |  | 13,032 |  |  |  |  | 4,420 |  |  |  |  | — |  |  |  |  | 17,452 |  |  |  |  | 18,989 |  |  |  |  | 776 |  |  |  |  | — |  |  |  |  | 19,765 |  |  |  |  | 193,385 |  |  |  |  | 164,729 |  |  |  |  | 1,016 |  |  |  |  | 359,130 |
Credit card |  |  |  | 57,073 |  |  |  |  | 102,180 |  |  |  |  | — |  |  |  |  | 159,253 |  |  |  |  | 6,027 |  |  |  |  | 3,353 |  |  |  |  | — |  |  |  |  | 9,380 |  |  |  |  | 4,313 |  |  |  |  | 697 |  |  |  |  | — |  |  |  |  | 5,010 |  |  |  |  | 67,413 |  |  |  |  | 106,230 |  |  |  |  | — |  |  |  |  | 173,643 |
Personal loans |  |  |  | 12,290 |  |  |  |  | 57,339 |  |  |  |  | 1,016 |  |  |  |  | 70,645 |  |  |  |  | 3,108 |  |  |  |  | 1,065 |  |  |  |  | — |  |  |  |  | 4,173 |  |  |  |  | 11,897 |  |  |  |  | 79 |  |  |  |  | — |  |  |  |  | 11,976 |  |  |  |  | 27,295 |  |  |  |  | 58,483 |  |  |  |  | 1,016 |  |  |  |  | 86,794 |
Payroll loans |  |  |  | 42,115 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 42,115 |  |  |  |  | 733 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 733 |  |  |  |  | 1,868 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 1,868 |  |  |  |  | 44,716 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 44,716 |
Vehicles |  |  |  | 12,550 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 12,550 |  |  |  |  | 987 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 987 |  |  |  |  | 628 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 628 |  |  |  |  | 14,165 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 14,165 |
Mortgage loans |  |  |  | 37,336 |  |  |  |  | 14 |  |  |  |  | — |  |  |  |  | 37,350 |  |  |  |  | 2,177 |  |  |  |  | 2 |  |  |  |  | — |  |  |  |  | 2,179 |  |  |  |  | 283 |  |  |  |  | — |  |  |  |  | — |  |  |  |  | 283 |  |  |  |  | 39,796 |  |  |  |  | 16 |  |  |  |  | — |  |  |  |  | 39,812 |
Corporate |  |  |  | 91,442 |  |  |  |  | 14,100 |  |  |  |  | 50,811 |  |  |  |  | 156,353 |  |  |  |  | 3,833 |  |  |  |  | 278 |  |  |  |  | 1,299 |  |  |  |  | 5,410 |  |  |  |  | 12,372 |  |  |  |  | 390 |  |  |  |  | 5,538 |  |  |  |  | 18,300 |  |  |  |  | 107,647 |  |  |  |  | 14,768 |  |  |  |  | 57,648 |  |  |  |  | 180,063 |
Small and medium businesses |  |  |  | 47,132 |  |  |  |  | 33,203 |  |  |  |  | 2,229 |  |  |  |  | 82,564 |  |  |  |  | 6,001 |  |  |  |  | 1,638 |  |  |  |  | 74 |  |  |  |  | 7,713 |  |  |  |  | 7,157 |  |  |  |  | 254 |  |  |  |  | 54 |  |  |  |  | 7,465 |  |  |  |  | 60,290 |  |  |  |  | 35,095 |  |  |  |  | 2,357 |  |  |  |  | 97,742 |
Foreign loans - Latin America |  |  |  | 117,448 |  |  |  |  | 25,867 |  |  |  |  | 9,069 |  |  |  |  | 152,384 |  |  |  |  | 13,028 |  |  |  |  | 3,527 |  |  |  |  | 371 |  |  |  |  | 16,926 |  |  |  |  | 5,921 |  |  |  |  | 140 |  |  |  |  | 28 |  |  |  |  | 6,089 |  |  |  |  | 136,397 |  |  |  |  | 29,534 |  |  |  |  | 9,468 |  |  |  |  | 175,399 |
Total |  |  |  | 417,386 |  |  |  |  | 232,703 |  |  |  |  | 63,125 |  |  |  |  | 713,214 |  |  |  |  | 35,894 |  |  |  |  | 9,863 |  |  |  |  | 1,744 |  |  |  |  | 47,501 |  |  |  |  | 44,439 |  |  |  |  | 1,560 |  |  |  |  | 5,620 |  |  |  |  | 51,619 |  |  |  |  | 497,719 |  |  |  |  | 244,126 |  |  |  |  | 70,489 |  |  |  |  | 812,334 |
% |  |  |  | 58.5 | % |  |  |  | 32.6 | % |  |  |  | 8.9 | % |  |  |  | 100.0 | % |  |  |  | 75.5 | % |  |  |  | 20.8 | % |  |  |  | 3.7 | % |  |  |  | 100.0 | % |  |  |  | 86.1 | % |  |  |  | 3.0 | % |  |  |  | 10.9 | % |  |  |  | 100.0 | % |  |  |  | 61.2 | % |  |  |  | 30.1 | % |  |  |  | 8.7 | % |  |  |  | 100.0 | %
(*) | In the composition of balance there are operations designated at Fair Value Through Profit or Loss, in the amount of R$ 102 at 12/31/2017.
|  | 12/31/2018 |  |  | 12/31/2017 |
Internal Rating |  | Stage 1 |  |  | Stage 2 |  |  | Stage 3 |  |  | Total loans |  |  | Stage 1 |  |  | Stage 2 |  |  | Stage 3 |  |  | Total loans |
Lower Risk |  |  | 378,389 |  |  |  | 4,536 |  |  |  | — |  |  |  | 382,925 |  |  |  | 349,354 |  |  |  | 5,274 |  |  |  | — |  |  |  | 354,628 |
Satisfactory |  |  | 72,921 |  |  |  | 19,723 |  |  |  | — |  |  |  | 92,644 |  |  |  | 60,707 |  |  |  | 17,798 |  |  |  | — |  |  |  | 78,505 |
Higher Risk |  |  | 8,316 |  |  |  | 12,635 |  |  |  | — |  |  |  | 20,951 |  |  |  | 7,325 |  |  |  | 12,822 |  |  |  | — |  |  |  | 20,147 |
Credit-lmpaired |  |  | — |  |  |  | — |  |  |  | 39,571 |  |  |  | 39,571 |  |  |  | — |  |  |  | — |  |  |  | 44,439 |  |  |  | 44,439 |
Total |  |  | 459,626 |  |  |  | 36,894 |  |  |  | 39,571 |  |  |  | 536,091 |  |  |  | 417,386 |  |  |  | 35,894 |  |  |  | 44,439 |  |  |  | 497,719 |
% |  |  | 85.7 |  |  |  | 6.9 |  |  |  | 7.4 |  |  |  | 100.0 |  |  |  | 83.9 |  |  |  | 7.2 |  |  |  | 8.9 |  |  |  | 100.0 |
Other financial assets
|  | 12/31/2018 |
|  | Fair Value |  |  | Stage 1 |  |  | Stage 2 |  |  | Stage 3 |
| Cost |  |  | Fair Value |  |  | Cost |  |  | Fair Value |  |  | Cost |  |  | Fair Value |
Investment funds |  |  | 4,326 |  |  |  | 4,335 |  |  |  | 4,129 |  |  |  | 0 |  |  |  | 0 |  |  |  | 918 |  |  |  | 197 |
Government securities |  |  | 327,720 |  |  |  | 325,734 |  |  |  | 327,546 |  |  |  | 232 |  |  |  | 174 |  |  |  | 0 |  |  |  | 0 |
Brazilian government |  |  | 300,172 |  |  |  | 298,084 |  |  |  | 299,998 |  |  |  | 232 |  |  |  | 174 |  |  |  | 0 |  |  |  | 0 |
Other Public |  |  | 0 |  |  |  | 36 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Other countries |  |  | 27,548 |  |  |  | 27,614 |  |  |  | 27,548 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Argentina |  |  | 1,129 |  |  |  | 1,121 |  |  |  | 1,129 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
United States |  |  | 2,754 |  |  |  | 2,770 |  |  |  | 2,754 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Mexico |  |  | 2,378 |  |  |  | 2,378 |  |  |  | 2,378 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Italy |  |  | 115 |  |  |  | 115 |  |  |  | 115 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Spain |  |  | 2,411 |  |  |  | 2,411 |  |  |  | 2,411 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Korea |  |  | 1,385 |  |  |  | 1,385 |  |  |  | 1,385 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Chile |  |  | 8,211 |  |  |  | 8,204 |  |  |  | 8,211 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Paraguay |  |  | 1,530 |  |  |  | 1,602 |  |  |  | 1,530 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Uruguay |  |  | 652 |  |  |  | 656 |  |  |  | 652 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Colombia |  |  | 6,065 |  |  |  | 6,054 |  |  |  | 6,065 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
France |  |  | 891 |  |  |  | 891 |  |  |  | 891 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Germany |  |  | 22 |  |  |  | 22 |  |  |  | 22 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Other |  |  | 5 |  |  |  | 5 |  |  |  | 5 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Corporate securities |  |  | 87,206 |  |  |  | 82,438 |  |  |  | 82,301 |  |  |  | 3,908 |  |  |  | 2,937 |  |  |  | 4,957 |  |  |  | 1,968 |
Rural product note |  |  | 4,003 |  |  |  | 3,855 |  |  |  | 3,848 |  |  |  | 0 |  |  |  | 0 |  |  |  | 326 |  |  |  | 155 |
Securitized real estate loans |  |  | 10,926 |  |  |  | 10,419 |  |  |  | 10,436 |  |  |  | 55 |  |  |  | 55 |  |  |  | 793 |  |  |  | 435 |
Bank deposit certificate |  |  | 2,145 |  |  |  | 2,145 |  |  |  | 2,145 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Debentures |  |  | 30,950 |  |  |  | 27,306 |  |  |  | 27,068 |  |  |  | 3,323 |  |  |  | 2,557 |  |  |  | 3,563 |  |  |  | 1,325 |
Eurobonds and other |  |  | 6,895 |  |  |  | 6,950 |  |  |  | 6,895 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Financial bills |  |  | 19,724 |  |  |  | 19,724 |  |  |  | 19,724 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Promissory notes |  |  | 1,490 |  |  |  | 1,465 |  |  |  | 1,463 |  |  |  | 15 |  |  |  | 15 |  |  |  | 24 |  |  |  | 12 |
Others |  |  | 11,073 |  |  |  | 10,574 |  |  |  | 10,722 |  |  |  | 515 |  |  |  | 310 |  |  |  | 251 |  |  |  | 41 |
Total |  |  | 419,252 |  |  |  | 412,507 |  |  |  | 413,976 |  |  |  | 4,140 |  |  |  | 3,111 |  |  |  | 5,875 |  |  |  | 2,165 |
|  | 12/31/2017 |
|  | Fair Value |  |  | Stage 1 |  |  | Stage 2 |  |  | Stage 3 |
| Cost |  |  | Fair Value |  |  | Cost |  |  | Fair Value |  |  | Cost |  |  | Fair Value |
Investment funds |  |  | 3,513 |  |  |  | 3,351 |  |  |  | 3,345 |  |  |  | — |  |  |  | — |  |  |  | 784 |  |  |  | 168 |
Government securities |  |  | 326,227 |  |  |  | 324,585 |  |  |  | 326,031 |  |  |  | 261 |  |  |  | 196 |  |  |  | — |  |  |  | — |
Brazilian government |  |  | 297,325 |  |  |  | 295,671 |  |  |  | 297,129 |  |  |  | 261 |  |  |  | 196 |  |  |  | — |  |  |  | — |
Other countries |  |  | 28,902 |  |  |  | 28,914 |  |  |  | 28,902 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Argentina |  |  | 1,466 |  |  |  | 1,446 |  |  |  | 1,466 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
United States |  |  | 1,666 |  |  |  | 1,684 |  |  |  | 1,666 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Mexico |  |  | 564 |  |  |  | 564 |  |  |  | 564 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Denmark |  |  | 1,951 |  |  |  | 1,951 |  |  |  | 1,951 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Spain |  |  | 2,937 |  |  |  | 2,937 |  |  |  | 2,937 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Korea |  |  | 1,944 |  |  |  | 1,944 |  |  |  | 1,944 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Chile |  |  | 9,761 |  |  |  | 9,765 |  |  |  | 9,761 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Paraguay |  |  | 1,807 |  |  |  | 1,922 |  |  |  | 1,807 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Uruguay |  |  | 828 |  |  |  | 824 |  |  |  | 828 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Colombia |  |  | 5,945 |  |  |  | 5,844 |  |  |  | 5,945 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Other |  |  | 33 |  |  |  | 33 |  |  |  | 33 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Corporate securities |  |  | 79,344 |  |  |  | 75,240 |  |  |  | 75,486 |  |  |  | 1,510 |  |  |  | 1,109 |  |  |  | 7,857 |  |  |  | 2,749 |
Rural product note |  |  | 2,739 |  |  |  | 2,518 |  |  |  | 2,511 |  |  |  | — |  |  |  | — |  |  |  | 381 |  |  |  | 228 |
Securitized real estate loans |  |  | 13,577 |  |  |  | 12,492 |  |  |  | 12,501 |  |  |  | 64 |  |  |  | 59 |  |  |  | 3,062 |  |  |  | 1,017 |
Bank deposit certificate |  |  | 1,150 |  |  |  | 1,150 |  |  |  | 1,150 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Debentures |  |  | 23,758 |  |  |  | 21,584 |  |  |  | 21,569 |  |  |  | 1,255 |  |  |  | 969 |  |  |  | 3,892 |  |  |  | 1,220 |
Eurobonds and other |  |  | 6,192 |  |  |  | 6,195 |  |  |  | 6,192 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Financial bills |  |  | 21,230 |  |  |  | 21,230 |  |  |  | 21,230 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Promissory notes |  |  | 3,614 |  |  |  | 3,597 |  |  |  | 3,596 |  |  |  | — |  |  |  | — |  |  |  | 40 |  |  |  | 18 |
Others |  |  | 7,084 |  |  |  | 6,474 |  |  |  | 6,737 |  |  |  | 191 |  |  |  | 81 |  |  |  | 482 |  |  |  | 266 |
Total |  |  | 409,084 |  |  |  | 403,176 |  |  |  | 404,862 |  |  |  | 1,771 |  |  |  | 1,305 |  |  |  | 8,641 |  |  |  | 2,917 |
Other Financial Assets - Internal Classification by Level of Risk
|  | 12/31/2018 |
|  | Financial Assets - At Amortized Cost |  |  |  |  |  |  |  |  |  |
Internal rating |  | Interbank deposits and securities purchased under agreements to resell |  |  | Securities |  |  | Financial assets at fair value through profit or loss at fair value (*) |  |  | Financial Assets Fair Value Through Other Comprehensive Income |  |  | Total |
Lower risk |  |  | 306,556 |  |  |  | 103,157 |  |  |  | 284,896 |  |  |  | 49,323 |  |  |  | 743,932 |
Satisfactory |  |  | 0 |  |  |  | 3,645 |  |  |  | 1,340 |  |  |  | 0 |  |  |  | 4,985 |
Higher risk |  |  | 0 |  |  |  | 3,593 |  |  |  | 410 |  |  |  | 0 |  |  |  | 4,003 |
Total |  |  | 306,556 |  |  |  | 110,395 |  |  |  | 286,646 |  |  |  | 49,323 |  |  |  | 752,920 |
% |  |  | 40.6 |  |  |  | 14.7 |  |  |  | 38.1 |  |  |  | 6.6 |  |  |  | 100.0 |
(*) | Includes Derivatives in the amount of R$ 23,466 at 12/31/2018.
|  | 12/31/2017 |
|  | Financial Assets - At Amortized Cost |  |  |  |  |  |  |  |  |  |
Internal rating |  | Interbank deposits and securities purchased under agreements to resell |  |  | Securities |  |  | Financial assets at fair value through profit or loss at fair value (*) |  |  | Financial Assets Fair Value Through Other Comprehensive Income |  |  | Total |
Lower risk |  |  | 273,747 |  |  |  | 104,610 |  |  |  | 271,859 |  |  |  | 52,149 |  |  |  | 702,365 |
Satisfactory |  |  | — |  |  |  | 338 |  |  |  | 1,278 |  |  |  | — |  |  |  | 1,616 |
Higher Risk |  |  | — |  |  |  | 1,294 |  |  |  | 399 |  |  |  | — |  |  |  | 1,693 |
Total |  |  | 273,747 |  |  |  | 106,242 |  |  |  | 273,536 |  |  |  | 52,149 |  |  |  | 705,674 |
% |  |  | 38.7 |  |  |  | 15.1 |  |  |  | 38.8 |  |  |  | 7.4 |  |  |  | 100.0 |
(*) | Includes Derivatives in the amount of R$ 22,843 at 12/31/2017.
1.4.3 | Collateral held for loan and lease operations portfolio
|  | 12/31/2018 |  |  | 12/31/2017 |
|  | Over-collateralized assets |  |  | Under-collateralized assets |  |  | Over-collateralized assets |  |  | Under-collateralized assets |
|  | Carrying value of the assets |  |  | Fair value of collateral |  |  | Carrying value of the assets |  |  | Fair value of collateral |  |  | Carrying value of the assets |  |  | Fair value of collateral |  |  | Carrying value of the assets |  |  | Fair value of collateral |
Individuals |  |  | 57,842 |  |  |  | 145,775 |  |  |  | 1,054 |  |  |  | 993 |  |  |  | 52,608 |  |  |  | 132,007 |  |  |  | 1,079 |  |  |  | 1,028 |
Personal (1) |  |  | 643 |  |  |  | 1,949 |  |  |  | 753 |  |  |  | 711 |  |  |  | 370 |  |  |  | 1,398 |  |  |  | 901 |  |  |  | 864 |
Vehicles (2) |  |  | 15,173 |  |  |  | 35,266 |  |  |  | 298 |  |  |  | 280 |  |  |  | 13,618 |  |  |  | 34,368 |  |  |  | 177 |  |  |  | 163 |
Mortgage loans (3) |  |  | 42,026 |  |  |  | 108,560 |  |  |  | 3 |  |  |  | 2 |  |  |  | 38,620 |  |  |  | 96,241 |  |  |  | 1 |  |  |  | 1 |
Small, medium businesses and corporate (4) |  |  | 112,508 |  |  |  | 293,724 |  |  |  | 13,870 |  |  |  | 10,267 |  |  |  | 115,731 |  |  |  | 339,892 |  |  |  | 11,032 |  |  |  | 8,537 |
Foreign loans - Latin America (4) |  |  | 117,094 |  |  |  | 246,462 |  |  |  | 11,242 |  |  |  | 3,758 |  |  |  | 105,425 |  |  |  | 175,476 |  |  |  | 10,262 |  |  |  | 3,598 |
Total |  |  | 287,444 |  |  |  | 685,961 |  |  |  | 26,166 |  |  |  | 15,018 |  |  |  | 273,764 |  |  |  | 647,375 |  |  |  | 22,373 |  |  |  | 13,163 |
(1) | In general requires financial collaterals.
(2) | Vehicles themselves are pledged as collateral, as well as assets leased in lease operations.
(3) | Properties themselves are pledged as collateral.
(4) | Any collateral set forth in the credit policy of ITAÚ UNIBANCO HOLDING (chattel mortgage, surety/joint debtor, mortgage and others).
Of total credit and finance lease operations, R$ 222,481 (R$ 201,582 at 12/31/2017) represented unsecured loans. 1.4.4 Repossessed assets Assets received from the foreclosure of loans, including real estate, are initially recorded at the lower of: (i) the fair value of the asset less the estimated selling expenses, or (ii) the carrying amount of the loan. Further impairment of assets is recorded as a provision, with a corresponding charge to income. The maintenance costs of these assets are expensed as incurred. The policy for sales of these assets (assets not for use) includes periodic auctions that are announced in advance and considers that the assets cannot be held for more than one year as stipulated by the BACEN. Total assets repossessed in the period was R$ 657 (R$ 701 from 01/01 to 12/31/2017), mainly composed of real estate. 2. Market risk Possibility of incurring financial losses arising from the changes in the market value of positions held by a financial institution, including the risks of transactions subject to foreign exchange variation, interest rates, share prices, price indexes and commodity prices. ITAÚ UNIBANCO HOLDING’s market risk management strategy is aimed at balancing corporate business goals, taking into account, among other things: political, economic and market conditions; portfolio profile of ITAÚ UNIBANCO HOLDING and expertise within the group to support operations in specific markets. The market risk is controlled by an area independent from the business areas, which is responsible for the daily activities of: (i) risk measurement and assessment, (ii) monitoring of stress scenarios, limits and warnings, (iii) application, analysis and tests of stress scenarios, (iv) risk reporting for individuals responsible within the business areas, in compliance with governance of ITAÚ UNIBANCO HOLDING, (v) monitoring of actions required for adjustment of positions and/or risk levels to make them feasible, and (vi) support to the launch of new financial products with security. The National Monetary Council (CMN) has regulations that establish the segregation of exposure to market risk at least in the following categories: interest rate, exchange rate, shares and commodities. Brazilian inflation indexes are treated as a group of risk indicators and receive the same treatment given to other risk indicators. The structure of limits and warnings is in line with the Board of Directors’ guidelines, and it is reviewed and approved on an annual basis. This structure has specific limits aiming at improving the risk monitoring and understanding process, and at avoiding concentration. These limits are quantified by assessing the forecasted results of the balance sheet, size of stockholders’ equity, liquidity, market complexity and volatility, as well as the institution’s appetite for risk of ITAÚ UNIBANCO HOLDING. In order to set up operations within the defined limits, ITAÚ UNIBANCO HOLDING hedges transactions with clients and proprietary positions, including its foreign investments. Derivatives are commonly used for these hedging activities, and can be characterized as accounting or economic hedge, both governed by the institutional polices of ITAÚ UNIBANCO HOLDING. The market risk structure categorizes transactions as part of either the banking portfolio or the trading portfolio, in accordance with general criteria established by CMN Resolution nº. 4,557, of February 2017, 23, and BACEN Circular nº. 3,354, of June 2007, 27. The trading portfolio consists of all transactions involving financial instruments and goods, including derivatives, which are carried out with the intention of trading. The banking portfolio is basically characterized by transactions from the banking business, and transactions related to the management of the balance sheet of the institution. It has the no-intention of resale and medium and long term time horizons as general guidelines. Market risk management is conducted based on the following metrics:
| • |  | Value at risk (VaR): statistical measure that estimates the expected maximum potential economic loss under normal market conditions, considering a certain time horizon and confidence level;
| • |  | Losses in stress scenarios: simulation technique to assess the behavior of assets, liabilities and derivatives of a portfolio when several risk factors are taken to extreme market situations (based on prospective and historical scenarios);
| • |  | Stop loss: metrics which purpose is to review positions, should losses accumulated in a certain period reach a certain amount;
| • |  | Concentration: cumulative exposure of a certain financial instrument or risk factor, calculated at market value (“MtM – Mark to Market”); and
| • |  | Stressed VaR: statistical metric arising from VaR calculation, which purpose is to capture higher risk in simulations for the trading portfolio, considering returns that can be seen in historical scenarios of extreme volatility.
Management of interest rate risk in the Banking Book (IRRBB) is performed based on the following metrics:
| • |  | DEVE: difference between the present value of sum of repricing flows instruments subject to IRRBB in a base scenario and present value of sum of repricing flows of these instruments in a scenario of shock in interest rates;
| • |  | DNII: difference between the result of financial intermediation of instruments subject to IRRBB in a base scenario and the result of financial intermediation of these instruments in a scenario of shock in interest rates.
In addition to the aforementioned risk measures, sensitivity and loss control measures are also analyzed. They comprise:
| • |  | Mismatching analysis (GAPS): accumulated exposure by risk factor of cash flows expressed at market value, allocated at the maturity dates;
| • |  | Sensitivity (DV01- Delta Variation): impact on the market value of cash flows, when submitted to an one annual basis point increase in the current interest rates or index rate;
| • |  | Sensitivity to several risk factors (Greeks): partial derivatives of an option portfolio in relation to the prices of underlying assets, implied volatilities, interest rates and time.
ITAÚ UNIBANCO HOLDING uses proprietary systems to measure the consolidated market risk. The processing of these systems occur, in an access-controlled environment, being highly available, which has data safekeeping and recovery processes, and counts on such an infrastructure to ensure the continuity of business in contingency (disaster recovery) situations. The document that details the guidelines established by the internal policy on market risk management, that is not part of the financial statements, may be viewed on the website www.itau.com.br/investor-relations, in the section Corporate Governance/Rules and Policies / Public Access Report – Market Risk. For a detailed view of Market Risk and Interest Rate Risk in the Banking Portfolio, see chapter Market Risk of the Publication on Risk and Capital Management - Pillar 3. 2.1 VaR - Consolidated ITAÚ UNIBANCO HOLDING Is calculated by Historical Simulation, i.e., the expected distribution for profit and loss (P&L’s - Profit and loss statement) of a portfolio over a time horizon that can be estimated based on the historical behavior of returns of market risk factors of this portfolio. VaR is calculated at a confidence level of 99%, historical period of 4 years (1000 business days) and a holding period of one day. In addition, in a conservative approach, VaR is calculated daily, being or not volatility-weighted, and the final VaR is the most restrictive value between both methodologies. From January 1 to December 31, 2018, the average total VaR in Historical Simulation was R$ 399.3 or 0.26% of total stockholders’ equity (R$ 409.9 or 0.28% of total stockholders’ equity 01/01 to 12/31/2017).
(Reais million) |
|  | VaR Total - Historical Simulation |
|  | 12/31/2018 (1) |  |  | 12/31/2017 (1) |
|  | Average |  |  | Minimum |  |  | Maximum |  |  | Var Total |  |  | Average |  |  | Minimum |  |  | Maximum |  |  | Var Total |
Risk factor group |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rates |  |  | 851.4 |  |  |  | 720.0 |  |  |  | 1,042.9 |  |  |  | 898.4 |  |  |  | 721.0 |  |  |  | 583.6 |  |  |  | 1,311.9 |  |  |  | 764.7 |
Currencies |  |  | 24.7 |  |  |  | 12.7 |  |  |  | 45.2 |  |  |  | 37.3 |  |  |  | 20.4 |  |  |  | 6.5 |  |  |  | 50.2 |  |  |  | 11.9 |
Shares |  |  | 39.2 |  |  |  | 23.6 |  |  |  | 58.5 |  |  |  | 50.1 |  |  |  | 45.4 |  |  |  | 38.5 |  |  |  | 54.9 |  |  |  | 46.4 |
Commodities |  |  | 1.6 |  |  |  | 0.6 |  |  |  | 3.1 |  |  |  | 1.0 |  |  |  | 1.5 |  |  |  | 0.7 |  |  |  | 4.0 |  |  |  | 0.8 |
Effect of diversification |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (605.3 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (451.5 | )
Total risk |  |  | 399.3 |  |  |  | 294.7 |  |  |  | 603.6 |  |  |  | 381.5 |  |  |  | 409.9 |  |  |  | 304.8 |  |  |  | 874.0 |  |  |  | 372.3 |
(1) | VaR by Group of Risk Factors considers information from foreign units.
2.1.1 Interest rate risk The table below shows the accounting position of financial assets and liabilities exposed to interest rate risk, distributed by maturity (remaining contractual terms). This table is not used directly to manage interest rate risks; it is mostly used to permit the assessment of mismatching between accounts and products associated thereto and to identify possible risk concentration.
|  | 12/31/2018 |  |  | 12/31/2017 |
|  | 0-30 days |  |  | 31-180 days |  |  | 181-365 days |  |  | 1-5 years |  |  | Over 5 years |  |  | Total |  |  | 0-30 days |  |  | 31-180 days |  |  | 181-365 days |  |  | 1-5 years |  |  | Over 5 years |  |  | Total |
Financial assets |  |  | 188,616 |  |  |  | 394,168 |  |  |  | 100,598 |  |  |  | 399,075 |  |  |  | 202,898 |  |  |  | 1,285,355 |  |  |  | 268,059 |  |  |  | 354,885 |  |  |  | 103,785 |  |  |  | 392,119 |  |  |  | 178,592 |  |  |  | 1,297,440 |
Central Bank compulsory deposits |  |  | 88,549 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 88,549 |  |  |  | 94,047 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 94,047 |
At amortized cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interbank deposits |  |  | 19,181 |  |  |  | 4,815 |  |  |  | 1,730 |  |  |  | 688 |  |  |  | 0 |  |  |  | 26,414 |  |  |  | 21,644 |  |  |  | 3,510 |  |  |  | 2,880 |  |  |  | 1,011 |  |  |  | 3 |  |  |  | 29,048 |
Securities purchased under agreements to resell |  |  | 64,677 |  |  |  | 215,352 |  |  |  | 0 |  |  |  | 12 |  |  |  | 91 |  |  |  | 280,132 |  |  |  | 42,612 |  |  |  | 201,889 |  |  |  | 2 |  |  |  | 28 |  |  |  | 168 |  |  |  | 244,699 |
Securities |  |  | 1,007 |  |  |  | 7,320 |  |  |  | 5,792 |  |  |  | 50,969 |  |  |  | 41,661 |  |  |  | 106,749 |  |  |  | 10,897 |  |  |  | 7,921 |  |  |  | 6,834 |  |  |  | 50,650 |  |  |  | 29,940 |  |  |  | 106,242 |
Loan and lease operations (1) |  |  | 78,709 |  |  |  | 140,057 |  |  |  | 70,792 |  |  |  | 167,517 |  |  |  | 79,016 |  |  |  | 536,091 |  |  |  | 73,239 |  |  |  | 120,231 |  |  |  | 67,463 |  |  |  | 161,824 |  |  |  | 74,962 |  |  |  | 497,719 |
At fair value through other comprehensive income |  |  | 1,915 |  |  |  | 4,743 |  |  |  | 4,026 |  |  |  | 21,649 |  |  |  | 16,990 |  |  |  | 49,323 |  |  |  | 1,088 |  |  |  | 2,476 |  |  |  | 6,102 |  |  |  | 23,415 |  |  |  | 19,068 |  |  |  | 52,149 |
At fair value through profit and loss |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities |  |  | 19,140 |  |  |  | 17,810 |  |  |  | 15,945 |  |  |  | 154,171 |  |  |  | 56,114 |  |  |  | 263,180 |  |  |  | 16,554 |  |  |  | 15,855 |  |  |  | 17,103 |  |  |  | 147,805 |  |  |  | 51,630 |  |  |  | 248,947 |
Derivatives |  |  | 3,987 |  |  |  | 4,071 |  |  |  | 2,313 |  |  |  | 4,069 |  |  |  | 9,026 |  |  |  | 23,466 |  |  |  | 7,978 |  |  |  | 3,003 |  |  |  | 2,360 |  |  |  | 6,681 |  |  |  | 2,821 |  |  |  | 22,843 |
Financial liabilities |  |  | 513,889 |  |  |  | 88,152 |  |  |  | 69,102 |  |  |  | 313,240 |  |  |  | 69,055 |  |  |  | 1,053,438 |  |  |  | 376,492 |  |  |  | 93,736 |  |  |  | 87,850 |  |  |  | 290,677 |  |  |  | 56,451 |  |  |  | 905,206 |
At amortized cost |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 248,913 |  |  |  | 36,856 |  |  |  | 22,063 |  |  |  | 146,288 |  |  |  | 9,304 |  |  |  | 463,424 |  |  |  | 216,842 |  |  |  | 33,258 |  |  |  | 23,239 |  |  |  | 126,886 |  |  |  | 2,713 |  |  |  | 402,938 |
Securities sold under repurchase agreements |  |  | 254,052 |  |  |  | 9,713 |  |  |  | 7,756 |  |  |  | 40,877 |  |  |  | 17,839 |  |  |  | 330,237 |  |  |  | 208,261 |  |  |  | 7,362 |  |  |  | 25,185 |  |  |  | 57,146 |  |  |  | 14,680 |  |  |  | 312,634 |
Interbank market debts |  |  | 7,438 |  |  |  | 33,869 |  |  |  | 31,869 |  |  |  | 58,375 |  |  |  | 3,119 |  |  |  | 134,670 |  |  |  | 8,557 |  |  |  | 34,097 |  |  |  | 30,727 |  |  |  | 47,219 |  |  |  | 3,987 |  |  |  | 124,587 |
Institutional market debts |  |  | 314 |  |  |  | 3,631 |  |  |  | 4,579 |  |  |  | 58,513 |  |  |  | 26,937 |  |  |  | 93,974 |  |  |  | 4,188 |  |  |  | 16,495 |  |  |  | 5,343 |  |  |  | 43,911 |  |  |  | 28,545 |  |  |  | 98,482 |
Capitalization plans |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 3,422 |  |  |  | 0 |  |  |  | 3,422 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3,301 |  |  |  | — |  |  |  | 3,301 |
At fair value through profit and loss |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivatives |  |  | 3,168 |  |  |  | 4,070 |  |  |  | 2,815 |  |  |  | 5,672 |  |  |  | 11,794 |  |  |  | 27,519 |  |  |  | 7,596 |  |  |  | 2,491 |  |  |  | 3,325 |  |  |  | 11,109 |  |  |  | 2,225 |  |  |  | 26,746 |
Structured notes |  |  | 4 |  |  |  | 13 |  |  |  | 20 |  |  |  | 93 |  |  |  | 62 |  |  |  | 192 |  |  |  | 11 |  |  |  | 22 |  |  |  | 22 |  |  |  | 319 |  |  |  | 91 |  |  |  | 465 |
Difference asset/ liability (2) |  |  | (325,273 | ) |  |  | 306,016 |  |  |  | 31,496 |  |  |  | 85,835 |  |  |  | 133,843 |  |  |  | 231,917 |  |  |  | (108,433 | ) |  |  | 261,149 |  |  |  | 15,935 |  |  |  | 101,442 |  |  |  | 122,141 |  |  |  | 392,234 |
Cumulative difference |  |  | (325,273 | ) |  |  | (19,257 | ) |  |  | 12,239 |  |  |  | 98,074 |  |  |  | 231,917 |  |  |  | 0 |  |  |  | (108,433 | ) |  |  | 152,716 |  |  |  | 168,651 |  |  |  | 270,093 |  |  |  | 392,234 |  |  |  |  |
Ratio of cumulative difference to total interest-bearing assets |  |  | (25.3 | %) |  |  | (1.5 | %) |  |  | 1.0 | % |  |  | 7.6 | % |  |  | 18.0 | % |  |  | 0 |  |  |  | (8.4 | %) |  |  | 11.8 | % |  |  | 13.0 | % |  |  | 20.8 | % |  |  | 30.2 | % |  |  |  |
(1) | In the composition of balance there are operations designated at Fair Value Through Profit or Loss, in the amount of R$ 102 at 12/31/2017.
(2) | The difference arises from the mismatch between the maturities of all remunerated assets and liabilities, at the respective period-end date, considering the contractually agreed terms.
2.1.2 Currency risk The table below shows the accounting exposure to currency risk of financial assets and liabilities and reflects ITAÚ UNIBANCO HOLDING’s currency risk management.
|  | 12/31/2018 |
|  | Dollar |  |  | Chilean Peso |  |  | Other |  |  | Total |
Net exposure of financial instruments |  |  | (38,190 | ) |  |  | 7,647 |  |  |  | 15,418 |  |  |  | (15,125 | )
|  | 12/31/2017 |
|  | Dollar |  |  | Chilean Peso |  |  | Other |  |  | Total |
Net exposure of financial instruments |  |  | (15,910 | ) |  |  | 7,159 |  |  |  | 13,232 |  |  |  | 4,481 |
2.1.3 Share Price Risk The exposure to share price risk is disclosed in Note 5, related to Financial Assets Through Profit or Loss – Securities, and Note 8, related to Financial Assets at Fair Value Through Other Comprehensive Income – Securities. 3. Liquidity risk The institution’s possibility of not being able to efficiently meet its expected and unexpected obligations, both current and future, including those arising from the pledged guarantees, without affecting its daily operations and without incurring significant losses. The control over liquidity risk is carried out by an area independent from the business area and that is responsible for establishing the reserve composition, estimating the cash flow and exposure to liquidity risk in different horizons of time, and for monitoring the minimum limits to absorb losses in stress scenarios for each country where ITAÚ UNIBANCO HOLDING operates. All activities are subject to verification by the independent validation, internal control and audit areas. The liquidity management policies and respective limits are established based on prospective scenarios and top management’s guidelines. These scenarios are reviewed on a periodic basis, by analyzing the need for cash due to atypical market conditions or resulting from strategic decisions of ITAÚ UNIBANCO HOLDING. The document Public Access Report - Liquidity Risk, that expresses the guidelines set forth by the internal policy on liquidity risk, that is not part of the financial statements, may be viewed on the website www.itau.com.br/investor-relations, in the section Itaú Unibanco, Corporate Governance, Rules and Policies. ITAÚ UNIBANCO HOLDING conducts the control over and management of liquidity risk on a daily basis, through a governance approved in superior committees, which sets forth, among other activities, the adoption of liquidity minimum limits, sufficient to absorb possible cash losses in stress scenarios, measured through internal and regulatory methodologies. Additionally the following items for monitoring and supporting decisions are periodically prepared and submitted to top management:
• |  | Different scenarios projected for changes in liquidity;
• |  | Contingency plans for crisis situations;
• |  | Reports and charts that describe the risk positions;
• |  | Assessment of funding costs and alternative sources of funding;
• |  | Monitoring of changes in funding through a constant control over sources of funding, considering the type of investor and maturities, among other factors.
3.1 Primary sources of funding ITAÚ UNIBANCO HOLDING has different sources of funding, of which a significant portion is from the retail segment. Of total clients’ funds, 39.2% or R$ 253.0 billion, are immediately available to the client. However, the historical behavior of the accumulated balance of the two largest items in this group – demand and savings deposits - is relatively consistent with the balances increasing over time and inflows exceeding outflows for monthly average amounts.
|  | 12/31/2018 |  |  | 12/31/2017 |
Funding from clients |  | 0-30 days |  |  | Total |  |  | % |  |  | 0-30 days |  |  | Total |  |  | % |
Deposits |  |  | 248,913 |  |  |  | 463,424 |  |  |  | 0 |  |  |  | 216,842 |  |  |  | 402,938 |  |  |  |  |
Demand deposits |  |  | 72,581 |  |  |  | 72,581 |  |  |  | 11.2 |  |  |  | 68,973 |  |  |  | 68,973 |  |  |  | 11.1 |
Savings deposits |  |  | 136,865 |  |  |  | 136,865 |  |  |  | 21.2 |  |  |  | 119,980 |  |  |  | 119,980 |  |  |  | 19.3 |
Time deposits |  |  | 37,784 |  |  |  | 251,300 |  |  |  | 38.9 |  |  |  | 27,798 |  |  |  | 211,800 |  |  |  | 34.0 |
Other |  |  | 1,683 |  |  |  | 2,678 |  |  |  | 0.4 |  |  |  | 91 |  |  |  | 2,185 |  |  |  | 0.4 |
Funds from acceptances and issuance of securities (1) |  |  | 2,285 |  |  |  | 111,566 |  |  |  | 17.3 |  |  |  | 6,820 |  |  |  | 107,581 |  |  |  | 17.3 |
Funds from own issue (2) |  |  | 1,831 |  |  |  | 21,417 |  |  |  | 3.3 |  |  |  | 2,570 |  |  |  | 58,837 |  |  |  | 9.5 |
Subordinated debt |  |  | 2 |  |  |  | 49,313 |  |  |  | 7.6 |  |  |  | 1,315 |  |  |  | 52,696 |  |  |  | 8.5 |
Total |  |  | 253,031 |  |  |  | 645,720 |  |  |  | 100.0 |  |  |  | 227,547 |  |  |  | 622,052 |  |  |  | 100.0 |
(1) | Includes mortgage notes, real estate credit bills, agribusiness, financial and structured operations certificates recorded in interbank market and debts and liabilities for issuance of debentures and foreign borrowing and securities recorded in funds from institutional markets.
(2) | Refer to deposits received under securities repurchase agreements with securities from own issue.
3.2 Control over liquidity ITAÚ UNIBANCO HOLDING manages its liquidity reserves based on estimates of funds that will be available for investment, considering the continuity of business in normal conditions. During the period of 2018, ITAÚ UNIBANCO HOLDING maintained appropriate levels of liquidity in Brazil and abroad. Liquid assets (cash and deposits on demand, securities purchased under agreements to resell - funded position and government securities – available, detailed in the table Undiscounted future flows – Financial assets) totaled R$ 158.6 billion and accounted for 62.7% of the short term redeemable obligations, 24.6% of total funding, and 15.8% of total assets. The table below shows the indicators used by ITAÚ UNIBANCO HOLDING in the management of liquidity risk:
Liquidity indicators |  | 12/31/2018 % |  |  | 12/31/2017 % |
Net assets (1) / funds within 30 days (2) |  |  | 62.7 |  |  |  | 72.2 |
Net assets (1) / total funds (3) |  |  | 24.6 |  |  |  | 26.4 |
Net assets (1) / total financial assets (4) |  |  | 15.8 |  |  |  | 17.6 |
(1) | Net assets: Cash and deposits on demand, Securities purchased under agreements to resell – Funded position and Government securities - available. Detailed in the table Undiscounted future flows – Financial assets.
(2) | Table Funding from clients (Total Funding from clients 0-30 days).
(3) | Table funding from clients (Total funding from clients).
(4) | Detailed in the table Undiscounted future flows – Financial assets, total present value regards R$ 1,001,240 (R$ 933,686 at 12/31/2017).
Assets and liabilities according to their remaining contractual maturities, considering their undiscounted flows, are presented below:
Undiscounted future flows, except for derivatives which are fair value |  | 12/31/2018 |  |  | 12/31/2017 |
Financial assets (1) |  | 0 - 30 days |  |  | 31 - 365 days |  |  | 366 - 720 days |  |  | Over 720 days |  |  | Total |  |  | 0 - 30 days |  |  | 31 - 365 days |  |  | 366 - 720 days |  |  | Over 720 days |  |  | Total |
Cash and deposits on demand |  |  | 37,159 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 37,159 |  |  |  | 18,749 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 18,749 |
Interbank investments |  |  | 115,278 |  |  |  | 182,606 |  |  |  | 468 |  |  |  | 322 |  |  |  | 298,674 |  |  |  | 93,218 |  |  |  | 173,663 |  |  |  | 673 |  |  |  | 508 |  |  |  | 268,062 |
Securities purchased under agreements to resell – Funded position (2) |  |  | 45,335 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 45,335 |  |  |  | 38,833 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 38,833 |
Securities purchased under agreements to resell – Financed position |  |  | 50,741 |  |  |  | 175,857 |  |  |  | 0 |  |  |  | 10 |  |  |  | 226,608 |  |  |  | 31,238 |  |  |  | 167,061 |  |  |  | — |  |  |  | — |  |  |  | 198,299 |
Interbank deposits (4) |  |  | 19,202 |  |  |  | 6,749 |  |  |  | 468 |  |  |  | 312 |  |  |  | 26,731 |  |  |  | 23,147 |  |  |  | 6,602 |  |  |  | 673 |  |  |  | 508 |  |  |  | 30,930 |
Securities |  |  | 82,144 |  |  |  | 17,255 |  |  |  | 17,853 |  |  |  | 98,531 |  |  |  | 215,783 |  |  |  | 110,667 |  |  |  | 24,960 |  |  |  | 16,717 |  |  |  | 76,923 |  |  |  | 229,267 |
Government securities - available |  |  | 72,026 |  |  |  | 292 |  |  |  | 292 |  |  |  | 5,315 |  |  |  | 77,925 |  |  |  | 103,447 |  |  |  | 152 |  |  |  | 232 |  |  |  | 5,052 |  |  |  | 108,883 |
Government securities – subject to repurchase commitments |  |  | 52 |  |  |  | 6,321 |  |  |  | 12,671 |  |  |  | 32,811 |  |  |  | 51,855 |  |  |  | 203 |  |  |  | 15,677 |  |  |  | 9,107 |  |  |  | 19,270 |  |  |  | 44,257 |
Private securities - available |  |  | 10,066 |  |  |  | 9,406 |  |  |  | 4,185 |  |  |  | 49,003 |  |  |  | 72,660 |  |  |  | 7,007 |  |  |  | 8,577 |  |  |  | 5,541 |  |  |  | 45,885 |  |  |  | 67,010 |
Private securities – subject to repurchase commitments |  |  | 0 |  |  |  | 1,236 |  |  |  | 705 |  |  |  | 11,402 |  |  |  | 13,343 |  |  |  | 10 |  |  |  | 554 |  |  |  | 1,837 |  |  |  | 6,716 |  |  |  | 9,117 |
Derivative financial instruments |  |  | 3,987 |  |  |  | 6,384 |  |  |  | 4,069 |  |  |  | 9,026 |  |  |  | 23,466 |  |  |  | 7,978 |  |  |  | 5,363 |  |  |  | 2,756 |  |  |  | 6,746 |  |  |  | 22,843 |
Net position |  |  | 3,987 |  |  |  | 6,384 |  |  |  | 4,069 |  |  |  | 9,026 |  |  |  | 23,466 |  |  |  | 7,978 |  |  |  | 5,363 |  |  |  | 2,756 |  |  |  | 6,746 |  |  |  | 22,843 |
Swaps |  |  | 705 |  |  |  | 1,132 |  |  |  | 2,881 |  |  |  | 8,331 |  |  |  | 13,049 |  |  |  | 189 |  |  |  | 1,258 |  |  |  | 1,661 |  |  |  | 6,082 |  |  |  | 9,190 |
Option |  |  | 1,167 |  |  |  | 1,890 |  |  |  | 975 |  |  |  | 183 |  |  |  | 4,215 |  |  |  | 430 |  |  |  | 1,748 |  |  |  | 865 |  |  |  | 294 |  |  |  | 3,337 |
Forward (onshore) |  |  | 893 |  |  |  | 942 |  |  |  | 0 |  |  |  | 0 |  |  |  | 1,835 |  |  |  | 6,529 |  |  |  | 382 |  |  |  | — |  |  |  | — |  |  |  | 6,911 |
Other derivative financial instruments |  |  | 1,222 |  |  |  | 2,420 |  |  |  | 213 |  |  |  | 512 |  |  |  | 4,367 |  |  |  | 830 |  |  |  | 1,975 |  |  |  | 230 |  |  |  | 370 |  |  |  | 3,405 |
Loan and lease operations portfolio (3) |  |  | 68,829 |  |  |  | 166,503 |  |  |  | 88,138 |  |  |  | 241,919 |  |  |  | 565,389 |  |  |  | 57,505 |  |  |  | 152,660 |  |  |  | 71,107 |  |  |  | 201,881 |  |  |  | 483,153 |
Total financial assets |  |  | 307,397 |  |  |  | 372,748 |  |  |  | 110,528 |  |  |  | 349,798 |  |  |  | 1,140,471 |  |  |  | 288,117 |  |  |  | 356,646 |  |  |  | 91,253 |  |  |  | 286,058 |  |  |  | 1,022,074 |
(1) | The assets portfolio does not take into consideration the balance of compulsory deposits in Central Bank, amounting to R$ 94,148 (R$ 98,837 at 12/31/2017), which release of funds is linked to the maturity of the liability portfolios. The amounts of PGBL and VGBL are not considered in the assets portfolio because they are covered in Note 26.
(2) | Net of R$ 5,120 (R$ 3,664 at 12/31/2017) which securities are restricted to guarantee transactions at B3 S.A. - Brasil, Bolsa, Balcão and the BACEN.
(3) | Net of payment to merchants of R$ 60,504 (R$ 53,687 at 12/31/2017) and the amount of liabilities from transactions related to credit assignments R$ 3,993 (R$ 4,931 at 12/31/2017).
(4) | Includes R$ 15,886 (R$ 6,689 at 12/31/2017) related to Compulsory Deposits with Central Banks of other countries.
Undiscounted future flows, except for derivatives which are fair value |  | 12/31/2018 |  |  | 12/31/2017 |
Financial liabilities |  | 0 – 30 days |  |  | 31 – 365 days |  |  | 366 – 720 days |  |  | Over 720 days |  |  | Total |  |  | 0 – 30 days |  |  | 31 – 365 days |  |  | 366 – 720 days |  |  | Over 720 days |  |  | Total |
Deposits |  |  | 246,729 |  |  |  | 62,909 |  |  |  | 16,674 |  |  |  | 191,131 |  |  |  | 517,443 |  |  |  | 222,782 |  |  |  | 61,672 |  |  |  | 16,500 |  |  |  | 152,961 |  |  |  | 453,915 |
Demand deposits |  |  | 72,581 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 72,581 |  |  |  | 68,973 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 68,973 |
Savings deposits |  |  | 136,865 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 136,865 |  |  |  | 119,980 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 119,980 |
Time deposit |  |  | 35,450 |  |  |  | 62,185 |  |  |  | 16,647 |  |  |  | 190,984 |  |  |  | 305,266 |  |  |  | 33,114 |  |  |  | 60,272 |  |  |  | 16,445 |  |  |  | 152,903 |  |  |  | 262,734 |
Interbank deposits |  |  | 1,830 |  |  |  | 724 |  |  |  | 27 |  |  |  | 147 |  |  |  | 2,728 |  |  |  | 712 |  |  |  | 1,400 |  |  |  | 55 |  |  |  | 58 |  |  |  | 2,225 |
Other deposits |  |  | 3 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 3 |  |  |  | 3 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |
Compulsory deposits |  |  | (39,116 | ) |  |  | (15,228 | ) |  |  | (3,831 | ) |  |  | (35,973 | ) |  |  | (94,148 | ) |  |  | (40,538 | ) |  |  | (18,197 | ) |  |  | (4,644 | ) |  |  | (35,458 | ) |  |  | (98,837 | )
Demand deposits |  |  | (5,600 | ) |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | (5,600 | ) |  |  | (4,790 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4,790 | )
Savings deposits |  |  | (24,695 | ) |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | (24,695 | ) |  |  | (26,008 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (26,008 | )
Time deposit |  |  | (8,821 | ) |  |  | (15,228 | ) |  |  | (3,831 | ) |  |  | (35,973 | ) |  |  | (63,853 | ) |  |  | (9,740 | ) |  |  | (18,197 | ) |  |  | (4,644 | ) |  |  | (35,458 | ) |  |  | (68,039 | )
Securities sold under repurchase agreements (1) |  |  | 275,395 |  |  |  | 16,557 |  |  |  | 10,933 |  |  |  | 42,349 |  |  |  | 345,234 |  |  |  | 232,970 |  |  |  | 35,234 |  |  |  | 30,404 |  |  |  | 39,444 |  |  |  | 338,052 |
Government securities |  |  | 232,776 |  |  |  | 2,856 |  |  |  | 7,353 |  |  |  | 38,752 |  |  |  | 281,737 |  |  |  | 202,545 |  |  |  | 3,197 |  |  |  | 8,260 |  |  |  | 27,680 |  |  |  | 241,682 |
Private securities |  |  | 10,910 |  |  |  | 13,701 |  |  |  | 3,580 |  |  |  | 3,597 |  |  |  | 31,788 |  |  |  | 8,020 |  |  |  | 31,348 |  |  |  | 22,144 |  |  |  | 11,764 |  |  |  | 73,276 |
Foreign |  |  | 31,709 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 31,709 |  |  |  | 22,405 |  |  |  | 689 |  |  |  | — |  |  |  | — |  |  |  | 23,094 |
Funds from acceptances and issuance of securities (2) |  |  | 2,189 |  |  |  | 32,950 |  |  |  | 39,077 |  |  |  | 53,626 |  |  |  | 127,842 |  |  |  | 7,093 |  |  |  | 43,463 |  |  |  | 21,325 |  |  |  | 52,837 |  |  |  | 124,718 |
Borrowing and onlending (3) |  |  | 6,304 |  |  |  | 45,668 |  |  |  | 11,541 |  |  |  | 11,840 |  |  |  | 75,353 |  |  |  | 3,975 |  |  |  | 37,132 |  |  |  | 9,839 |  |  |  | 19,807 |  |  |  | 70,753 |
Subordinated debt (4) |  |  | 154 |  |  |  | 2,658 |  |  |  | 6,264 |  |  |  | 52,453 |  |  |  | 61,529 |  |  |  | 1,061 |  |  |  | 13,402 |  |  |  | 2,054 |  |  |  | 49,454 |  |  |  | 65,971 |
Derivative financial instruments |  |  | 3,168 |  |  |  | 6,885 |  |  |  | 5,672 |  |  |  | 11,794 |  |  |  | 27,519 |  |  |  | 7,596 |  |  |  | 5,816 |  |  |  | 4,877 |  |  |  | 8,457 |  |  |  | 26,746 |
Net position |  |  | 3,168 |  |  |  | 6,885 |  |  |  | 5,672 |  |  |  | 11,794 |  |  |  | 27,519 |  |  |  | 7,596 |  |  |  | 5,816 |  |  |  | 4,877 |  |  |  | 8,457 |  |  |  | 26,746 |
Swaps |  |  | 923 |  |  |  | 3,002 |  |  |  | 4,687 |  |  |  | 10,742 |  |  |  | 19,354 |  |  |  | 65 |  |  |  | 2,364 |  |  |  | 3,747 |  |  |  | 7,516 |  |  |  | 13,692 |
Option |  |  | 883 |  |  |  | 1,935 |  |  |  | 823 |  |  |  | 288 |  |  |  | 3,929 |  |  |  | 332 |  |  |  | 1,299 |  |  |  | 889 |  |  |  | 273 |  |  |  | 2,793 |
Forward (onshore) |  |  | 470 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 470 |  |  |  | 6,272 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,272 |
Other derivative financial instruments |  |  | 892 |  |  |  | 1,948 |  |  |  | 162 |  |  |  | 764 |  |  |  | 3,766 |  |  |  | 927 |  |  |  | 2,153 |  |  |  | 241 |  |  |  | 668 |  |  |  | 3,989 |
Total financial liabilities |  |  | 494,823 |  |  |  | 152,399 |  |  |  | 86,330 |  |  |  | 327,220 |  |  |  | 1,060,772 |  |  |  | 434,939 |  |  |  | 178,522 |  |  |  | 80,355 |  |  |  | 287,502 |  |  |  | 981,318 |
(1) | Includes own and third parties’ portfolios.
(2) | Includes mortgage notes, real estate credit bills, agribusiness, financial bills and structured operations certificates recorded in interbank market funds and liabilities for issuance of debentures and foreign securities recorded in funds from institutional markets.
(3) | Recorded in funds from interbank markets.
(4) | Recorded in funds from institutional markets.
|  | 12/31/2018 |  |  | 12/31/2017 |
Off balance sheet |  | 0 – 30 days |  |  | 31 – 365 days |  |  | 366 – 720 days |  |  | Over 720 days |  |  | Total |  |  | 0 – 30 days |  |  | 31 – 365 days |  |  | 366 – 720 days |  |  | Over 720 days |  |  | Total |
Financial Guarantees |  |  | 1,305 |  |  |  | 17,314 |  |  |  | 5,509 |  |  |  | 41,977 |  |  |  | 66,105 |  |  |  | 1,749 |  |  |  | 17,563 |  |  |  | 5,451 |  |  |  | 45,726 |  |  |  | 70,489 |
Commitments to be released |  |  | 110,909 |  |  |  | 25,977 |  |  |  | 5,796 |  |  |  | 130,161 |  |  |  | 272,843 |  |  |  | 98,310 |  |  |  | 27,857 |  |  |  | 7,307 |  |  |  | 110,652 |  |  |  | 244,126 |
Letters of credit to be released |  |  | 10,747 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 10,747 |  |  |  | 9,214 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 9,214 |
Contractual commitments - Fixed assets and Intangible (Notes 13 and 14) |  |  | 0 |  |  |  | 405 |  |  |  | 273 |  |  |  | 0 |  |  |  | 678 |  |  |  | — |  |  |  | 432 |  |  |  | 460 |  |  |  | 273 |  |  |  | 1,165 |
Total |  |  | 122,961 |  |  |  | 43,696 |  |  |  | 11,578 |  |  |  | 172,138 |  |  |  | 350,373 |  |  |  | 109,273 |  |  |  | 45,852 |  |  |  | 13,218 |  |  |  | 156,651 |  |  |  | 324,994 |
c) | Capital Management Governance
ITAÚ UNIBANCO HOLDING is subject to the requirements of BACEN, which determines minimum capital requirements, procedures to assess information on globally systemic important banks (G-SIB), fixed asset limits, loan limits, accounting practices and require banks to conform to the regulation based on the Basel Accord for capital adequacy purposes. Additionally, the CNSP and SUSEP issue regulations on capital requirements that impact our insurance operations, and private pension and capitalization plans. The capital statements were prepared in accordance with BACEN’s regulatory requirements and with internationally accepted minimum requirements according to the Bank for International Settlements (BIS).
I - | Composition of capital
The Referential Equity (PR) used to monitor compliance with the operational limits imposed by BACEN is the sum of three items, namely:
| • |  | Common Equity Tier I: the sum of capital, reserves and retained earnings, less deductions and prudential adjustments.
| • |  | Additional Tier I Capital: consists of instruments of a perpetual nature, which meet eligibility requirements. Together with Common Equity Tier I it makes up Tier I.
| • |  | Tier II: consists of subordinated debt instruments with defined maturity dates that meet eligibility requirements.
Composition of Referential Equity
|  | 12/31/2018 |  |  | 12/31/2017 |
Stockholders’ equity attributable to controlling interests |  |  | 131,757 |  |  |  | 126,924 |
Non-controlling interests |  |  | 12,276 |  |  |  | 11,942 |
Change in interest in subsidiaries in a capital transaction |  |  | 98 |  |  |  | 1,482 |
Consolidated Stockholders’ Equity (BACEN) |  |  | 144,131 |  |  |  | 140,348 |
Common Equity Tier I Prudential Adjustments |  |  | (20,773 | ) |  |  | (17,952 | )
Common Equity Tier I |  |  | 123,358 |  |  |  | 122,396 |
Instruments Eligible to Comprise Additional Tier I |  |  | 7,701 |  |  |  | — |
Additional Tier I Prudential Adjustments |  |  | 95 |  |  |  | 57 |
Additional Tier I Capital |  |  | 7,796 |  |  |  | 57 |
Tier I (Common Equity Tier I + Additional Tier I Capital) |  |  | 131,154 |  |  |  | 122,453 |
Instruments Eligible to Comprise Tier II |  |  | 15,778 |  |  |  | 19,723 |
Tier II Prudential Adjustments |  |  | 96 |  |  |  | 76 |
Tier II |  |  | 15,874 |  |  |  | 19,799 |
Referential Equity (Tier I + Tier II) |  |  | 147,028 |  |  |  | 142,252 |
The funds obtained through the issuance of subordinated debt securities are considered Tier II capital for the purpose of capital to risk-weighted assets ratio, as follows. According to current legislation, the accounting balance of subordinated debt as of December 2012 was used for the calculation of reference equity as of December 2018, considering instruments approved after the closing date to compose Tier II, totaling R$ 35,206.
Name of security / currency |  | Principal amount (original currency) |  |  | Issue |  |  | Maturity |  |  | Return p.a. |  | Account balance 12/31/2018 |
Subordinated financial bills - BRL |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | 2 |  |  |  | 2011 |  |  |  | 2019 |  |  | 109% to 109.7% of CDI |  |  | 4 |
|  |  | 1 |  |  |  | 2012 |  |  |  | 2019 |  |  | 110% of CDI |  |  | 2 |
|  |  | 12 |  |  |  |  |  |  |  |  |  |  | 11.96% |  |  | 26 |
|  |  | 101 |  |  |  |  |  |  |  |  |  |  | IPCA + 4.7% to 6.3% |  |  | 187 |
|  |  | 1 |  |  |  | 2012 |  |  |  | 2020 |  |  | 111% of CDI |  |  | 2 |
|  |  | 20 |  |  |  |  |  |  |  |  |  |  | IPCA + 6% to 6.17% |  |  | 44 |
|  |  | 6 |  |  |  | 2011 |  |  |  | 2021 |  |  | 109.25% to 110.5% of CDI |  |  | 13 |
|  |  | 2,307 |  |  |  | 2012 |  |  |  | 2022 |  |  | IPCA + 5.15% to 5.83% |  |  | 4,595 |
|  |  | 20 |  |  |  |  |  |  |  |  |  |  | IGPM + 4.63% |  |  | 29 |
|  |  | 2,470 |  |  |  |  |  |  |  |  |  |  | Total |  |  | 4,902 |
Subordinated euronotes - USD |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | 990 |  |  |  | 2010 |  |  |  | 2020 |  |  | 6.20% |  |  | 3,881 |
|  |  | 1,000 |  |  |  | 2010 |  |  |  | 2021 |  |  | 5.75% |  |  | 3,987 |
|  |  | 730 |  |  |  | 2011 |  |  |  | 2021 |  |  | 5.75% to 6.20% |  |  | 2,839 |
|  |  | 550 |  |  |  | 2012 |  |  |  | 2021 |  |  | 6.20% |  |  | 2,131 |
|  |  | 2,600 |  |  |  | 2012 |  |  |  | 2022 |  |  | 5.50% to 5.65% |  |  | 10,256 |
|  |  | 1,851 |  |  |  | 2012 |  |  |  | 2023 |  |  | 5.13% |  |  | 7,209 |
|  |  | 7,721 |  |  |  |  |  |  |  |  |  |  | Total |  |  | 30,303 |
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 35,205 |
Perpetual subordinate notes / Supplementary Capital (AT1), issued on December 12, 2017 and March 19, 2018, were approved by BACEN, increasing by 0.97 p.p. the Tier I Capital index of ITAÚ UNIBANCO HOLDING.
II - | Capital Requirements in Place and In Progress
ITAÚ UNIBANCO HOLDING’s minimum capital requirements are expressed as ratios obtained from the ratio between available capital and the Risk-Weighted Assets (RWA). Schedule for Basel III implementation
|  | As From January 1, |
|  | 2017 |  |  | 2018 |  |  | 2019 (1) |
Common Equity Tier I |  |  | 4.5 | % |  |  | 4.5 | % |  |  | 4.5 | %
Tier I |  |  | 6.0 | % |  |  | 6.0 | % |  |  | 6.0 | %
Total Capital |  |  | 9.25 | % |  |  | 8.625 | % |  |  | 8.0 | %
Additional Common Equity Tier I (ACP) |  |  | 1.50 | % |  |  | 2.375 | % |  |  | 3.5 | %
Conservation |  |  | 1.25 | % |  |  | 1.875 | % |  |  | 2.5 | %
Countercyclical(2) |  |  | 0 | % |  |  | 0 | % |  |  | 0 | %
Systemic (3) |  |  | 0.25 | % |  |  | 0.5 | % |  |  | 1.0 | %
Common Equity Tier I + ACP |  |  | 6.0 | % |  |  | 6.875 | % |  |  | 8.0 | %
Total Capital + ACP |  |  | 10.75 | % |  |  | 11.0 | % |  |  | 11.5 | %
Prudential Adjustments Deductions |  |  | 80 | % |  |  | 100 | % |  |  | 100 | %
(1) | Requirements in force as from January 1, 2019.
(2) | ACP Countercyclical is triggered during the credit cycle expansion phase. Additionally, in the event of increase of countercyclical additional, the new percentage will be in effect only twelve months after it is announced.
(3) | The calculation of ACP Systemic associates the systemic importance, represented by the institution’s total exposure, to Gross Domestic Product (GDP).
III - | Risk-Weighted Assets (RWA)
For assessing the minimum capital requirements, the RWA must be calculated by adding the following risk exposures: RWA = RWACPAD + RWAMINT + RWAOPAD
|  | 12/31/2018 |  |  | 12/31/2017 |
Credit risk (RWACPAD)(1) |  |  | 714,969 |  |  |  | 660,516 |
Market risk (RWAMINT)(2) |  |  | 30,270 |  |  |  | 32,915 |
Operacional risk (RWAPOPAD)(3) |  |  | 72,833 |  |  |  | 63,277 |
Total risk-weighted assets |  |  | 818,072 |  |  |  | 756,708 |
(1) | Portion related to exposures to credit risk, calculated using the standardized approach;
(2) | Portion related to capital required for market risk, composed of the maximum between the internal model and 80% of the standardized model, regulated by BACEN Circulars 3,646 and 3,674;
(3) | Portion related to capital required for operational risk, calculated based on the standardized approach.
The tables below present the breakdown of credit, market and operational risk weighted assets, respectively.
a) | Credit Risk
Exposure Weighted by Credit Risk (RWACPAD)
|  | 12/31/2018 |  |  | 12/31/2017 |
Exposure Weighted by Credit Risk (RWACPAD) |  |  | 714,969 |  |  |  | 660,516 |
Marketable securities |  |  | 40,276 |  |  |  | 45,629 |
Loan Operations - Retail |  |  | 124,356 |  |  |  | 114,141 |
Loan Operations - Non-Retail |  |  | 256,958 |  |  |  | 240,816 |
Joint Liabilities - Retail |  |  | 140 |  |  |  | 172 |
Joint Liabilities - Non-Retail |  |  | 43,288 |  |  |  | 45,405 |
Loan Commitments - Retail |  |  | 33,871 |  |  |  | 31,058 |
Loan Commitments - Non-Retail |  |  | 10,673 |  |  |  | 9,017 |
Derivatives – Future potential gain |  |  | 4,193 |  |  |  | 5,457 |
Agency Transition |  |  | 3,330 |  |  |  | — |
Other exposures |  |  | 197,884 |  |  |  | 168,821 |
b) | Market Risk
|  | 12/31/2018 (1) |  |  | 12/31/2017 |
Market Risk Weighted Assets - Standard Aproach (RWAMPAD) |  |  | 37,838 |  |  |  | 32,893 |
Operations subject to interest rate variations |  |  | 30,286 |  |  |  | 31,076 |
Fixed rate denominated in reais |  |  | 2,026 |  |  |  | 6,119 |
Foreign exchange coupons |  |  | 19,633 |  |  |  | 17,153 |
Price index coupon |  |  | 8,627 |  |  |  | 7,804 |
Operations subject to commodity price variation |  |  | 389 |  |  |  | 361 |
Operations subject to stock price variation |  |  | 362 |  |  |  | 239 |
Operations subject to risk exposures in gold, foreign currency and foreign exchange variation |  |  | 6,801 |  |  |  | 1,217 |
Minimum Market Risk Weighted Assets - Standard Aproach (RWAMPAD) (1) (a) |  |  | 30,270 |  |  |  | 26,314 |
Market Risk Weighted Assets calculated based on internal methodology (b) |  |  | 22,871 |  |  |  | 32,915 |
Reduction of Market Risk Weighted Assets due to Internal Models Aproach |  |  | (7,568 | ) |  |  | — |
Market Risk Weighted Assets (RWAMINT) - maximum of (a) and (b) |  |  | 30,270 |  |  |  | 32,915 |
(1) | Calculated based on internal models, with maximum saving possibility of 20% of the standard model.
At December 31, 2018, RWAMINT totaled R$ 30,270, which corresponds to 80% of RWAMPAD, higher than the capital calculated at internal models, which totaled R$ 22,871.
c) | Operational Risk
|  | 12/31/2018 |  |  | 12/31/2017 |
Operational Risk-Weighted Assets (RWAOPAD) |  |  | 72,833 |  |  |  | 63,277 |
Retail |  |  | 12,822 |  |  |  | 11,870 |
Commercial |  |  | 26,214 |  |  |  | 24,857 |
Corporate finance |  |  | 2,697 |  |  |  | 2,663 |
Negotiation and sales |  |  | 11,736 |  |  |  | 7,434 |
Payments and settlement |  |  | 8,282 |  |  |  | 7,532 |
Financial agent services |  |  | 4,343 |  |  |  | 3,893 |
Asset management |  |  | 6,715 |  |  |  | 5,010 |
Retail brokerage |  |  | 24 |  |  |  | 18 |
IV - | Capital Adequacy
The Board of Directors is the body responsible for approving the capital management institutional policy and guidelines for the capitalization level of ITAÚ UNIBANCO HOLDING. The Board is also responsible for the full approval of the ICAAP (Internal Capital Adequacy Assessment Process) report, which purpose is to assess the capital adequacy of ITAÚ UNIBANCO HOLDING. The result of the last ICAAP – conducted for the base date December 2017 – indicated that ITAÚ UNIBANCO HOLDING has, in addition to capital to face all material risks, a significant capital surplus, thus assuring the institution’s equity soundness. In order to ensure the soundness of ITAÚ UNIBANCO HOLDING and the availability of capital to support business growth, ITAÚ UNIBANCO HOLDING maintains PR levels above the minimum level required to face risks, as evidenced by the Common Equity, Tier I Capital and Basel ratios. The Basel Ratio reached 18% on December 31, 2018, with a reduction of 0.8 percentage points in relation to December 31, 2017, mainly due to the payment of additional dividends related to the 2017 net income. Additionally, ITAÚ UNIBANCO HOLDING has a surplus in relation to the minimum Referential Equity required in the amount of R$ 76,469 million, higher than the ACP of R$ 19,429 million, widely covered by the available capital.
|  | 12/31/2018 |  |  | 12/31/2017 |
|  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |
|  | Required |  |  | Current |  |  | Required |  |  | Current |  |  | Required |  |  | Current |  |  | Required |  |  | Current |
Common Equity Tier I |  |  | 36,813 |  |  |  | 123,358 |  |  |  | 4.5 | % |  |  | 15.1 | % |  |  | 34,052 |  |  |  | 122,396 |  |  |  | 4.5 | % |  |  | 16.2 | %
Additional Tier I Capital |  |  | 0 |  |  |  | 7,796 |  |  |  | 0 |  |  |  | 0 |  |  |  | — |  |  |  | 57 |  |  |  | — |  |  |  | — |
Tier I (Common Equity Tier I + Additional Tier I Capital) |  |  | 49,084 |  |  |  | 131,154 |  |  |  | 6.0 | % |  |  | 16.0 | % |  |  | 45,402 |  |  |  | 122,453 |  |  |  | 6.0 | % |  |  | 16.2 | %
Tier II |  |  | 0 |  |  |  | 15,874 |  |  |  | 0 |  |  |  | 0 |  |  |  | — |  |  |  | 19,799 |  |  |  | — |  |  |  | — |
Referential Equity (Tier I + Tier II) |  |  | 70,559 |  |  |  | 147,028 |  |  |  | 8.625 | % |  |  | 18.0 | % |  |  | 69,995 |  |  |  | 142,252 |  |  |  | 9.25 | % |  |  | 18.8 | %
Amount Required for Additional Common Equity Tier I (ACP) |  |  | 19,429 |  |  |  | 2.375% |  |  |  |  |  |  |  | 11,351 |  |  |  | 1.5% |
The fixed assets ratio shows the commitment percentage of adjusted Referential Equity with adjusted permanent assets. ITAÚ UNIBANCO HOLDING falls within the maximum limit of 50% of adjusted RE, established by BACEN. At 12/31/2018 , fixed assets ratio reached 25.9%, showing a surplus of R$ 35,447 million. Further details on Risk and Capital Management of ITAÚ UNIBANCO HOLDING and indicators of the Global Systemic Importance Index, which are not included in the financial statements, may be viewed on www.itau.com.br/relacoes-com-investidores “Reports”/ Pillar 3 and Global Systemically Important Banks.
V - | Stress testing
The stress test is a process of simulation of extreme economic and market conditions in the institution’s results and capital. The institution has conducted this test since 2010 aiming at assessing its solvency in plausible scenarios of a systemic crisis, as well as at identifying areas that are more susceptible to the impact of stress, and that can be subject to risk mitigation. To perform the test, macroeconomic variables for each stress scenario are estimated by the economic research department. The scenarios are established considering their relevance to the bank’s result, and the probability of occurrence, and they are submitted to the approval of the Board of Directors on an annual basis. Projections of macroeconomic variables (GDP, benchmark interest rate and inflation) and of the credit market (fundraising, loans, default rate, spread and fees) for these scenarios are generated based on exogenous shocks or by using models validated by an independent area. These projections affect the budgeted result and balance sheet that then change the risk-weighted assets and capital and liquidity ratios. The stress test is also an integral part of ICAAP, with the main purpose of assessing whether, even in severe adverse conditions, the institution would have appropriate capital levels, not impacting the development of its activities. This information allows to identify potential factors of risks on businesses, supporting the Board of Directors’ strategic decisions, the budgetary process and discussions on credit granting policies, in addition to being used as input for risk appetite metrics. Further details on Risk and Capital Management of ITAÚ UNIBANCO HOLDING and indicators of the Global Systemic Importance Index, which are not included in the financial statements, may be viewed on www.itau.com.br/investor-relations, section “Reports”/ Pillar 3 and Global Systemically Important Banks.
VI – | Leverage Ratio
The Leverage Ratio is defined as the rate between Capital Tier I and Total Exposure, calculated pursuant to BACEN Circular 3,748, of February 27, 2015. The purpose of this ratio is to be a simple measure of leverage not sensitive to risk, thus it does not consider weighting or mitigation factors. According to instructions provided by BACEN Circular Letter 3,706, of May 5, 2015, since October 2015, ITAÚ UNIBANCO HOLDING has sent the Leverage Ratio to BACEN, in accordance with Basel recommendations, and the basis was established as the ratio behavior observation period since its implementation in 2011 until 2017. More information on the composition of the Leverage Ratio, which are not part of its financial statements, is available at www.itau.com.br/investors-relations, “Reports” / Pillar 3 and Global Systemically Important Banks.
d) | Management Risks of insurance and private pension
I – Management Structure, roles and responsibilities In line with good national and international practices, ITAÚ UNIBANCO HOLDING has a risk management structure that ensures that the risks arising from insurance, pension plan and capitalization products are properly reported to the proper bodies. The management process of insurance, pension plan and capitalization risks is independent and focused on the specifics of each risk. ITAÚ UNIBANCO HOLDING has specific committees to define the management of funds from the technical reserves for insurance and private pension, issue guidelines for managing these funds with the objective of achieving long term return, and define evaluation models, risk limits and strategies on allocation of funds to defined financial assets. Such committees are comprised not only of executives and those directly responsible for the business management process, but also for an equal number of professionals that head up or coordinate the commercial and financial areas. II – Risks of Insurance and Private Pension ITAÚ UNIBANCO HOLDING offers its products to clients through bancassurance or direct distribution. Life, accident, credit life and multiple peril insurance products are mainly distributed by bancassurance operation. Life insurance and pension plans are, in general, medium or long-lived products and the main risks involved in the business may be classified as biometric risk, financial and behaviorall.
| • |  | Biometric risk relates to: i) more than expected increase in life expectancies for products with survivorship coverage (mostly pension plans); and ii) more than expected decrease in mortality rates for products with survivorship coverage (mostly life insurance).
| • |  | Financial risk: is inherent in the underwriting risk of products that offer a financial guarantee pre-established in an agreement, and this risk is considered insurance risk
| • |  | Behavioral risk relates to a more than expected increase in the rates of conversion into annuity income, resulting in increased payments of retirement benefits.
The estimated actuarial assumptions are based on the historical evaluation of ITAÚ UNIBANCO HOLDING, on benchmarks and the experience of the actuaries.
a) | Effect of changes on actuarial assumptions
To measure the effects of changes in the key actuarial assumptions, sensitivity tests were conducted in the amounts of current estimates of future liability cash flows. The sensitivity analysis considers a vision of the impacts caused by changes in assumptions, which could affect the income for the period and stockholders’ equity at the balance sheet date. This type of analysis is usually conducted under the ceteris paribus condition, in which the sensitivity of a system is measured when one variable of interest is changed and all the others remain unchanged. The results obtained are shown in the table below:
Sensitivity analysis |  | Impact in Results and Stockholders’ Equity (1) |
| 12/31/2018 (2) |  |  | 12/31/2017 |
| Private Pension |  |  | Insurance |  |  | Private Pension |  |  | Insurance |
Mortality Rates |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
5% increase |  |  | 15 |  |  |  | (1 | ) |  |  | 24 |  |  |  | — |
5% decrease |  |  | (16 | ) |  |  | (1 | ) |  |  | (25 | ) |  |  | (1 | )
Risk-free Interest Rates |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
0.1% increase |  |  | 30 |  |  |  | 8 |  |  |  | 26 |  |  |  | 5 |
0.1% decrease |  |  | (44 | ) |  |  | (8 | ) |  |  | (27 | ) |  |  | (5 | )
Conversion in Income Rates |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
5% increase |  |  | (14 | ) |  |  | 0 |  |  |  | (13 | ) |  |  | — |
5% decrease |  |  | 14 |  |  |  | 0 |  |  |  | 13 |  |  |  | — |
Claims |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
5% increase |  |  | 0 |  |  |  | (37 | ) |  |  | — |  |  |  | (36 | )
5% decrease |  |  | 0 |  |  |  | 37 |  |  |  | — |  |  |  | 36 |
(1) | Amounts net of tax effects.
(2) | The amounts shown in the tables express the position at 12/31/2018, since the actuarial calculations are made semi-annually.
b) | Risk concentration
For ITAÚ UNIBANCO HOLDING, there is no product concentration in relation to insurance premiums, reducing the risk of product concentration and distribution channels. At December 31, 2017, the production of DPVAT arises from interests that ITAÚ UNIBANCO HOLDING’s insurance companies hold in Seguradora Líder dos Consórcios de DPVAT.
|  | 01/01 to 12/31/2018 |  |  | 01/01 to 12/31/2017 |  |  | 01/01 to 12/31/2016 |
|  | Insurance premiums |  |  | Retained premium |  |  | Retention (%) |  |  | Insurance premiums |  |  | Retained premium |  |  | Retention (%) |  |  | Insurance premiums |  |  | Retained premium |  |  | Retention (%) |
Property and casualty |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mandatory personal injury caused by motor vehicle (DPVAT) |  |  | 0 |  |  |  | 0 |  |  |  | 0.0 |  |  |  | 24 |  |  |  | 24 |  |  |  | 100.0 |  |  |  | 37 |  |  |  | 37 |  |  |  | 100.0 |
Extended warranty |  |  | 0 |  |  |  | 0 |  |  |  | 0.0 |  |  |  | — |  |  |  | — |  |  |  | 0.0 |  |  |  | 112 |  |  |  | 112 |  |  |  | 100.0 |
Individuals |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Group accident insurance |  |  | 690 |  |  |  | 689 |  |  |  | 99.9 |  |  |  | 667 |  |  |  | 666 |  |  |  | 99.8 |  |  |  | 780 |  |  |  | 776 |  |  |  | 99.5 |
Individual accident |  |  | 275 |  |  |  | 280 |  |  |  | 101.8 |  |  |  | 290 |  |  |  | 289 |  |  |  | 99.8 |  |  |  | 224 |  |  |  | 212 |  |  |  | 94.8 |
Credit life |  |  | 881 |  |  |  | 879 |  |  |  | 99.8 |  |  |  | 623 |  |  |  | 621 |  |  |  | 99.7 |  |  |  | 570 |  |  |  | 570 |  |  |  | 100.0 |
Group life |  |  | 934 |  |  |  | 937 |  |  |  | 100.3 |  |  |  | 1,001 |  |  |  | 990 |  |  |  | 98.9 |  |  |  | 1,278 |  |  |  | 1,234 |  |  |  | 96.5 |
III) | Market, credit and liquidity risk
a) | Market risk
Market risk is analyzed, in relation to insurance operations, based on the following metrics and sensitivity and loss control measures: Value at Risk (VaR), Losses in Stress Scenarios (Stress Test), Sensitivity (DV01- Delta Variation) and Concentration. In the table, the sensitivity analysis (DV01 – Delta Variation) is presented in relation to insurance operations that demonstrate the impact on the cash flows market value when submitted to a 1 annual basis point increase in the current interest rates or index rate and 1 percentage point in the share price and currency.
|  | 12/31/2018 |  |  | 12/31/2017 |
Class |  | Account balance |  |  | DV01 |  |  | Account balance |  |  | DV01 |
Government securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
NTN-C |  |  | 5,096 |  |  |  | (2.70 | ) |  |  | 4,936 |  |  |  | (2.87 | )
NTN-B |  |  | 6,091 |  |  |  | (7.17 | ) |  |  | 5,343 |  |  |  | (6.78 | )
LTN |  |  | 0 |  |  |  | 0 |  |  |  | 279 |  |  |  | (0.09 | )
Private securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Indexed to IPCA |  |  | 259 |  |  |  | (0.06 | ) |  |  | 336 |  |  |  | (0.10 | )
Indexed to PRE |  |  | 10 |  |  |  | 0 |  |  |  | 31 |  |  |  | — |
Floating assets |  |  | 4,085 |  |  |  | 0 |  |  |  | 5,132 |  |  |  |  |
Under agreements to resell |  |  | 5,575 |  |  |  | 0 |  |  |  | 6,856 |  |  |  |  |
b) | Liquidity Risk
Liquidity risk is the risk that ITAÚ UNIBANCO HOLDING may have insufficient net funds available to honor its current obligations at a given moment. The liquidity risk is managed, for insurance operation, continuously based on the monitoring of payment flows related to its liabilities vis a vis the inflows generated by its operations and financial assets portfolio. Financial assets are managed in order to optimize the risk-return ratio of investments, considering, on a careful basis, the characteristics of their liabilities. The risk integrated control considers the concentration limits by issuer and credit risk, sensitivities and market risk limits and control over asset liquidity risk. Thus, investments are concentrated in government and private securities with good credit quality in active and liquid markets, keeping a considerable amount invested in short-term assets, available on demand, to cover regular needs and any liquidity contingencies. Additionally, ITAÚ UNIBANCO HOLDING constantly monitors the solvency conditions of its insurance operations.
Liabilities |  | Assets |  | 12/31/2018 |  |  | 12/31/2017 |
|  |  |  | Liabilities amounts (1) |  |  | Liabilities DU (2) |  |  | Assets DU (2) |  |  | Liabilities amounts (1) |  |  | Liabilities DU (2) |  |  | Assets DU (2) |
Insurance operations |  | Backing asset |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Unearned premiums |  | LFT, repurchase agreements, NTN-B, CDB, LF and debentures |  |  | 2,111 |  |  |  | 56.7 |  |  |  | 12.6 |  |  |  | 1,882 |  |  |  | 24.7 |  |  |  | 12.0 |
IBNR, PDR e PSL |  | LFT, repurchase agreements, NTN-B, CDB, LF and debentures |  |  | 927 |  |  |  | 48.0 |  |  |  | 18.5 |  |  |  | 985 |  |  |  | 20.4 |  |  |  | 18.3 |
Other provisions |  | LFT, repurchase agreements, NTN-B, CDB, LF and debentures |  |  | 562 |  |  |  | 99.2 |  |  |  | 32.3 |  |  |  | 565 |  |  |  | 70.6 |  |  |  | 26.2 |
Subtotal |  | Subtotal |  |  | 3,600 |  |  |  |  |  |  |  |  |  |  |  | 3,432 |  |  |  |  |  |  |  |  |
Pension plan, VGBL and individual life operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Related expenses |  | LFT, repurchase agreements, NTN-B, CDB, LF and debentures |  |  | 98 |  |  |  | 128.4 |  |  |  | 75.9 |  |  |  | 95 |  |  |  | 116.8 |  |  |  | 78.9 |
Unearned premiums |  | LFT, repurchase agreements, NTN-B, CDB and debentures |  |  | 13 |  |  |  | 0 |  |  |  | 11.0 |  |  |  | 16 |  |  |  | — |  |  |  | 9.7 |
Unsettled claims |  | LFT, repurchase agreements, NTN-B, CDB and debentures |  |  | 43 |  |  |  | 0 |  |  |  | 11.0 |  |  |  | 37 |  |  |  | — |  |  |  | 9.8 |
IBNR |  | LFT, repurchase agreements, NTN-B, CDB and debentures |  |  | 25 |  |  |  | 15.4 |  |  |  | 11.0 |  |  |  | 28 |  |  |  | 17.0 |  |  |  | 9.7 |
Redemptions and Other Unsettled Amounts |  | LFT, repurchase agreements, NTN-B, CDB and debentures |  |  | 310 |  |  |  | 0 |  |  |  | 11.0 |  |  |  | 275 |  |  |  | — |  |  |  | 9.8 |
Mathematical reserve for benefits granted |  | LFT, repurchase agreements, LTN, NTN-B, NTN-C, NTN-F, CDB, LF and debentures |  |  | 2,820 |  |  |  | 120.4 |  |  |  | 71.4 |  |  |  | 2,404 |  |  |  | 116.8 |  |  |  | 79.1 |
Mathematical reserve for benefits to be granted – PGBL/ VGBL |  | LFT, repurchase agreements, LTN, NTN-B, NTN-C, NTN-F, CDB, LF and debentures (3) |  |  | 187,908 |  |  |  | 182.0 |  |  |  | 28.2 |  |  |  | 169,149 |  |  |  | 197.2 |  |  |  | 38.9 |
Mathematical reserve for benefits to be granted – traditional |  | LFT, repurchase agreements, NTN-B, NTN-C, debentures |  |  | 4,815 |  |  |  | 209.0 |  |  |  | 91.7 |  |  |  | 4,454 |  |  |  | — |  |  |  | 95.1 |
Other provisions |  | LFT, repurchase agreements, NTN-B, NTN-C, CDB, LF and debentures |  |  | 948 |  |  |  | 165.5 |  |  |  | 91.7 |  |  |  | 737 |  |  |  | 116.8 |  |  |  | 95.1 |
Financial surplus |  | LFT, repurchase agreements, NTN-B, NTN-C, CDB, LF and debentures |  |  | 607 |  |  |  | 208.8 |  |  |  | 91.5 |  |  |  | 605 |  |  |  | 116.8 |  |  |  | 95.0 |
Subtotal |  | Subtotal |  |  | 197,587 |  |  |  |  |  |  |  |  |  |  |  | 177,800 |  |  |  |  |  |  |  |  |
Total technical reserves |  | Total backing assets |  |  | 201,187 |  |  |  |  |  |  |  |  |  |  |  | 181,232 |  |  |  |  |  |  |  |  |
(1) | Gross amounts of Credit Rights, Escrow Deposits and Reinsurance.
(2) | DU = Duration in months.
(3) | Excluding PGBL / VGBL reserves allocated in variable income.
c) | Credit Risk
I - | Reinsurers
Reinsurance operations are controlled through an internal policy, in compliance with the provisions of regulatory authority of reinsurers with which ITAÚ UNIBANCO HOLDING operates. We present below the division of risks granted by the ITAÚ UNIBANCO HOLDING’s insurance companies to reinsurance companies:
| – | Insurance Operations: reinsurance premiums operations are basically represented by: IRB Brasil Resseguros with 78.13% (45.07% at 12/31/2017) and Munich Re do Brasil with 5.08% (53.80% at 12/31/2017).
| – | Social Security Operations: related to reinsurance premiums are entirely represented by Austral with 40%, General Reinsurance 30% and IRB Brasil Resseguros with 30%. At 12/31/2017 reinsurance premiums were entirely represented by Munich Re do Brasil with 70% and General Reinsurance AG with 30%.
II – | Premiums Receivable
ITAÚ UNIBANCO HOLDING considers the credit risk arising from past-due premiums immaterial, since cases with coverage payment in default may be canceled, pursuant to Brazilian regulation.
III – | Risk level of financial assets
The table below shows insurance financial assets, individually evaluated, classified by rating:
|  | 12/31/2018 |
|  | Financial Assets at Amortized Cost |  |  |  |  |  |  |
Internal rating |  | Interbank deposits and securities purchased under agreements to resell |  |  | Securities |  |  | Financial assets at fair value through profit or loss (*) |  |  | Total |
Lower risk |  |  | 8,247 |  |  |  | 28,969 |  |  |  | 179,771 |  |  |  | 216,987 |
Satisfactory |  |  | 0 |  |  |  | 0 |  |  |  | 2 |  |  |  | 2 |
Higher Risk |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total |  |  | 8,247 |  |  |  | 28,969 |  |  |  | 179,773 |  |  |  | 216,989 |
% |  |  | 3.8 |  |  |  | 13.3 |  |  |  | 82.9 |  |  |  | 100.0 |
(*) | Includes Derivatives in the amount of R$ 449 million.
|  | 12/31/2017 |
|  | Financial Assets at Amortized Cost |  |  |  |  |  |  |
Internal rating |  | Interbank deposits and securities purchased under agreements to resell |  |  | Securities |  |  | Financial assets at fair value through profit or loss (*) |  |  | Total |
Lower risk |  |  | 7,558 |  |  |  | 27,719 |  |  |  | 168,006 |  |  |  | 203,283 |
Satisfactory |  |  | — |  |  |  | — |  |  |  | 4 |  |  |  | 4 |
Higher Risk |  |  | — |  |  |  | — |  |  |  | 25 |  |  |  | 25 |
Total |  |  | 7,558 |  |  |  | 27,719 |  |  |  | 168,035 |  |  |  | 203,312 |
% |  |  | 3.5 |  |  |  | 13.9 |  |  |  | 82.6 |  |  |  | 100.0 |
(*) | Includes Derivatives in the amount of R$ 194 million.

X
- Definition Disclosure of management risk. + References No definition available. + Details
Name: | itub_DisclosureOfManagementRiskExplanatory
Namespace Prefix: | itub_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Definition Text block1 [abstract] + References No definition available. + Details
Name: | itub_TextBlock1Abstract
Namespace Prefix: | itub_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration