Risk Management

Agibank follows the Market Risk Management structure determined by Brazilian Central Bank Resolution 4557 of 2017.

The Resolution 4557, of February 23rd, 2017, defines Market Risk as the possibility of incurring in losses from variations in the market value of a financial institution’s positions. The definition includes operating risks subject to variations in exchange rates, interest rates, equity prices and commodity prices.

The Market Risk Management guidelines are described in the Market Risk Management Policy, duly formalized and provided to all employees of the Institution. This policy is reviewed annually by the Finance Department, Compliance Department, and all members of the Board of Directors.

Market Risk Management policies and strategies establish operating limits and procedures to maintain Market Risk exposure at levels considered acceptable by the Institution.

The Agibank method to measure Market Risk uses the following instruments:

Periodic analysis of the current mismatch between asset and liability operations with different rate indexes;

Market Risk Indicator: indicator included in a special dashboard used to monitor Market Risk. It shows the percentage of mismatch between the Asset and Liability Portfolios with different indexes (pre- or post-fixed rates);

Stress Tests: This methodology seeks to test stress scenarios and determine how sensitive the Institution’s capital is to extreme market movements and to measure the economic and financial impact of those movements;

Market Risk Contingency Plan: in order to prospectively manage the Institution’s Market Risk, a Contingency Plan was established that defines responsibilities and procedures to be adopted in the event of a crisis, so that when a given threshold is reached, the Institution can act to reduce any mismatch and return to desirable levels of Market Risk.

The Agibank Liquidity Risk management structure matches its growth strategy and the complexity of its operations, seeking to identify, assess, monitor and control risks that may impact its liquidity and jeopardize the economic and financial equilibrium of the institution, in compliance with the provisions of Resolution 4557/2017.

The Liquidity Risk Management process is in line with the market’s best practices and comprehends all areas involved in identifying and assessing risks relevant to the institution’s operations. Liquidity Risk management includes the model used to determine stress tests and for reporting, as well as the Liquidity Contingency Plan, and the necessary measures to maintain the capacity to honor expected and unexpected obligations without disrupting operational continuity.

The Contingency Plan defines the responsibilities and decision-making powers of the relevant authorities so that all employees understand their roles in times of difficulty or crisis, when often there is not enough time to craft the best possible decision or determine what actions to take and what procedures should be used to mobilize resources in order to address each of the emergency situations identified.

In compliance with National Monetary Council Resolution 3721/2009, which provides for the implementation of the Credit Management Structures, Agibank discloses its Credit Risk Management structure.

Credit Risk Management seeks to ensure the corporation is in compliance with current laws, regulations, and standards, as well as to adopt best practices in credit risk management.

Agibank’s Credit Risk Management structure matches nature of its operations, the complexity of its products and services, and its level of Credit Risk exposure. It consists of the three steps—decision-making, formalization, monitoring, and collection—which enable Agibank monitor the quality of its loan portfolio continuously.

At Agibank, Credit Risk is managed according to the Credit Policy and Credit Standards specific to the business, with approval levels defined according to risk, participation of the Credit Committee, and approval rules, among other criteria.

Agibank has established a Credit Committee responsible for defining and managing the definitions of its Credit Policy and for deciding whether to grant credit to the institution’s clients.

The board receives daily reports that enable it to analyze the situation. In addition to the Office of the Comptroller, the Credit Board uses its own dashboard every day to monitor other indicators, which reflect the credit quality of its portfolio.

Agibank provisions funds for its credit operations in compliance with National Monetary Council Resolution 2682/99.

In compliance with Resolution 4193/13, Agibank also maintains sufficient capital to cover the risks incurred by its credit operations.

The Resolution 4557 defines Operational Risk as the possibility of incurring in losses from the failure, deficiency or inadequacy of internal processes, people and systems, or from external events. It includes the legal risk associated with the inadequacy or deficiency of agreements into which the institution has entered, as well as penalties due to noncompliance with legal provisions and compensation for damages to third parties resulting from the institution’s activities.

Agibank, as determined by the relevant regulatory agencies, as well as in the attempt to improve its internal controls, has developed a structure to manage its Operational Risk exposure. The structure seeks to identify, assess, monitor, control and mitigate the operational risk inherent in the Institution’s products, processes, services, activities, and systems. An Operational Risk Management Policy was developed as part of that structure to ensure full compliance with the operational risk management model, and is reviewed and approved annually by the officer responsible.

• Officer responsible for Operational Risk Management: statutorily appointed officer who represents the institution before the Brazilian Central Bank. The officer is responsible for analyzing, approving and reviewing the Operational Risk Management Policy and ensuring it matches the institution’s needs.
• Internal Controls and Operational Risk Area: responsible for identifying, assessing, controlling, and suggesting new control practices to mitigate risk exposure, spreading the risk management culture within the institution, issuing periodic follow-up reports on risks identified, and supporting process managers in their assessment and implementation of measures necessary to mitigate operational risks.
• Internal Audits: responsible for overseeing the operational risk management structure and process, testing controls, and issuing reports to senior management about any gaps that may be found.

The Operational Risk Management structure also includes the development of a Risk Matrix comprehending impact and vulnerability assessments. This matrix records the processes and risks to which the institution is exposed, as well as the registers action plans to mitigate the risks identified and to improve internal controls.

For more details about Operational Risks for Third Parties, click here. (Portuguese Only)

Agibank’s risk management structure is in compliance with the provisions of Resolution 4557/17, premised on:

• Monitoring and control of the capital held by the institution.
• Assessing and reporting to senior management on the capital requirements to face the risks to which the institution is exposed.
• Setting goals and capital requirements, considering the strategic objectives of the institution.
• Capital Management at the Institution matches the nature of its operations, the complexity of its products and services and the level of its exposure to risk.
• The development of capital management instruments and indicators is based on the annual budget forecast, subject to quarterly reviews, which is in turn discussed at the quarterly meeting of the Liquidity, Market and Capital Committee, with mandatory attendance from the officer responsible for Capital Risk Management.
• The committee is tasked with providing senior management with information to make decisions related to its capital adequacy ratio and the possible implementation of its Capital Restoration Plan.
• The Agibank Plan comprehends the Capital Management Policy, Structure and strategies. Its primary goal is to guide the Institution’s relevant principles and procedures as it adheres to its Strategic Planning.

The Agibank Plan considers the strategies and the Capital Management Structure and Policy, primarily in order to provide guidance regarding related principles and procedures, in compliance with the Institution’s Strategic Planning.