Liquidity Risk Management Structure

In May 2012, the National Monetary Council, through the Central Bank of Brazil, released the Resolution no. 4090, which provides for the management structure of liquidity risk.

Liquidity risk is defined as:

  • the possibility that the Company will not be able to honor its obligations without affecting its daily operations and without incurring in significant losses; and,
  • the possibility that the Company can not negotiate any given position according to market prices, due to a discontinuity in the market.

At Banrisul, to comply with current legislation, the structure of liquidity risk management provides for:

  • policies and strategies for managing liquidity risk;
  • processes to identify, assess, monitor and control liquidity risk with settlement terms of less than 90 (ninety) days;
  • fundraising policies and strategies to diversify funding sources and maturities;
  • liquidity contingency plan to cope with stressful liquidity situations;
  • stress tests for short- and long-term, systemic and idiosyncratic scenarios;
  • assesment of liquidity risk as part of the approval process for new products.

For the effective management of liquidity risk, Banrisul takes into account:

  • transactions carried out within the financial and capital markets, as well as possible or unexpected contingent exposures such as settlement services, provision of sureties and guarantees, and lines of credit hired but not yet used;
  • domestic liquidity risks in countries where it operates and in the currencies to which it is exposed, observing any restrictions on the transfer of liquidity and convertibility of currencies.

ORGANIZATION CHART OF THE LIQUIDITY RISK MANAGEMENT STRUCTURE

Below is presented Banrisul’s Organization Chart, to which the Liquidity Risk Management Structure is part of.

Banrisul’s Organization

Responsibilities

The responsibility for compliance with legislation and the management of liquidity risk is defined as follows:

  • the Board of Administration and the Board of Executive Officers shall ensure that the Company maintains adequate levels of liquidity;
  • the Corporate Risk Committee is to approve the allocation methodologies applied in the measurement of risks, as well as to deliberate and ensure the correct application of management policies for liquidity, market, credit, operational and capital risks, and to communicate to the Board of Administration and to the Board of Executive Officers the liquidity risk positions of both Banrisul and Banrisul Group;
  • Internal Audit is responsible for auditing the observance of the requirements set forth by Resolution no. 4,090/12 and other rules related to liquidity risk

it is responsability of the Corporate Risks Managment Unit to coordinate the process of managing liquidity risk developed by the Market and Liquidity Risk Management Area.