HSBC J.P. Morgan Standard Chartered Bank - bicbanco

cash”). If the Bank needs greater liquidity, it is able to sell credit to third parties, either on a large scale through
bank credit notes (cédulas de crédito bancário), or CCBs, or on a smaller scale, with the use of credit receivable
funds, or FIDCs.
The Bank seeks a balance between local and foreign fund raising. The Bank has access to diversified
sources of funding, including time deposits, foreign borrowings, issuing bonds abroad or issuing subordinated debt,
FIDCs, savings accounts and cash deposits. The Bank has a range of time deposits and its principal customers are
corporate entities. Time deposits from corporate entities represented 63.2% as of December 31, 2009, 68.0% as of
December 31, 2008 and 61.1% as of December 31, 2007 of the Bank’s total time deposits. The diversity of the
Bank’s funding sources enables it to minimize mismatches between the terms, interest rates and exchange rates
relating to its fund raising and lending. With the exception of funding allocated specifically for trade finance
operations, where the exchange risk is undertaken by the borrower, all of the Bank’s other funding in foreign
currency has the exchange risk protected by swaps with other financial institutions. As of December 31, 2009, the
Bank had R$2,585.7 million in assets and R$2,878.1 million in liabilities denominated or indexed in foreign
currency. For more information, see “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Analysis of Cash Flow—Exchange Rate Sensitivity.”
Furthermore, the Bank diversifies its funding in order to avoid a concentration by type of client. As of
December 31, 2009, the Bank’s 10 largest clients represented 20.7% of its deposits in bank credit deposits
(certificados de depósito bancário), or CDBs. As of December 31, 2008 and 2007, the Bank’s 10 largest clients
represented 19.9% and 20.2% of its deposits in CDBs, respectively.
The Bank’s financial strength is also evidenced by the increase in its international fund raising operations,
including fund raising from multilateral organizations. As of December 31, 2008 and December 31, 2009, the Bank
had a total of U.S.$1.8 billion and U.S.$1.6 billion outstanding from its international fund raising operations,
respectively.
Customized and efficient information technology systems
Over the years, the Bank has developed its own information technology systems to enable it to provide
information within the Bank’s processes for the provision of credit. The Bank believes that it has a prompt and
consistent process for credit analysis and approval. The Bank has also developed a system to control and monitor
the guarantees it receives to enhance the security in its secured transactions. The Bank’s service outlets are
connected to the on-line central system, which is based on a web platform that the Bank developed to assure the
quality of its business. The Bank intends to maintain and develop the quality of its management’s information to
assure the transparency of its management and to enable the management to effectively oversee the performance of
its employees, specifically those working in the commercial area of its business.
Commitment to the best corporate governance practices and internal controls
The Bank believes that its corporate management model is consistent with the highest standards of
corporate governance. The Bank’s activities are driven by transparency and financial discipline, with strict control
over its operational risks, its internal controls and on the alignment of the interests of its shareholders and
management. In 2009, among medium-sized banks, the Bank was ranked first in Brazil and second in Latin
America in sustainability by the consulting firm Management & Excellence.
The Bank is involved in social projects and is under the regular supervision of the corporate social
responsibility committee, with the purpose of improving its relationship with the communities in which it operates.
In addition, the Bank analyses the social and environmental risks involved in its business operations. The Bank has
implemented programs to train its employees to better identify these risks. The Bank is currently involved, with the
support of the IADB, in a social project that includes managing the potential social and environmental risks relating
to the financing the Bank provides, as well as determining actions to be taken to more accurately identify these risks.
The Bank constantly seeks to improve its internal controls and has invested in updating its information
technology systems over the last few years. The Bank has a risk management department working in conjunction
with its internal audit department that regularly evaluates the quality and effectiveness of the Bank’s internal
controls. In addition to this, PricewaterhouseCoopers LLP was hired in 2007 to analyze the operational risk
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