Risk Factors

An investment in securities involves a high degree of risk. All investors should carefully consider the following factors in addition to the other information in this investor relations website before investing in Banco ABC Brasil’s securities. In general, investing in the securities of issuers in emerging market countries, such as Brazil, involves a higher degree of risk than investing in the securities of U.S. issuers or issuers in other countries with highly developed capital markets. Banco ABC Brasil’s business, financial condition, results of operations and prospects may be materially adversely affected by any of these risks.

The risks briefly described below are those that the Bank currently believes most likely may materially affect its performance.

Perguntas Frequentes

1 – Risks Relating to the Bank

An increase in the delinquency rates of the borrowers of Banco ABC Brasil could have an adverse effect on its income.

The Bank’s risk management and control system may be insufficient to prevent losses.

Banco ABC Brasil has high exposure to the credit risk of Brazil’s federal government. Any lack of timeliness in the federal government’s payments of its obligations could have an adverse effect on its financial situation.

The Bank’s operations involving securities and derivatives could result in substantial losses.

Any imbalances between the credit portfolio of Banco ABC Brasil and its funding sources could adversely affect its operating income and its capacity to expand its credit operations.

Any problems with the Bank’s fund raising operations could adversely affect its operating income.

The Bank is subject to operating errors or problems that could adversely affect its business, financial conditions and operating income.

The departure of any member of the board or senior management team of Banco ABC Brasil, or the inability to recruit and retain qualified personnel to work in these areas, could have a significant adverse impact on the Bank.

The departure or lack of support of the controlling shareholder in Banco ABC Brasil in an economic scenario marked by low liquidity could have an adverse impact on its business.

Any downgrade in the credit ratings of the Bank could increase its funding costs, which could affect it adversely.

Any deterioration in the credit quality of the drawees of the receivables guarantee portfolio could adversely affect the credit operations extended to companies of Banco ABC Brasil.

The Bank’s capacity to collect the payments originating from the payroll-backed personal credit operations is dependent on the effectiveness and validity of the agreements signed with employers and government agencies

2 – Risks Relating to the Brazilian Banking Industry

Changes implemented by the Central Bank in the basic interest rate of the economy could adversely affect the operating income of Banco ABC Brasil.

The federal government regulates the operations of Brazilian banks and any amendments to existing laws and regulations or the imposition of new laws and regulations may adversely affect the Bank’s operations and revenue.

Changes in Brazil’s tax and pension laws and could adversely affect Banco ABC Brasil.

The Bank may, in the future and periodically, have insufficient capital to comply with the minimum capital requirements established by the National Monetary Council (CMN) and by the Central Bank.

Specific measures taken by the Central Bank regarding other financial institutions could adversely affect investor confidence and consequently have an adverse affect on Banco ABC Brasil.

Changes in reserve requirements could affect the Bank’s profitability.

The increasingly competitive environment in Brazil’s banking industry and the growing competition in the Middle-Market, Large-Middle and Wholesale segments could adversely affect the business outlook of Banco ABC Brasil.

3 – Risks Relating to Brazil

The federal government has exercised and continues to exercise considerable influence on the Brazilian economy. This influence, as well as the country’s political and economic conditions, may adversely affect the activities of Banco ABC Brasil and the market value of its shares.

Events and the perception of risk in other countries, especially in emerging-market countries, could have a negative effect on the market value of Brazilian assets, including the Bank’s shares.

Inflation and measures taken by the federal government to control inflation could contribute significantly to economic uncertainty in Brazil and adversely affect the operating income of Banco ABC Brasil and the market price of its shares.

Instability in foreign-currency exchange rates could adversely affect the Bank’s operating income as well as the market value of its shares.

The application of a limit on the interest rates charged on bank loans could have an adverse affect on Banco ABC Brasil.

4 – Risks Relating to Banco ABC Brasil’s Preferred Shares

An active and liquid trading market for the shares issued by Banco ABC Brasil may not develop, limiting the ability of investors to sell said shares at the price and time they desire.

The Bank has one controlling shareholder, and the interests of said controlling shareholder may differ substantially from those of the other shareholders in the Bank.

Substantial selling of shares in Banco ABC Brasil may reduce their market value.

The Bank may require additional funds in the future, which may be raised through increases in its capital; said capital increases may dilute the stakes of the other investors in the Bank’s capital stock.

Risk Management Structure – Banco ABC Brasil