Circular No. 3678 — Disclosure of Information on Risk Management, Risk-Weighted Assets (RWA), and Reference Equity (PR)

CIRCULAR NO. 3,678, OF OCTOBER 31, 2013

Discloses information regarding risk management, the calculation of the amount of risk-weighted assets (RWA), and the calculation of Reference Equity (PR).

The Collegiate Board of the Central Bank of Brazil, in an extraordinary session held on October 31, 2013, based on the provisions of Articles 9, 10, item IX, and 11, item VII, of Law No. 4,595, of December 31, 1964, and taking into account the provisions of Article 31, item II, of Resolution No. 4,192 and Articles 12, § 2, and 15, item III, of Resolution No. 4,193, both of March 1, 2013,

RESOLVES:

CHAPTER I
SCOPE OF APPLICATION AND PRELIMINARY PROVISIONS

Art. 1. Information relating to risk management, exposure to risks, the calculation of the amount of risk-weighted assets (RWA), as provided for in Resolution No. 4,193, of March 1, 2013, and the calculation of Reference Equity (PR), defined in the terms of Resolution No. 4,192, of March 1, 2013, must be disclosed by:

I - multiple banks, commercial banks, investment banks, exchange banks, and savings banks;

II - institutions obliged to constitute an audit committee, as provided for in Article 10 of the Regulation annexed to Resolution No. 3,198, of May 27, 2004.

§ 1. The disclosure of information referred to in this Circular must be made on a consolidated basis for institutions belonging to the same conglomerate, in accordance with the Accounting Plan of the Institutions of the National Financial System (Cosif), of which at least one of the institutions mentioned in items I and II is a part.

§ 2. The disclosure must be carried out with detail adequate to the scope and complexity of the operations and the risk management systems and processes.

§ 3. Relevant restrictions or impediments, existing or possible, to the transfer of resources between the institutions comprising the conglomerate must be disclosed.

§ 4. Relevant differences between the information provided for in this Circular and other information disclosed by the institution must be clarified in the disclosure process referred to in Article 18.

CHAPTER II
GENERAL PROVISIONS

Art. 2. Qualitative aspects must be disclosed for each of the risk management structures, including the description:

I - of the objectives and risk management policies, addressing the organization of their respective structures, the strategies and processes used;

II - of the structured process of risk communication and information and of the measurement systems used by the institution;

III - of the methodology adopted to assess the sufficiency of Core Capital, Level I, and PR, and for the coverage of incurred risks, including those not covered by the RWA amount components; and

IV - of risk mitigation policies, strategies, and processes used for the continuous monitoring of the effectiveness of mitigation instruments.

Sole Paragraph. At a minimum, credit risk, market risk, operational risk, and liquidity risk, as well as risks associated with investment in equity participations and the interest rate of operations not classified in the trading book, must be considered.

CHAPTER III
COMPARISON BETWEEN DISCLOSED INFORMATION

Art. 3. The institutions referred to in Article 1 constituted as publicly held companies or that are obliged to constitute an audit committee in accordance with current regulations must, for the base dates of June 30 and December 31 of each year:

I - disclose the individual balance sheet of the institution or the Conglomerate Balance Sheet, if it is part of a conglomerate;

II - disclose the individual balance sheet of the institution or the conglomerate balance sheet mentioned in item I, in a comparative manner with the individual balance sheet or with the published consolidated balance sheet, respectively;

III - list the institutions that are part of the scope of consolidation of the balance sheet referred to in item I, as well as of the published consolidated balance sheet;

IV - disclose the total assets, shareholders' equity, and line of business of the institutions referred to in item III considered relevant; and

V - disclose a brief description of the companies in which the institution has relevant equity participation subject to risk weighting for the purpose of calculating capital requirements.

§ 1. The information originating from the financial statement referred to in item I of the caput must be sufficiently detailed, so that the equity elements disclosed as defined in Article 4 are identified.

§ 2. The last column of Annex 1 referred to in Article 4 must refer to the equity elements mentioned in § 1.

CHAPTER IV
INFORMATION RELATING TO PR

Art. 4. Information relating to the calculation of PR must be disclosed according to the standard format defined in Annex 1.

Art. 5. Information relating to each instrument comprising PR must be disclosed according to the standard format defined in Annex 2.

§ 1. The instruments comprising PR whose characteristics described in the standard format defined in Annex 2 are identical, except for the issuance date, may be reported in an aggregated manner.

§ 2. In addition to the information referred to in the caput, the institution must disclose, on its website, the full terms and conditions of the contracts of the instruments that compose its PR.

§ 3. The information disclosed in accordance with this article must be updated whenever there is a relevant change, covering the occurrences of issuance, redemption, or repurchase, extinction or conversion, or any other material change in the nature of the instrument.

CHAPTER V
INFORMATION RELATING TO THE RWA AMOUNT, INDICES, AND LIMITS

Art. 6. The following information relating to the RWA amount and PR must be disclosed:

I - value of the RWACPAD component, segmented by the risk weighting factors (RWF) mentioned in specific regulation;

II - value of the RWACIRB component, segmented by the exposure categories and subcategories mentioned in specific regulation, in the case of the use of internal models;

III - values of the RWAJUR1, RWAJUR2, RWAJUR3, RWAJUR4, RWAACS, RWACAM, and RWACOM components of the RWAMPAD component, or of the RWAMINT component, in the case of the use of an internal model;

IV - value of the RWAOPAD component, or of the RWAOAMA component, in the case of the use of an internal model;

V - total amount of the RWA amount;

VI - Basel Index (IB), calculated according to the following formula:

IB = PR / RWA, where:

PR = reference equity, calculated in accordance with Article 2 of Resolution No. 4,192, of 2013; and

RWA = amount of risk-weighted assets, calculated in accordance with Article 3 of Resolution No. 4,193, of 2013;

VII - Level I Index (IN1), calculated according to the following formula:

IN1 = Level 1 / RWA, where:

Level 1 = component of PR calculated in accordance with Article 2, § 1, and Articles 4, 5, and 6 of Resolution No. 4,192, of 2013;

VIII - Core Capital Index (ICP), calculated according to the following formula:

ICP = Core Capital / RWA, where:

Core Capital = component of PR calculated in accordance with Articles 4 and 5 of Resolution No. 4,192, of 2013;

IX - amount of PR calculated for coverage of the interest rate risk of operations not classified in the trading book, as provided for in Article 13 of Resolution No. 4,193, of 2013;

X - values of any excess of resources applied in permanent assets and of PR highlight, in accordance with Articles 10 and 11 of Resolution No. 4,193, of 2013;

§ 1. Institutions that use internal models for credit risk, market risk, or operational risk must disclose the RWA amount calculated according to the respective standardized model for the same exposures to which the internal model is applied.

§ 2. The institution must disclose a summary of the assessment of the sufficiency and adequacy of its PR for coverage of the risks of its current and projected activities.

CHAPTER VI
INFORMATION RELATING TO CREDIT RISK

Art. 7. The following information relating to exposures to credit risk, as defined in Article 3 of Circular No. 3,644, of March 4, 2013, must be disclosed:

I - total exposures and average value of exposures in the quarter;

II - percentage of the ten and one hundred largest exposures in relation to the total of operations with the characteristic of granting credit;

III - countries and geographic regions of Brazil with significant exposures;

IV - economic sector;

V - maturity of operations, including, at a minimum:

a) up to 6 months;

b) more than 6 months up to 1 year;

c) more than 1 year up to 5 years; and

d) more than 5 years.

VI - amount of overdue operations, gross of provisions and excluding operations already written off as losses, segmented by countries and geographic regions of Brazil and by economic sector with significant exposures, segregated into the following ranges:

a) delay between 15 and 60 days;

b) delay between 61 and 90 days;

c) delay between 91 and 180 days;

d) delay between 181 and 360 days; and

e) delay above 360 days.

VII - flow of operations written off as losses in the quarter, segmented by economic sector with significant exposures; and

VIII - amount of provisions for losses relating to the exposures referred to in the caput, segmented by economic sector with significant exposures, discriminating the values added and subtracted in the quarter.

Sole Paragraph. The information referred to in items I, III, IV, and V must be segmented by type of exposure to credit risk, including, at a minimum:

I - Rural Credit – individuals and legal entities;

II - Individuals – real estate;

III - Individuals – payroll-deductible loans;

IV - Individuals – vehicles and leasing;

V - Individuals – credit cards, including limits;

VI - Individuals – others;

VII - Legal Entities – investment;

VIII - Legal Entities – import and export;

IX - Legal Entities – working capital, discounting of bills, and guaranteed accounts; and

X - Legal Entities – others.

Art. 8. The following information relating to credit risk mitigation instruments used must be disclosed:

I - description of the policies and methodologies for assessing and measuring the credit risk mitigation provided, including the assessment of concentration risk;

II - total value mitigated by the instruments defined in Article 36, § 3, of Circular No. 3,644, of 2013, segmented by type of mitigator and by its respective RWF, in accordance with Articles 37 to 39 of Circular No. 3,644, of 2013; and

III - total value mitigated by the mitigation techniques provided for in Circular No. 3,648, of March 4, 2013, for exposures subject to IRB approaches, in the case of the use of internal models, segmented by mitigation instruments, in accordance with Article 87 of Circular No. 3,648, of 2013.

Art. 9. The following information relating to exposures subject to counterparty credit risk must be disclosed:

I - description of the methodology to establish limits to exposures;

II - description of the methods and policies to ensure the effectiveness of guarantees and to define provisions, in case they are distinct from the minimum regulatory provisions;

III - notional value of the respective contracts, including derivatives, securities lending and borrowing, and repo transactions, segmented as follows:

a) values relating to contracts to be settled in clearing and settlement systems in which the clearing house acts as a central counterparty; and

b) values relating to contracts in which there is no acting of clearing houses as a central counterparty, segmented between contracts without guarantees and contracts with guarantees;

IV - gross positive value of the respective contracts, including derivatives, securities lending and borrowing, and repo transactions, disregarding the positive values relating to netting agreements defined in Resolution No. 3,263, of February 24, 2005;

V - gross positive value of received real guarantees (collateral) in operations subject to counterparty credit risk;

VI - positive values relating to agreements for netting and settlement of obligations, as defined in Resolution No. 3,263, of 2005;

VII - value of guarantees that cumulatively meet the following requirements:

a) are held or custodied by the institution itself;

b) have the exclusive purpose of constituting a guarantee for the operations to which they are linked;

c) are subject to movement, exclusively, by order of the depositing institution; and

d) are immediately available to the depositing institution in the event of debtor default or need for realization;

VIII - global exposure to counterparty credit risk, net of the effects of netting agreements and the value of guarantees defined in items V and VI;

IX - percentage of exposures covered by the notional value of hedges effected through credit derivatives; and

X - notional value of operations with credit derivatives segmented by type of operation, in accordance with Circular No. 3,106, of April 10, 2002, detailed as follows:

a) credit derivatives held in the institution's portfolio, separated by "risk received" or "risk transferred"; and

b) credit derivatives used for intermediation purposes, separated by "risk received" or "risk transferred".

CHAPTER VII
INFORMATION RELATING TO OPERATIONS FOR THE ACQUISITION, SALE, OR TRANSFER OF FINANCIAL ASSETS AND SECURITIZATION

Art. 10. The following information relating to operations for the acquisition, sale, or transfer of financial assets must be disclosed:

I - brief description of the policies and objectives related to operations for the acquisition, sale, or transfer of financial assets;

II – value of ceded operations with co-obligation that are registered in clearing accounts, and not in assets;

III - flow of ceded exposures in the last 12 months with substantial transfer of risks and benefits, segregated by quarter and by type of transferee;

IV - balance of ceded exposures without substantial transfer or retention of risks and benefits, segregated by type of transferee;

V - balance of ceded exposures with substantial retention of risks and benefits, segregated by type of transferee;

VI - total of ceded exposures in the last 12 months that have been honored, repurchased, or written off as losses, segregated by quarter; and

VII - balance of acquired exposures, segregated by type of exposure and by transferor, highlighting whether there was or was not substantial retention or transfer of risks and benefits by the transferor.

§ 1. For the purposes of the provision in the caput, only exposures relating to the acquisition, sale, or transfer of credit operations, leasing, other operations with the characteristic of granting credit, and private credit securities should be considered.

§ 2. For the purposes of the provision in items III to VIII of the caput of this article, the definitions of Resolution No. 3,533, of January 31, 2008, must be used.

§ 3. By type of transferee, at a minimum, the following must be considered:

I - Credit Rights Investment Fund (FIDC);

II - Securitization Companies;

III - Financial Institutions; and

IV - Special Purpose Entities (SPE).

Art. 11. The following information relating to each of the securitization processes in which the institution participates, whether traditional or synthetic, must be disclosed:

I - summary of securitization activity in the period, including the total value of securitized exposures, of securitization titles issued, with detail of the respective subordination structure and mechanisms adopted for risk retention, and of gains or losses in securitization processes, segmented by type of underlying asset;

II - total value of securitization exposures, segmented as follows:

a) traditional securitization or synthetic securitization;

b) type of securitization title;

c) type of underlying asset; and

d) class of the securitization title, according to its payment priority, compared to other classes;

III - description of the objectives and policies related to securitization processes, including aspects related to risk management and strategies used;

IV - description of the structured process of communication and information on risks and of the measurement systems used by the institution;

V - role of the institution in the process, according to the classification indicated in § 3;

VI - description of the process of monitoring credit and market risks of securitization and resecuritization exposures;

VII - description of the mechanisms for mitigating retained risks and of the processes for monitoring their effectiveness;

VIII - the approaches used for the calculation of the RWACIRB component, in the case of the use of internal models, with regard to securitization exposures;

IX - total value of securitization exposures and the respective RWA amount, segmented into the RWACPAD and RWACIRB components, in the case of the use of internal models, and by securitization and resecuritization exposures;

X - list of SPEs possibly used for administration or advisory to the issuer counterparty of securitization titles or for public placement of securitization titles, highlighting those to which the institution is exposed, including off-balance sheet exposures;

XI - total value of assets securitized by the institution, overdue or written off as losses, segmented by type of underlying asset;

XII - losses recognized in the quarter resulting from securitization processes, segmented by type of underlying asset;

XIII - total value of securitization exposures registered in the balance sheet, retained or acquired, segmented by type of underlying asset;

XIV - total value of off-balance sheet securitization exposures, segmented by type of underlying asset;

XV - total value of securitization exposure to which an RWF of 1,250% (one thousand two hundred and fifty percent) is applied;

XVI - total value of resecuritization exposures, segmented by:

a) exposures for which credit risk mitigators are used and those for which they are not used;

b) exposures to guarantors, specifying the guarantor or its credit quality.

§ 1. The provision in items III to XVI applies only to institutions whose value of the RWACPAD and RWACIRB components, in the case of the use of internal models, attributable to securitization exposures is greater than 5% of the value of the respective component on the calculation date.

§ 2. For the purposes of the provision in this article, the definitions of Article 115 of Circular No. 3,648, of 2013, apply, and information relating to securitization through Real Estate Receivable Certificates (CRI) or Agribusiness Receivable Certificates (CRA) must be added.

§ 3. The roles assumed by the institution in a securitization process, referred to in item V of the caput, may be:

I - originator counterparty, with the activities performed to be specified;

II - issuer counterparty; and

III - administrator of the underlying assets.

§ 4. The total value of securitization operations in which the originating institution acts in the administration or advisory to the issuer counterparty of securitization titles or in the public placement of securitization titles, without retaining securitization exposure, must be reported only in the year the operation is carried out.

§ 5. The information referred to in items I, XI, XII, XIII, and XIV of the caput must be segmented by type of securitization title.

CHAPTER VIII
INFORMATION RELATING TO MARKET RISK AND EQUITY PARTICIPATIONS

Art. 12. The total value of the trading book segmented by relevant market risk factor must be disclosed, highlighting long and short positions.

Art. 13. The following information relating to exposures to interest rate risk of operations not classified in the trading book must be disclosed:

I - brief description of the policies and methodologies for measuring interest rate risk;

II - assumptions used for the treatment of early settlement of loans and deposits that do not have a defined maturity; and

III - impact on the result or on the valuation of the value of the institution resulting from interest rate shocks, segmented by foreign currencies, when relevant, using the methodology employed internally for the management of interest rate risk of operations not classified in the trading book.

Art. 14. The following information relating to equity participations not classified in the trading book must be disclosed:

I - brief description of the policies and methodologies for measuring the risk of investment in equity participations, including the differentiation of participations in which capital gain is expected and those held for strategic and relationship reasons;

II - description of the accounting and valuation policies for equity participations, including methodologies, assumptions, and practices used in the valuation, as well as explanation regarding any significant changes in these policies;

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III - book value of equity participations, as well as their respective fair value, including the comparison, for securities traded on an exchange, with the corresponding quoted market price when the market price is materially different from the fair value;

IV - nature of equity participations, segmenting those of publicly held and closed companies;

V - capital requirement value related to equity participations, segregated by categories of participations, according to criteria established by the institution itself;

VI - total value, in the quarter, of gains or losses resulting from the sale or liquidation of equity participations;

VII - total value of unrealized gains or losses, but recognized;

VIII - total value of unrealized gains or losses and not recognized;

IX - values related to items VI and VII considered in the calculation of Core Capital.

Art. 15. It must be disclosed, at a minimum, the total exposure to financial derivative instruments by category of market risk factor, segmented between long and short positions, segregated as follows:

I - operations with financial derivative instruments carried out for own account and settled through a central counterparty, subdivided into those carried out in Brazil and abroad;

II - operations with financial derivative instruments carried out for own account and not settled through a central counterparty, subdivided into those carried out in Brazil and abroad;

§ 1º For the calculation of the value of exposures in derivatives with non-linear characteristics, the variation of the derivative's price relative to the variation of the underlying asset's price (delta) multiplied by the quantity of contracts and their size must be considered.

§ 2º The segregation by market risk factor referred to in the caput corresponds, at a minimum, to classification in the following categories:

I - interest rates;

II - exchange rates;

III - stock prices; and

IV - commodity prices.

CHAPTER IX
FINAL PROVISIONS

Art. 16. Additional information deemed relevant by the institution must be disclosed, with a view to ensuring appropriate transparency of its management and risk measurement, as well as the adequacy of Core Capital, Tier 1, and Reference Equity (PR) to the required values.

§ 1º The Central Bank of Brazil may determine the disclosure of supplementary information beyond that provided in this Circular.

§ 2º Institutions that disclose capitalization ratios different from those defined in this Circular must explain how these ratios are calculated.

Art. 17. The information referred to in this Circular, with the exception of those mentioned in Arts. 3 and 5, must be updated with the following minimum frequency:

I - annually, for qualitative information, or when there is a relevant change;

II - quarterly, relative to the base dates of March 31, June 30, September 30, and December 31, for quantitative information.

Sole Paragraph. The update of information must be done within a maximum period of forty days for monthly information, sixty days for the base dates of March 31, June 30, and September 30, and ninety days for the base date of December 31.

Art. 18. The information referred to in this Circular must be available in a single location, publicly accessible and easily located, in a specific section on the institution's website.

§ 1º The information mentioned in the caput must be available together with those related to the risk management structure, according to the provisions of Art. 4 of Resolution No. 3,380, of June 29, 2006, Art. 6 of Resolution No. 3,464, of June 26, 2007, Art. 7 of Resolution No. 3,721, of April 30, 2009, and Art. 6 of Resolution No. 4,090, of May 24, 2012.

§ 2º The Board of Directors or, in its absence, the management of the institution, must state its responsibility for the disclosed information.

§ 3º The institution must publish, together with the published financial statements, the location of the information mentioned in the caput on its website.

Art. 19. The institution must make available the information referred to in this Circular relating, at a minimum, to the last five years, accompanied by a comparative assessment and explanation for relevant variations.

§ 1º Disclosure of information for base dates prior to December 31, 2009, is waived;

§ 2º The information referred to in item IX of Art. 6 must be disclosed starting from the base date of December 31, 2011.

§ 3º Disclosure of the information referred to in Art. 3 is waived for base dates prior to the entry into force of this Circular.

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§ 4º From the entry into force of the prudential conglomerate, a new comparison period must begin, waiving the comparison of the prudential conglomerate with information from the financial conglomerate on base dates prior.

§ 5º From the entry into force of this Circular, a new comparison period must begin for the information referred to in items V, VI, VII, and VIII, and the sole paragraph of Art. 7.

Art. 20. The director designated under the terms of Art. 14 of Resolution No. 4,193, of 2013, is responsible for the information referred to in this Circular.

Art. 21. This Circular enters into force on June 30, 2014.

Art. 22. Circular No. 3,477, of December 24, 2009, is hereby repealed, effective from June 30, 2014.

Luiz Awazu Pereira da Silva
Director of Regulation

This text does not replace the one published in the DOU on 11/4/2013, Section 1, pp. 53-59, rectified on 11/5/2013, in Section 1, p. 11, and in Sisbacen.

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Annex 1
Composition of Reference Equity (PR) and information on PR adequacy

Line Number | Core Capital: Instruments and Reserves | Value (R$ thousand) | Value subject to transitional treatment (R$ thousand) 1 | Consolidated Balance Sheet Reference 2 --- | --- | --- | --- | --- 1 | Eligible Instruments for Core Capital | | | 2 | Profit Reserves | | | 3 | Other Revenues and Other Reserves | | | 4 | Instruments authorized to compose Core Capital before the entry into force of Resolution No. 4,192, of 2013 | | | 5 | Non-controlling interests in subsidiaries part of the conglomerate, not deductible from Core Capital | | | 6 | Core Capital before prudential adjustments | | |

Line Number | Core Capital: Prudential Adjustments | Value (R$ thousand) | Value subject to transitional treatment (R$ thousand) 1 | Consolidated Balance Sheet Reference 2 --- | --- | --- | --- | --- 7 | Prudential adjustments related to valuation of financial instruments | | | 8 | Goodwill paid in the acquisition of investments based on expectation of future profitability | | | 9 | Intangible Assets | | | 10 | Tax credits resulting from fiscal losses and negative base of Social Contribution on Net Income and those originating from this contribution relating to assessment periods closed until December 31, 1998 | | | 11 | Adjustments related to the market value of financial derivative instruments used for cash flow hedge of protected items that do not have their mark-to-market adjustments registered accounting-wise. | | |

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12 | Difference below the provisioned amount and expected loss for institutions using IRB | | | 13 | Gains resulting from securitization operations | | | 14 | Gains or losses arising from the impact of changes in the institution's credit risk on the fair value assessment of liability items | | | 15 | Actuarial assets related to defined benefit pension funds | | | 16 | Shares or other instruments of own issue authorized to compose Core Capital, acquired directly, indirectly, or synthetically | | | 17 | Cross-investments in instruments eligible for Core Capital | | | 18 | Aggregated value of participations below 10% of the share capital of companies similar to non-consolidated financial institutions, insurance companies, reinsurers, capitalization companies, and open complementary pension entities, which exceeds 10% of the Core Capital value, disregarding specific deductions | | | 19 | Participations exceeding 10% of the share capital of companies similar to non-consolidated financial institutions, insurance companies, reinsurers, capitalization companies, and open complementary pension entities | | | 20 | Mortgage servicing rights | | | 21 | Tax credits resulting from temporary differences that depend on the generation of future taxable profits or revenues for their realization, above the

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limit of 10% of Core Capital, disregarding specific deductions | | | 22 | Value that exceeds 15% of Core Capital | | | 23 | of which: originating from participations in the share capital of companies similar to non-consolidated financial institutions, insurance companies, reinsurers, capitalization companies, and open complementary pension entities | | | 24 | of which: originating from mortgage servicing rights | | | 25 | of which: originating from tax credits resulting from temporary differences that depend on the generation of future taxable profits or revenues for their realization | | | 26 | National regulatory adjustments | | | 26.a | Deferred permanent assets | | | 26.b | Investment in dependency, financial institution controlled abroad or non-financial entity that composes the conglomerate, regarding which the Central Bank of Brazil does not have access to information, data, and documents | | | 26.c | Eligible instruments for Core Capital issued by an institution authorized to operate by the Central Bank of Brazil or by a financial institution abroad, that does not compose the conglomerate | | | 26.d | Unauthorized increase in share capital | | | 26.e | Excess over the adjusted value of Core Capital | | | 26.f | Deposit to cover capital deficiency | | | 26.g | Amount of intangible assets

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constituted before the entry into force of Resolution No. 4,192, of 2013 | | | 27 | Regulatory adjustments applied to Core Capital due to insufficiency of Supplementary Capital and Tier 2 to cover deductions | | | 28 | Total of regulatory deductions to Core Capital | | | 29 | Core Capital | | |

Line Number | Supplementary Capital: Instruments | Value (R$ thousand) | Value subject to transitional treatment (R$ thousand) 1 | Consolidated Balance Sheet Reference 2 --- | --- | --- | --- | --- 30 | Instruments eligible for Supplementary Capital | | | 31 | of which: classified as share capital according to accounting rules | | | 32 | of which: classified as liability according to accounting rules | | | 33 | Instruments authorized to compose Supplementary Capital before the entry into force of Resolution No. 4,192, of 2013 | | | 34 | Non-controlling interests in subsidiaries part of the conglomerate, not deductible from Supplementary Capital | | | 35 | of which: instruments issued by subsidiaries before the entry into force of Resolution No. 4,192, of 2013 | | | 36 | Supplementary Capital before regulatory deductions | | |

Line Number | Supplementary Capital: Regulatory Deductions | Value (R$ thousand) | Value subject to transitional treatment (R$ thousand) 1 | Consolidated Balance Sheet Reference 2 --- | --- | --- | --- | --- 37 | Shares or other instruments of own issue, authorized to compose Supplementary Capital, acquired directly, indirectly, or synthetically | | |

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38 | Cross-investments in instruments eligible for supplementary capital | | | 39 | Aggregated value of participations below 10% of the share capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad, that does not compose the conglomerate and which exceeds 10% of the Supplementary Capital value | | | 40 | Participations exceeding 10% of the share capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad, that does not compose the conglomerate | | | 41 | National regulatory adjustments | | | 41.a | Instruments eligible for supplementary capital issued by an institution authorized to operate by the Central Bank of Brazil or by a financial institution abroad, that does not compose the conglomerate, limited to instruments held by third parties and issued until December 31, 2012 | | | 42 | Regulatory adjustments applied to Supplementary Capital due to insufficiency of Tier 2 to cover deductions | | | 43 | Total of regulatory deductions to Supplementary Capital | | | 44 | Supplementary Capital | | | 45 | Tier 1 | | |

Line Number | Tier 2: Instruments | Value (R$ thousand) | Value subject to transitional treatment (R$ thousand) 1 | Consolidated Balance Sheet Reference 2 --- | --- | --- | --- | --- 46 | Instruments eligible for Tier 2 | | | 47 | Instruments authorized to

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compose Tier 2 before the entry into force of Resolution No. 4,192, of 2013 | | | 48 | Non-controlling interests in subsidiaries part of the conglomerate, not deductible from Tier 2 | | | 49 | of which: instruments issued by subsidiaries before the entry into force of Resolution No. 4,192, of 2013 | | | 50 | Excess of provisions relative to expected loss in IRB | | | 51 | Tier 2 before regulatory deductions | | |

Line Number | Tier 2: Regulatory Deductions | Value (R$ thousand) | Value subject to transitional treatment (R$ thousand) 1 | Consolidated Balance Sheet Reference 2 --- | --- | --- | --- | --- 52 | Shares or other instruments of own issue, authorized to compose Tier 2, acquired directly, indirectly, or synthetically | | | 53 | Cross-investments in instruments eligible for Tier 2 | | | 54 | Aggregated value of participations below 10% of the share capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad, that does not compose the conglomerate, which exceeds 10% of the Supplementary Capital value | | | 55 | Participations exceeding 10% of the share capital of institutions authorized to operate by the Central Bank of Brazil or by a financial institution abroad, that does not compose the conglomerate | | | 56 | National regulatory adjustments | | | 56.a | Instruments eligible for capital issued by an institution authorized to operate by the

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Central Bank of Brazil or by a financial institution abroad, that does not compose the conglomerate, limiting to instruments held by third parties and issued until December 31, 2012 | | | 57 | Total of regulatory deductions to Tier 2 | | | 58 | Tier 2 | | | 59 | Reference Equity (Tier 1 + Tier 2) | | | 60 | Total of risk-weighted assets | | |

Line Number | Basel Indices and Additional Core Capital | % | | | --- | --- | --- | --- | --- 61 | Core Capital Index (CCI) | | | | 62 | Tier 1 Index (T1I) | | | | 63 | Basel Index (BI) | | | | 64 | Minimum Core Capital requirement, including capital add-ons (% of RWA) | | | | 65 | of which: capital conservation add-on | | | | 66 | of which: countercyclical add-on | | | | 67 | of which: add-on for globally systemically important institutions (G-SIB) | | | | 68 | Core Capital available to meet the Additional Core Capital requirement (% of RWA) | | | |

Line Number	National Minimums	%
69	Core Capital Index (CCI), if different from that established in Basel III

Circular No. 3,678, of October 31, 2013 Page 20 of 31 different from that established in Basel III | | | |

Line Number | Values below the deduction limit (not risk-weighted) | Value (R$ thousand) | Value subject to transitional treatment (R$ thousand) 1 | Consolidated Balance Sheet Reference 2 --- | --- | --- | --- | --- 72 | Aggregated value of participations below 10% of the share capital of companies similar to non-consolidated financial institutions, insurance companies, reinsurers, capitalization companies, and open complementary pension entities | | | | 73 | Participations exceeding 10% of the share capital of companies similar to non-consolidated financial institutions, insurance companies, reinsurers, capitalization companies, and open complementary pension entities | | | | 74 | Mortgage servicing rights | | | | 75 | Tax credits resulting from temporary differences, not deducted from Core Capital | | | |

Line Number | Limits to the inclusion of provisions in Tier 2 | Value (R$ thousand) | | | --- | --- | --- | --- | --- 76 | Generic provisions eligible for inclusion in Tier 2 relating to exposures subject to capital requirement calculation through standardized approach | | | | 77 | Limit for the inclusion of generic provisions in Tier 2 for exposures subject to standardized approach | | | | 78 | Provisions eligible for inclusion in Tier 2 relating to exposures subject to capital requirement calculation through IRB approach (before applying the limit) | | | | 79 | Limit for the inclusion of provisions in Tier 2 for exposures subject to

Circular No. 3,678, of October 31, 2013 Page 21 of 31 IRB approach | | | |

Line Number | Instruments authorized to compose PR before the entry into force of Resolution 4,192, of 2013 (applicable between October 1, 2013 and January 1, 2022) | Value (R$ thousand) | Value subject to transitional treatment (R$ thousand) 1 | Consolidated Balance Sheet Reference 2 --- | --- | --- | --- | --- 80 | Current limit for instruments authorized to compose Core Capital before the entry into force of Resolution No. 4,192, of 2013 | | | | 81 | Value excluded from Core Capital due to the limit | | | | 82 | Instruments authorized to compose Supplementary Capital before the entry into force of Resolution No. 4,192, of 2013 | | | | 83 | Value excluded from Supplementary Capital due to the limit | | | | 84 | Instruments authorized to compose Tier 2 before the entry into force of Resolution No. 4,192, of 2013 | | | | 85 | Value excluded from Tier 2 due to the limit | | | |

1 Column in which the value of regulatory adjustments subject to transitional treatment must appear.
The regulatory adjustment corresponds to the value:

• of instruments authorized to compose the PR of the institution before the entry into force of Resolution No. 4,192, of 2013, which, between October 1, 2013 and December 31, 2021, still compose the PR of the institution, according to Art. 28 of Resolution No. 4,192, of 2013 (lines 33, 35, 47, 48, and 49 may have values filled in this column until December 31, 2021);
• of prudential adjustments that, between October 1, 2013 and December 31, 2017, have not yet been fully deducted from PR, according to Art. 11 of Resolution No. 4,192, of 2013 (lines 5, 8, 9, 12, 15, 18, 19, 21, 22, 23, 24, 25, 34, 48, 83, and 85 may have values filled in this column until December 31, 2017).

2 This column must contain the reference of the instruments reported in the table relative to the balance sheet of the institution or the conglomerate, according to item I and §1 of Art. 3 of this Circular.

3 Lines 4, 33, 35, 47, and 49 must be deleted from January 1, 2022, the date on which the instruments reported therein will no longer be acceptable to compose PR.

Circular No. 3,678, of October 31, 2013 Page 22 of 31

Instructions for filling out the Table "Composition of Reference Equity (PR) and information on PR adequacy"

Line Number	Filling Instruction
1	According to item "a" of item I of Art. 4 of Resolution No. 4,192, of 2013, excluding the entirety of non-controlling interests in subsidiaries part of the conglomerate, according to item II of § 2 of Art. 2 of Resolution No. 4,192, of 2013 and including instruments referred to in Art. 16 2

Circular No. 3,678, of October 31, 2013 Page 23 of 31

Resolution No. 4,192, of 2013

Circular No. 3,678, of October 31, 2013 Page 24 of 31 Resolution No. 4,192, of 2013, including values relating to insurance companies, reinsurers, capitalization companies, and open complementary pension entities, excluding values reported in lines 19 to 21 23 Value reported in line 22 related to equity interests in companies similar to financial institutions not consolidated, insurance companies, reinsurers, capitalization companies, and open complementary pension entities 24 Value reported in line 22 related to rights from mortgage services. Not applicable to Brazil 25 Value reported in line 22 related to tax credits arising from temporary differences 26 National regulatory adjustments, corresponding to the sum of lines 26.a, 26.b, 26.c, 26.d and 26.e, minus lines 26.f and 26.g 26.a According to item IX of art. 5 of Resolution No. 4,192, of 2013 26.b According to item XI of art. 5 of Resolution No. 4,192, of 2013 26.c According to item X of art. 5 of Resolution No. 4,192, of 2013. This line is related to line 5 26.d According to item I of § 1 of art. 4 of Resolution No. 4,192, of 2013 26.e According to art. 25 of Resolution No. 4,192, of 2013 26.f According to item “f” of item I of art. 4 of Resolution No. 4,192, of 2013 26.g According to item II of art. 5 of Resolution No. 4,192, of 2013, corresponding to the amount of intangible assets constituted before the entry into force of the mentioned Resolution 27 Regulatory adjustments applied to Core Capital due to insufficiency of Supplementary Capital and Tier 2 to cover deductions. If the value of line 43 exceeds the value of line 36, the excess must be reported in this line 28 Total regulatory deductions from Core Capital, corresponding to the sum of lines 7 to 22, 26 and 27 29 Core Capital, corresponding to line 6 minus line 28 30 According to item I of art. 6 of Resolution No. 4,192, of 2013 31 According to item I of art. 6 of Resolution No. 4,192, of 2013 32 According to item I of art. 6 of Resolution No. 4,192, of 2013 33 According to art. 28 of Resolution No. 4,192, of 2013 34 According to conglomerate rules, with the deduction provided for in § 2 of art. 9 of Resolution No. 4,192, of 2013, limited to instruments held by third parties 35 Value reported in line 34 to which art. 11 of Resolution No. 4,192, of 2013 applies 36 Sum of lines 30, 33 and 34 37 According to item “b” of item II of art. 6 and paragraph 3 of art. 18 of Resolution No. 4,192, of 2013 38 Not applicable to Brazil, due to item “a” of item II of art. 6 of Resolution No. 4,192, of 2013 39 According to art. 8 of Resolution No. 4,192, of 2013 40 According to art. 8 of Resolution No. 4,192, of 2013 41 National regulatory adjustments, corresponding to the value of line 41.a 41.a According to item “a” of item II of art. 6 of Resolution No. 4,192, of 2013, limited to instruments held by third parties and issued until December 31, 2012, according to § 5 of art. 9 of the mentioned Resolution. This line is related

Circular No. 3,678, of October 31, 2013 Page 25 of 31 to line 34 42 Regulatory adjustments applied to Supplementary Capital due to insufficiency of Tier 2 to cover deductions. If the value of line 57 exceeds the value of line 51, the excess must be reported in this line 43 Sum of lines 37 to 42 44 Core Capital, corresponding to line 36 minus line 43 45 Tier 1, corresponding to line 29 plus line 44 46 According to item “a” of item I of art. 7 of Resolution No. 4,192, of 2013 47 According to art. 28 of Resolution No. 4,192, of 2013 48 According to conglomerate rules, with the deduction provided for in § 3 of art. 9 of Resolution No. 4,192, of 2013, limited to instruments held by third parties 49 Value reported in line 48 to which art. 11 of Resolution No. 4,192, of 2013 applies 50 According to item “b” of item I of art. 7 of Resolution No. 4,192, of 2013 51 Sum of lines 46 to 48 and 50 52 According to item “b” item II art. 7 and § 3 of art. 21 of Resolution No. 4,192, of 2013 53 Not applicable to Brazil, due to item “a” item II art. 7 of Resolution No. 4,192, of 2013 54 According to art. 8 of Resolution No. 4,192, of 2013 55 According to art. 8 of Resolution No. 4,192, of 2013 56 National regulatory adjustments, corresponding to the value of line 56.a 56.a According to item “a” item II art. 7 of Resolution No. 4,192, of 2013, limited to instruments held by third parties and issued until December 31, 2012, according to § 5 of art. 9 of the mentioned Resolution. This line is related to line 48 57 Sum of lines 52 to 56 58 Tier 2, corresponding to line 51 minus line 57 59 Reference Equity, corresponding to line 45 plus line 58 60 Total risk-weighted assets (RWA), according to art. 3 of Resolution No. 4,193, of 2013 61 According to item VIII of art. 6 of this circular 62 According to item VII of art. 6 of this circular 63 According to item VI of art. 6 of this circular 64 Specific minimum requirement of the institution: minimum Core Capital requirement (in percentage), according to art. 6 of Resolution 4,193, of 2013, plus the Core Capital Add-on (in percentage), according to art. 8 of Resolution 4,193, of 2013. This line informs the Core Capital percentage below which the institution is subject to the restrictions defined in art. 9 of Resolution 4,193, of 2013 65 The percentage value of line 64 that corresponds to the lower limit of the Core Capital Add-on, according to art. 8 of Resolution No. 4,193, of 2013 66 The percentage value of line 64 that corresponds to the difference between the value established for the Core Capital Add-on and its respective lower limit, according to art. 8 of Resolution No. 4,193, of 2013 67 The percentage value of line 64 that corresponds to the add-on for globally systemically important institutions (G-SIB). Not applicable to Brazil 68 Core Capital available to meet the Core Capital Add-on requirement (% of RWA). Calculated as the Core Capital Ratio (CCR), minus

Circular No. 3,678, of October 31, 2013 Page 26 of 31 any percentage value of Core Capital used in meeting the minimum requirements of Tier 1 and Reference Equity 69 Core Capital Ratio (CCR), if different from that established in Basel III. Not applicable to Brazil 70 Tier 1 Ratio (T1R). According to art. 5 of Resolution No. 4,193, of 2013, it is lower until December 31, 2014: 5.5% from October 1, 2013 to December 31, 2014 and 6% from January 1, 2015 71 Basel Ratio (BR). According to art. 4 of Resolution No. 4,193, of 2013, it is higher until December 31, 2018: 11% from October 1, 2013 to December 31, 2015; 9.875% from January 1, 2016 to December 31, 2016; 9.25% from January 1, 2017 to December 31, 2017; 8.625% from January 1, 2018 to December 31, 2018; and 8% from January 1, 2019 72 Aggregated value of equity interests below 10% of the share capital of companies similar to financial institutions not consolidated, insurance companies, reinsurers, capitalization companies, and open complementary pension entities, that did not exceed 10% of the Core Capital value, according to item I of § 2 of art. 5 of Resolution No. 4,192, of 2013, disregarding specific deductions. Values not reported in lines 18, 39 and 54 73 Equity interests above 10% of the share capital of companies similar to financial institutions not consolidated, insurance companies, reinsurers, capitalization companies, and open complementary pension entities that remained below the limit established in item II of § 2 of art. 5 of Resolution No. 4,192, of
2013. Values not reported in lines 19 and 23
74 Not applicable in Brazil
75 Tax credits arising from temporary differences, not deducted from Core Capital, according to §§ 2 to 5 of art. 5 of Resolution No. 4,192, of 2013. Values not reported in lines 21 and 25 76 Not applicable in Brazil 77 Not applicable in Brazil 78 According to item “b” of item I of art. 7 of Resolution No. 4,192, of 2013 79 According to art. 26 of Resolution No. 4,192, of 2013 80 Current limit for instruments authorized to compose Core Capital before the entry into force of Resolution No. 4,192, of 2013. Not applicable to Brazil due to the provision in § 1 of art. 28 of Resolution No. 4,192, of 2013 81 Value excluded from Core Capital due to the limit. Not applicable to Brazil due to the provision in § 1 of art. 28 of Resolution No. 4,192, of 2013 82 Instruments authorized to compose Supplementary Capital before the entry into force of Resolution No. 4,192, of 2013, according to art. 28 of Resolution No. 4,192, of 2013 83 Value excluded from Supplementary Capital due to the limit, according to art. 28 of Resolution No. 4,192, of 2013 84 Instruments authorized to compose Tier 2 before the entry into force of Resolution No. 4,192, of 2013, according to art. 28 of Resolution No. 4,192, of 2013 85 Value excluded from Tier 2 due to the limit, according to art. 28 of Resolution No. 4,192, of 2013

Circular No. 3,678, of October 31, 2013 Page 27 of 31
Annex 2
Main Characteristics of Reference Equity (PR) Instruments Line Number Characteristic Cell to be filled 1 1 Issuer 2 Unique identifier (e.g., Cusip, Isin or Bloomberg identifier for private placement) 3 Law applicable to the instrument Regulatory Treatment 4 Temporary treatment provided for in art. 28 of Resolution No. 4,192, of 2013 5 Treatment after the temporary treatment provided for in the previous line 6 Eligibility for the institution individual/conglomerate/conglomerate and individual institution 7 Type of instrument 8 Value recognized in PR (in R$ thousand, in the last database reported) 9 Face value of the instrument (in R$ thousand) 10 Accounting classification 11 Original issuance date 12 Perpetual or with maturity 13 Original maturity date 14 Redemption or repurchase option 15 (1) Redemption or repurchase date (2) Conditional redemption or repurchase dates (3) Redemption or repurchase value (in R$ thousand) 16 Subsequent redemption or repurchase dates, if applicable Remuneration/Dividends 17 Fixed or variable remuneration or dividends 18 Remuneration rate and referenced index 19 Existence of suspension of dividend payments 20 Full discretion, partial discretion or mandatory 21 Existence of clauses that alter agreed remuneration periods or conditions or other incentive for redemption 22 Cumulative or non-cumulative 23 Convertible or non-convertible into shares 24 If convertible, under which situations

1 The institution may choose to disclose this template in spreadsheet format and add columns for each of the PR capital instruments.

Circular No. 3,678, of October 31, 2013 Page 28 of 31 25 If convertible, fully or partially 26 If convertible, conversion rate 27 If convertible, mandatory or optional conversion 28 If convertible, specify for which type of instrument 29 If convertible, specify the issuer of the instrument for which it can be converted 30 Characteristics for the extinguishment of the instrument 31 If extinguishable, under which situations 32 If extinguishable, fully or partially 33 If extinguishable, permanently or temporarily 34 If temporary extinguishment, description of the situation in which the instrument returns to being considered in PR 35 Position in the subordination hierarchy in case of liquidation (specifies the type of instrument of immediately superior order) 36 Has characteristics that will not be accepted after the temporary treatment provided for in art. 28 of Resolution No. 4,192, of 2013 37 If yes, specify the characteristics provided for in the previous line Filling Instruction for the Table “Main Characteristics of Reference Equity (PR) Instruments” Line Number Filling Instruction 1 Identifies the legal entity issuer. Free text. 2 Unique identifier (e.g., Cusip, Isin or Bloomberg identifier for private placement). Free text. 3 Specifies the law applicable to the instrument. Free text. 4 Specifies the capital component in which the instrument is considered during the temporary treatment provided for in art. 28 of Resolution No. 4,192, of 2013. Select: [Core Capital] [Supplementary Capital] [Tier 2] 5 Specifies the capital component in which the instrument is considered not taking into account the temporary treatment provided for in art. 28 of Resolution No. 4,192, of 2013. Select: [Core Capital] [Supplementary Capital] [Tier 2] [Not eligible] 6 Specifies the level in the consolidation in which the instrument is included in PR. Select: [Individual institution] [Conglomerate] [Conglomerate and Individual institution] 7 Specifies the type of instrument. Select: [Share] [Financial letter] [Other] 8 Fill in the value of the instrument, in R$ thousand, recognized in PR, on the last date-

Circular No. 3,678, of October 31, 2013 Page 29 of 31 base reported by the institution.
Free text.
9 Fill in the face value of the instrument, in R$ thousand.
Free text.
10 Specifies the accounting classification.
Select: [Share] [Liability – amortized cost] [Liability – fair value] [Non-controlling interest in subsidiary] 11 Fill in the original issuance date. Free text. 12 Specifies whether the instrument is perpetual or has a maturity date. Select: [Perpetual] [With maturity] 13 For instruments with maturity, fill in with the original maturity date. For perpetual instruments, fill in “no maturity”. Free text. 14 Specifies whether there is an option to redeem or repurchase the instrument by the issuer. Select: [Yes] [No] 15 For instruments with redemption or repurchase option by the issuer, fill in:
(1) the first date on which the option can be exercised (day, month and year); (2) specify whether the instrument has a contingent redemption or repurchase option linked to a fiscal or regulatory event; (3) redemption or repurchase value, in R$ thousand Free text. 16 Specifies the existence and frequency of subsequent redemption or repurchase option dates, if applicable. Free text. 17 Specifies whether the remuneration or dividends paid by the instrument are fixed, variable, if they are currently fixed and will become variable in the future and if they are variable currently and will become fixed in the future. Select: [Fixed] [Variable] [Fixed and then variable] [Variable and then fixed] 18 Fill in with the remuneration rate of the instrument and with any other index that references the remuneration or dividends. Free text. 19 Specifies whether the non-payment of the remuneration or dividend of the instrument leads to the prohibition of payment of dividends on shares Select: [Yes] [No] 20 Specifies whether the issuer has full discretion, partial discretion or no discretion regarding the payment of the remuneration or dividend of the instrument. If the institution has full discretion to cancel the payment of the remuneration or dividend under any circumstances, it must select “full discretion” (even if there is a dividend suspension clause that does not prevent the institution from canceling payments related to the instrument). If it is necessary to fill in some conditions before that the payment of remuneration or dividends is canceled (e.g., PR below a certain limit), the institution must select “partial discretion”. If the institution cannot cancel the payment except in case of insolvency, it must select “mandatory”. Select: [Full discretion] [Partial discretion] [Mandatory]

Circular No. 3,678, of October 31, 2013 Page 30 of 31 21 Specifies the existence of clauses that alter agreed remuneration periods or conditions or other incentive for redemption of the instrument. Select: [Yes] [No] 22 Specifies whether the remuneration or dividends are cumulative or non-cumulative. Select: [Cumulative] [Non-cumulative] 23 Specifies whether the instrument is convertible into shares or not. Select: [Convertible] [Non-convertible] 24 Specifies the conditions under which the instrument is convertible, including situations of institutional non-viability. If one or more authorities can mandate conversion, they must be cited. For each of the authorities, it must be specified whether the terms of the instrument contract constitute the legal basis for mandatory conversion (contractual approach) or if the legal basis stems from statutory terms (statutory approach). Free text. 25 For each conversion situation, separately specify whether the instrument (i) will always be converted in its entirety, (ii) may be converted in its entirety or partially or (iii) will always be converted partially. Free text, referenced in options (i), (ii) or (iii). 26 Fill in with the conversion rate in an instrument with higher loss absorption capacity. Free text. 27 Specify whether the conversion is mandatory or optional. “NA” for instruments not convertible. Select: [Mandatory] [Optional] [NA] 28 Specify for which type of instrument the instrument is convertible. Use: [Core Capital] 29 Specify the issuer of the instrument for which the instrument can be converted. Free text. 30 Specifies whether the instrument can be extinguished. Select: [Yes] [No] 31 Specifies the conditions under which the instrument can be extinguished, including situations of institutional non-viability. If one or more authorities can mandate extinguishment, they must be cited. For each of the authorities, it must be specified whether the terms of the instrument contract constitute the legal basis for mandatory extinguishment (contractual approach) or if the legal basis stems from statutory terms (statutory approach). Free text. 32 For each extinguishment situation, separately specify whether the instrument (i) will always be extinguished in its entirety, (ii) may be extinguished in its entirety or partially or (iii) will always be extinguished partially. Free text, referenced in options (i), (ii) or (iii). 33 Specify whether the extinguishment is permanent or temporary. “NA” for instruments that cannot be extinguished. Select: [Permanent] [Temporary] [NA] 34 For the mechanism that can be temporarily extinguished, description of the situation in which the instrument returns to being considered in PR. Not applicable to Brazil. 35 Specifies the type of instrument of immediately superior order. When applicable,

Circular No. 3,678, of October 31, 2013 Page 31 of 31 specify the column of this annex corresponding to the instrument to which it is immediately subordinate Free text. 36 Specifies whether the instrument has transition characteristics that will not be accepted after the temporary treatment provided for in art. 28 of Resolution No. 4,192, of 2013. Select: [Yes] [No] 37 If the previous line has “yes” as the answer, specify the transition characteristics of the instrument. Free text.