Company: BBD
Filing Date: 2025-03-31
Form Type: 20-F
Source: 0001292814-25-001244
Chunk: 405

Company: BANK BRADESCO
Filing Date: 2025-03-31
Form: 20-F
Item: Item 19
Chunk 405
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, products, employees and customers,
and under several aspects (asset, delinquency, provision, write-off, restriction levels, guarantees, portfolio quality by rating, among
others).

Measurement of Credit Risk

Periodically, the Company evaluates the
expected credit losses from financial assets by means of quantitative models, considering the historical experience of credit losses of
the different types of portfolio (which can vary from 2 to 7
years), the current quality and characteristics of customers, operations, and mitigating factors, according to processes and internal
governance.

The actual loss experience has been adjusted
to reflect the differences between the economic conditions during the period in which the historical data was collected, current conditions
and the vision of the Company about future economic conditions, which are incorporated into the measurement by means of econometric models
that capture the current and future effects of estimates of expected losses. The main macroeconomic variables used in this process are
the Brazilian interest rates, unemployment rates, inflation rates and economic activity indexes.

The estimate of expected loss of financial
assets is divided into three categories (stages):

  Stage 1: Financial assets with no significant  
  increase in credit risks;                      
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  Stage 2: Financial assets with significant increase  
  in credit risks; and                                 
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  Stage 3: Financial assets that are credit impaired.  

The significant increase of credit risk
is evaluated based on different indicators for classification in stages according to the customers’ profile, the product type and
the current payment status, as shown below:

Retail and Wholesale Portfolios:

  Stage 1: Financial assets whose obligations are current or less          

  Stage 2 (Significant increase in credit risk): Financial assets                                                                          

  Stage 3 (Defaulted or “impaired”): Financial assets                                                                                  

  Re-categorization from stage 3 to stage 2: Financial assets that             

  Re-categorization from stage 2 to stage 1: Financial assets that              

  Re-categorization from stage 3 to stage 1: Financial assets that   
  returned regular payment leading to reclassification as low risk.  
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The expected losses are based on the multiplication
of credit risk parameters: Probability of default (PD), Loss due to default (LGD) and Exposure at default (EAD).

The PD parameter refers to the probability