Company: BBD
Filing Date: 2025-03-31
Form Type: 20-F
Source: 0001292814-25-001244
Chunk: 442

Company: BANK BRADESCO
Filing Date: 2025-03-31
Form: 20-F
Item: Item 19
Chunk 442
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 the future
economic scenarios and the respective weighting of each scenario according to the probability assigned to them; (iii) the definition of
a SICR (stage 2) and financial assets that are credit impaired (stage 3); and, (iv) for ECL calculated on an individual basis, the expected
cash flows including the related collateral valuation.

The following are the primary procedures we performed to address this
critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Bank’s
ECL process. This included controls related to: (i) the overall design of the ECL methodology, including the Bank´s definition of
a SICR (stage 2) and financial assets that are credit impaired (stage 3); (ii) the design of the models used to estimate PD, EAD, LGD,
including the determination of the basis for segregation of contracts by shared credit risk characteristics within these models, and the
models used to identify the relevant macroeconomic variables and estimate their quantitative impact; (iii) the independent validation
of models and definition of probability of each scenario used to calculate the ECL; (iv) the calculation of the ECL estimate; and (v)
the projection of expected cash flows, including related collateral values, for ECL calculated on an individual basis.

We involved professionals with specialized skills and knowledge in credit risk,
who assisted in: (i) evaluating the overall ECL methodology for compliance with IFRS as issued by IASB; (ii) assessing the conceptual
soundness of the models and modelling techniques, including those used to derive the PDs, EADs and LGDs and to identify the relevant macroeconomic
variables and estimate their quantitative impact, by inspecting the model documentation to determine whether the models are suitable for
their intended use; (iii) evaluating the Bank's definition of a SICR by assessing relevant Company-specific metrics and comparing it to
the applicable industry and regulatory practices; (iv) checking the accuracy of the Bank’s estimates of PDs, EADs and LGDs using
the Bank’s historical data and defined methodologies; (v) evaluating the basis for the segregation of contracts by shared credit
risk characteristics used in the estimation of PD, EAD, LGD by observing historical correlations; (vi) evaluating the reasonableness of
the macroeconomic variables considered in the future scenarios by regression analysis of the historical correlation of these variables
and credit risk and (vii) re