FLOW STATEMENT FOR REGULATORY CAPITAL

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(3) Changes related to 2012 are also due to the Tier 1 and Upper Tier II tender offer launched by UniCredit S.p.A. on January 24th, 2012, and closed on February 3rd, 2012.

(4) As of January 1, 2013, following the entry into force of the amendments to IAS 19 (IAS 19R), the elimination of the corridor method – requiring recognition of present value of defined benefit obligations – will result in an impact on the Group's net equity related to the recognition in the revaluation reserves of actuarial net losses not previously recognized in line with such method. Under a regulatory perspective, such revaluation reserve – equal to €1,467 million – is classified as a negative element of Tier 1 Capital; moreover, a prudential positive filter for

€1,418 million is applied according to Bank of Italy Communication issued on May9th, 2013.

(5) The amount related to 2013 (€ 166 million) refers to the negative prudential filter for multiple goodwill redemption (“affrancamenti multipli”), according to Bank of Italy Communication issued on May9th, 2013; specifically, with reference to the amount of the prudential filter related to the Year 2013, this item also includes the proportional amount for the first half 2013 equal to € 55 million (other than €111 million referred to the Year closed on December 31st, 2012).

(6) The amount related to 2013 also includes deductions related to shareholdings in insurance companies (plus subordinated liabilities issued by such companies) acquired before July 20, 2006; till 31.12.2012, such amount was deducted by the sum of Tier 1 and Tier 2 Capital.

(7) The amount related to 2013 is included in the overall deduction è confluito nelle complessive deduzioni riferite alle società bancarie, finanziarie ed assicurative (si veda la precedente nota 6).

Detail of Items to be deducted (50% TIER1 - 50% TIER2) (€' 000)

06.30.2013 12.31.2012

Shareholdings in banking and financial companies greater than 10% and shareholdings in

insurance companies greater than 20% (°) 3,352,300 2,386,322

Deductions for securitizations 516,776 512,226

Deductions for expected losses/provisions (IRB models) 3,580,208 3,050,714

Deductions for expected losses on capital instruments and O.I.C.R. 11,234 8,184

Deductions related to settlement risk on non DVP transactions - -

Total deducted Items (50% TIER1 - 50% TIER2) 7,460,518 5,957,446

(°) The amount includes both the stake in the Bank of Italy and the subordinated assets issued by the same shareholdings companies to be deducted.

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The UniCredit group has made a priority of capital management and allocation on the basis of the risk assumed in order to expand the Group’s operations and create value. These activities are part of the Group planning and monitoring process and comprise:

• planning and budgeting processes:

o proposals as to risk propensity and capitalization objectives;

o analysis of risk associated with value drivers and allocation of capital to business areas and units;

o assignment of risk-adjusted performance objectives;

o analysis of the impact on the Group’s value and the creation of value for shareholders;

o preparation and proposal of the financial plan and dividend policy;

• monitoring processes:

o analysis of performance achieved at Group and business unit level and preparation of management reports for internal and external use;

o analysis and monitoring of limits;

o analysis and performance monitoring of the capital ratios of the Group and individual companies.

The Group has set itself the goal of generating income in excess of that necessary to remunerate risk (cost of equity), and thus of creating value for its shareholders by allocating capital to the various business areas and business units on the basis of specific risk profiles. In support of planning and monitoring processes, the Group has adopted a methodology based on risk-adjusted performance measurement (RAPM) which provides a number of indicators that combine and summarize the operating, financial and risk variables to be considered.

Capital and its allocation are therefore extremely important in defining strategies, since on the one hand it represents the shareholders’ investment in the Group which must be adequately remunerated, on the other hand it is a scarce resource on which there are external limitations imposed by regulatory provisions.

The definitions of capital used in the allocation process are as follows:

• Risk or employed capital: This is the equity component provided by shareholders (employed capital) for which a return that is greater than or equal to expectations (cost of equity) must be provided;

• Capital at risk: This is the portion of capital and reserves that is used (the budgeted amount or allocated capital) or was used to cover (at period-end - absorbed capital) risks assumed to pursue the objective of creating value.

If capital at risk is measured using risk management methods, it is defined as economic capital, if it is measured using regulatory provisions, it is defined as regulatory capital.

Economic capital is set at a level that will cover adverse events with a probability of 99.93% (confidence interval), while regulatory capital is quantified on the basis of a Core Tier 1 target ratio in line with that of major international banking groups and taking into account the impacts of the supervisory regulations which will be adopted (with specific reference to the so-called CRD4 Package implementing the Basel 3 Framework for EU banks and the prudential treatment for the Global Systemically Important Financial Institutions).

The purpose of the capital management function performed by the Capital Management unit of Planning, Strategy and Capital Management is to define the target level of capitalization for the Group and its companies in line with regulatory restrictions and the propensity for risk.

Capital is managed dynamically: the Capital Management unit prepares the financial plan, monitors capital ratios for regulatory purposes and anticipates the appropriate steps required to achieve its goals.

On the one hand, monitoring is carried out in relation to both shareholders’ equity and the composition of capital for regulatory purposes (Core Tier 1, Tier 1, and Tier 2), and on the other hand, in relation to the planning and performance of risk-weighted assets (RWA).

The dynamic management approach aims to identify the investment and capital-raising instruments and hybrid capital instruments that are most suitable for achieving the Group’s goals. If there is a capital shortfall, the gaps to be filled and capital generation measures are indicated, and their cost and efficiency are measured using RAPM. In this context, value analysis is enhanced by the joint role played by the Capital Management unit in the areas of regulatory, accounting, financial, tax-related, risk management and other aspects and the changing regulations⁶ affecting these aspects so that an assessment and all necessary instructions can be given to other Group HQ areas or the companies asked to perform these tasks.

6 E.g. Basel II/III, IAS/IFRS etc.

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