Index
Pillar 3 - Disclosures Report
Pillar 3

Introduction (Ch.1)
Capital (Ch.2)
9
Executive Summary
23
Capital
13
Santander Group Pillar 3 Report overview
35
Pillar 1 - Regulatory Capital
16
Scope of consolidation
48
Pillar 2 - Economic Capital
18
Regulatory framework
Risks  (Ch. 3, 4, 5, 6, 7 and 8)
Santander Group (Ch. 9 and 10)
49
Credit Risk
159
Remuneration policies
97
Counterparty Credit Risk
168
Appendices
109
Credit Risk - Securitisations
Other appendices available on the Santander Group 
website.
Pillar 3 editable format tables.
127
Market Risk
145
Operational Risk
151
Other Risks
Access files2020 Pillar3 Appendices 2020 
Pillar3 tables available on the Santander 
Group website

1
Introduction
1.1. Executive summary
9
1.2. Santander Group Pillar 3 report overview
13
1.2.1.  Background information on Santander Group
13
1.2.2. Governance: approval and publication
14
1.2.3. Transparency enhancements
15
1.2.4. Disclosure criteria used in this report
16
1.3. Scope of consolidation
16
1.3.1.   Differences between the consolidation method for 
accounting purposes and the consolidation method for 
regulatory capital calculation purposes
16
1.3.2.   Substantial amendments due to a change in 
perimeter and corporate transactions
18
1.4. Regulatory framework
18
1.4.1. Regulatory changes in 2020
20

1.Introduction
1.1. Executive summary
Santander is one of the largest banks in the eurozone. As of 
December 2020, we had EUR 1,508,250 million of assets 
and EUR 1,056,127 million of total funds. Our market 
capitalization had reached EUR 44,011 million.
Our purpose is to help people and businesses prosper in a 
way that is Simple, Personal and Fair. We do not merely 
meet our legal and regulatory obligations, but also aspire to 
exceed expectations. We focus on areas where our activity 
can have the greatest impact, helping economic growth in 
an inclusive and sustainable way.
We engage in all types of typical banking activities, 
operations and services. Our scale, business model and 
diversification drive our aim to be the best open digital 
financial services platform, acting responsibly and earning 
the lasting loyalty of our stakeholders (customers, 
shareholders, people and communities).
In 2020, against the backdrop of the pandemic, our 
commitment to our stakeholders was even stronger:
• Our priority was to safeguard the health and safety of 
our 191,189 employees, by implementing measures 
such as redefining our way of working, with more than 
100,000 employees working from home at the peak of 
the pandemic, and gradual returns to the workplaces 
amid de-escalation.  We followed local governments' 
recommendations at all times and based our 
procedures on three pillars: developing and 
implementing of health and safety protocols, 
prioritizing the health of our employees, and tracking 
and tracing (through health apps).
• For our 148 million customers, we strengthened our 
proposition, and implemented support measures to 
ensure the necessary financial assistance through pre-
approved  lines of credit, payment deferrals and special 
policies, as well as facilitating the granting of state-
guaranteed business loans in all countries.
• For our shareholders, we kept all channels open to 
increase their trust, which was reflected in an increase 
of more than 30,000 shareholders in the year to 
4,018,817.
• In line with our commitment, we contributed to the 
well-being of society. We implemented actions and 
mobilized resources together with governments and 
institutions to help combat the health crisis, with more 
than EUR 105 million dedicated to solidarity initiatives.
As the global pandemic intensified, we accelerated our 
digital transformation, focusing on our multi-channel 
strategy and digitalization of processes and businesses.
As a result, loyal and digital customers and activity 
continued to grow. The number of loyal customers reached 
23 million (+6% in the year), picking up in individuals and 
corporates. Digital customers rose 15% to more than 42 
million.
On average, our customers accessed digital touchpoints 
close to 190 million times per week and 44% of total sales 
were digital (36% in 2019). We also aim to be one of the 
top three banks for customer satisfaction in our main 
markets.
Besides digital channels, we interact with our customers 
through our global network of 11,236 branches, which we 
are  optimizing and adapting to our customers' needs 
including universal offices and specialist centres for certain 
customer segments. We also have new collaborative 
spaces with increased digital capabilities (Work Café, 
SmartBank and Ágil branches). 
Economic Context
In 2020, Santander operated in an extraordinarily complex 
environment characterized by the pandemic and the 
measures to alleviate its economic impact. The crisis has 
been global, severe and abrupt, and has generated 
enormous uncertainty given the impossibility of predicting 
its scope and duration. Most of the economies in which the 
bank operates responded with tough policies and notable 
coordination between their fiscal, financial and monetary 
counterparts to limit permanent damage from lockdown 
measures. Nonetheless, hopes raised by better treatments, 
more targeted outbreak responses and the effective 
vaccines announced in the final months of the year 
contained the situation towards the end of the year and led 
to better expectations that were reflected in financial 
markets.
2020 Grupo Santander's results highlights 
Grupo Santander's results in the year were affected by the 
health crisis caused by the spread of covid-19, which is 
reflected in a weaker economic environment, lower interest 
rates and a sharp depreciation of some currencies.
Total income fell in the year from lower activity and 
exchange rates. Excluding their impact, total income 
remained in line with 2019, as the decrease in activity and 
lower interest rates were offset by higher volumes, sound 
market volatility management and the lower cost of 
deposits.
Cost reduction through the optimization plans 
implemented in recent years, along with additional savings 
measures adopted since the start of the crisis. This was 
reflected in the fall in real terms in the majority of our 
markets.
Greater loan-loss provisions due to credit growth and the 
worsening of economic conditions arising from the 
pandemic and the consequent expected impact on credit 
quality. Cost of credit ended the year at 1.28%, in line with 
our expectations.
INTRODUCTION 2020 Pillar 3 Disclosures Report
9

We adjusted the goodwill ascribed to some units and to 
deferred tax assets in the second quarter as a result of the 
worsening economic outlook, totalling EUR 12,600 million, 
resulting in an attributable profit to the Group of -EUR 
8,771 million in 2020.
Excluding the above adjustments and other costs and 
provisions that are outside the ordinary course of our 
business, underlying attributable profit to the parent was 
EUR 5,081 million, with net operating income of EUR 
23,633 million, 2% more in constant euros than in 2019.
Capital Management and adequacy
Grupo Santander’s capital management aims to guarantee 
solvency and maximize profitability, while complying with 
internal objectives and regulatory requirements.
It is a key strategic tool for local and corporate decision 
making, enabling us to set a common framework of actions, 
criteria, policies, functions, metrics and processes.
Our active capital management applies strategies on 
efficient capital allocation to business lines, and considers 
securitizations, asset sales and issuances of capital 
instruments (capital hybrids and subordinated debt).
Our economic capital model aims to ensure our capital 
allocation is right for the risks inherent in our operations 
and risk appetite to optimize value creation for our group 
and business units.
To optimize value creation, we measure the real economic 
capital an activity requires and its return, and select those 
activities that maximize returns. We do this under both 
expected as well as unlikely but plausible economic 
scenarios, and with the solvency level decided by the 
Group.
Capital ratios in 2020
The ratios of this report are calculated by applying the CRR 
and IFRS9 transitory schedules.
• At year-end, the CET1 ratio reached 12.34% after 
increasing 69 bps in the year (including 104 bps of 
organic generation).
• The total capital ratio was 16.18% (+113 bps in the 
year).
• Our active capital management culture strengthened 
throughout the organization. 
We have a strong capital base, comfortably meeting the 
minimum levels required by the European Central Bank on 
a consolidated basis (13.01% for total capital ratio and 
8.85% for the CET1 ratio. This resulted in a CET1 
management buffer of 349 bps, compared to a covid-19 
buffer of 189 bp.
In the year, the CET1 ratio increased 69 bps. Of note was 
the strong underlying capital generation of 104 bps, 
partially offset by the impact of restructuring costs, 
corporate transactions and market performance. It also 
includes 9 bps related to an accrual for 2020 dividend 
payments, based on the limit established by 
recommendation 2020/63 of the ECB on 15 December 
2020, which allows a maximum payment of EUR 0.0275 
per share.  
Had the IFRS 9 transitional arrangement not been applied, 
the total impact on the CET1 ratio was 45 bps, leading to a 
CET1 ratio of 11.89%. For more information, see Appendix 
XII.  
The leverage ratio stood at 5.33%. Had the IFRS9 
transitional arrangement not been applied, the leverage 
ratio stood at 5.15%.
With regards to regulatory ratios, Santander exceeded the 
2020 minimum regulatory requirements by 317 bps, taking 
into account the shortfalls in AT1 and T2.
In short, from a qualitative point of view, Santander has 
solid capital ratios, aligned with its business model, balance 
sheet structure and risk profile.
INTRODUCTION 2020 Pillar 3 Disclosures Report
10
2020 Pillar 3 Disclosures Report

The Group’s CET1 capital ratio increased to 12.34%,
 above the target rate of 11% - 12%
Changes in main Capital ratios’ figures
11.65%
12.34%
1.49%
1.61%
1.91%
2.23%
Dec. 19
Dec. 20
Ratios %
n Tier 2
n Tier 1
n CET1
Millon euros
Dec-2020
Dec-2019
Common Equity (CET1)
69,399
70,497
Tier 1
78,501
79,536
Total capital
91,015
91,067
Risk weighted assets
562,580
605,244
CET1 Ratio
12.34%
11.65%
Tier 1 Ratio
13.95%
13.14%
Total capital ratio
16.18%
15.05%
Leverage Ratio
5.33%
5.15%
                           2020 and 2019 data has been calculated under application of CRR and IFRS 9 transitional arrangements, unless otherwise indicated.
Capital ratios
15.05
15.09
15.48
15.58
16.18
13.14
13.16
13.48
13.60
13.95
11.65
11.58
11.84
11.98
12.34
Dec.19
Mar.20
Jun.20
Sep.20
Dec.20
Ratios %
n
Total Ratio
n
Tier 1
n
CET1
Note: this English version is a translation of the original in Spanish for information purposes only. In the event of discrepancy, the original Spanish-language version
prevails.
INTRODUCTION 2020 Pillar 3 Disclosures Report
11

In 2020 there has been an increase of 69 bps, 
104 bps for organic growth
2020  CET1 evolution
%
 +69bps
11.65
+1.04
+0.02
-0.43
-0.14
+0.29
-0.09
12.34
Dec.19
Organic
generation
Regulatory
impacts &
models
One offs and
corporate
operations
Markets
and others
Reversal of
dividend
2019
Dividend
accrual 2020
Dec.20
Distribution of capital requirements by risk type and geography
31 Dec. 2020
  
  
Credit Risk
87%
29%
13%
20%
13%
4%
12%
7%
2%
Market Risk
3%
68%
1%
1%
14%
8%
8%
Operational Risk
10%
19%
13%
21%
19%
5%
12%
11%
n
Spain
n
UK
n
Rest of Europe
n
USA
n Rest of North 
America
n
Brazil 
n Rest of South 
America
n
Others
39,096
1,441
4,469
Million euros
Million euros
Million euros
INTRODUCTION 2020 Pillar 3 Disclosures Report
12
2020 Pillar 3 Disclosures Report

1.2. Santander Group Pillar 3 report                                                                     
overview 
1.2.1. Background information on Santander Group
Banco Santander, S.A. is a private-law entity subject to the 
rules and regulations applicable to banks operating in Spain. 
In addition to its direct operations, Banco Santander is the 
head of a group of subsidiaries engaged in a range of business 
activities that comprise Santander Group. The Capital 
Requirements Regulation (CRR), Capital Requirements 
Directive (CRD) IV and its transposition through Bank of Spain 
Circular 2/2016, on supervision and capital adequacy, are 
applicable at a consolidated level to the whole of Santander 
Group.
The exemption under Article 49 of the CRR is not used, so 
table INS1 on non-deducted holdings in insurance companies 
does not need to be published.
Under Article 7 and 9 of the CRR, the subsidiaries Santander 
Leasing S.A. EFC and Santander Factoring y Confirming S.A. 
EFC are exempt from the minimum capital requirements, the 
limit on large exposures and the internal corporate 
governance obligations at 31 December 2020. None of the 
exemptions under applicable regulations have been used for 
any other Santander Group subsidiaries.
Santander is one of the banks that have not required state aid 
in any of the countries in which they operate.
See Appendix II, CRR Mapping, for all aspects for which 
disclosure is required under Part Eight of the CRR but that are 
not applicable to Santander Group. These are reported as “N/
A” (not applicable).
At 31 December 2020, none of the financial institutions 
consolidated in Santander Group had less than the minimum 
capital required under applicable regulations.
INTRODUCTION 2020 Pillar 3 Disclosures Report
13

1.2.2. Governance: approval and publication
Santander Group publishes its annual Pillar 3 disclosures 
report following board approval, pursuant to the official 
disclosure policy. Prior to the board of directors’ approval on 
22 February 2021, the report was reviewed by the risk 
supervision, regulation and compliance committee at a 
meeting on 19 February and by the capital committee at a 
meeting on 21 January 2021.
The report was reviewed by the audit committee on 19 
February 2021.
Quarterly information has been published since March 2015 
in compliance with the European Banking Association (EBA)’s 
Guidelines on materiality, proprietary and confidentiality and 
on disclosure frequency, and article 432, sections 1 and 2, and 
article 433 of Regulation (EU) 575/2013.
Appendix II lists the location of the information disclosed in 
accordance with the relevant articles of Part Eight of the 
Regulation.
The information in this report has been reviewed by the 
external auditor (PwC), who did not find any issues with 
regard to the reasonableness of the disclosures and 
compliance with the reporting requirements established in 
the CRD IV and the CRR.
Certification by governing bodies
The board of directors of Santander Group certifies that the 
publication of the Pillar 3 disclosures report is compliant with 
the guidelines in Part Eight of Regulation (EU) 575/2013 and 
consistent with the “Pillar 3 Disclosures Policy” adopted by 
the board of directors.
No exceptions have been applied for the publication of 
information considered proprietary or confidential.
The Pillar 3 disclosures report relies on a range of processes 
relating to the internal control framework, with duties and 
responsibilities having been defined for review and 
certification of the information in the report at several levels 
of the organisation.
Further information on Santander Group's internal control 
model (ICM) can be found in section VIII of the Corporate 
governance chapter of the 2020 Annual report.
Access 2020 Annual Report available on 
the Santander Group website
The external auditors perform an ex-ante review and Internal 
Audit's work plans for recurring reviews also cover this report.
The Pillar 3 disclosures report is available in the Shareholders 
and Investors section of the Santander Group website 
(www.santander.com), under “Financial and economic 
information”.
Access 2020 Pillar 3 available on the Santander 
Group Website
Disclosures by Santander Group subsidiaries.
In addition to the information contained in this report, 
Santander Group subsidiaries that are considered to have 
significant importance for their local market (under article 13 
of the CRR, Application of disclosure requirements on a 
consolidated basis) publish information at the individual level 
on their websites, in relation to own funds, capital 
requirements, capital buffers, credit risk adjustments, 
remuneration policy and the application of credit risk 
mitigation techniques.
INTRODUCTION 2020 Pillar 3 Disclosures Report
14
2020 Pillar 3 Disclosures Report

1.2.3. Transparency enhancements
Santander Group has noted the recommendation issued by 
international bodies with the aim of improving the 
transparency of the information published each year in the 
Pillar 3 disclosures report.
Santander Group includes all information requirements 
published by the EBA, the Basel Committee and the European 
Commission relating to transparency vis-à-vis the market. 
Details of the documents can be found in Appendix I.
The main improvements in transparency include the 
following:
• As a result of the global health crisis, the EBA published 
guidelines on reporting the impact of covid-19, called "EBA 
guidelines on reporting and disclosure of exposures subject 
to measures applied in response to the covid-19 crisis" 
whereby it is indicated that three quantitative templates 
must be published semi-annually, containing information 
on the scope of the payment holidays. 
• The EBA also published "EBA guidelines on supervisory 
reporting and disclosure requirements in compliance with 
the CRR ‘quick fix’ in response to the covid‑19 pandemic", 
containing measures to adapt the disclosure to the new 
requirements of the CRR, such as backstops or the leverage 
ratio. The latter required adaptation of the "LRCom" table to 
provide narrative information about the fact that excluded 
central bank exposures have been disclosed. (see section 
11 of chapter 3)
In March 2020, the EBA published its "ITS on institutions' 
Pillar 3 disclosures", assessing institutions' public disclosures 
in line with new reporting and internal consistency 
requirements. In these, Santander Group is listed for its best 
practices in different aspects such as: Liquidity risk, Prudent 
Valuation, improvements in general sections, information 
presentation and other navigability aspects.
Furthermore, the Appendix II lists the location of the 
information required in accordance with the relevant articles 
of Part Eight of the CRR.
Additionally, on Santander Group's website (Financial and 
Economic Information > Pillar III), you can find a file with all 
tables shown in this document, in editable format for easier 
processing.
Access file 2020 Pillar 3 Appendices available 
on the Santander Group website
INTRODUCTION 2020 Pillar 3 Disclosures Report
15

1.2.4. Disclosure criteria used in this report
This report has been prepared in accordance with current 
European regulations on capital requirements (CRR).
In addition, the ratios of this report are calculated by applying 
the CRR and IFRS9 transitory schedules.
Details of the types of information where there are 
discrepancies between the regulatory information shown in 
this report and the information in the annual report and 
accounting information are as follows:
• The credit risk exposure measurements used for calculating 
regulatory capital requirements include:
• Not only current exposures but also potential future risk 
exposures arising from future commitments (contingent 
liabilities and commitments) and changes in market risk 
factors (derivative instruments).
• The mitigating factors for these exposures (netting 
agreements and collateral agreements for derivative 
exposures, and collateral and personal guarantees for 
on-balance-sheet exposures).
• The criteria used in classifying non-performing exposures in 
portfolios subject to advanced models for calculating 
regulatory capital is more conservative than those used for 
preparing the disaggregated information provided in the 
annual report.
This English version is a translation of the original in Spanish 
for information purposes only. In the event of discrepancy, the 
original Spanish-language version prevails.
1.3. Scope of consolidation
The Santander Group companies included in the scope of 
consolidation for calculating the capital adequacy ratio under 
the CRR are the same as those included in the scope of 
consolidation for accounting purposes under Bank of Spain 
Circular 2/2018.
1.3.1. Differences between the accounting consolidation 
method and the consolidation method for calculating 
regulatory capital
In application of Part I (General Provisions) of the CRR, some 
Santander Group companies are consolidated using a 
different method to that used for accounting consolidation.
The companies for which different consolidation methods are 
used, depending on the regulations applied, are listed in 
Appendix V of the 2020 Pillar 3 Appendix file available on the 
Santander Group website. At present, holdings in significant 
financial institutions and insurance companies are exempt 
from deductions under Article 49 of the CRR.
Access file 2020 Pillar 3 Appendices available on 
the Santander Group website
For the purposes of calculating the capital adequacy ratio 
based on the nature of their business activities, Santander 
Group companies included in the prudential scope of 
consolidation are consolidated using the full consolidation 
method, with the exception of jointly controlled entities, 
which use proportionate consolidation. All companies that 
cannot be consolidated based on their business activities are 
accounted for using the equity method and so are treated as 
equity exposures.
The basis of the information used for accounting purposes 
differs from that used for calculating regulatory capital 
requirements. Risk exposure measurements may differ 
depending on the purpose for which they are calculated, such 
as financial reporting, regulatory capital reporting and 
management information. The exposure data included in the 
quantitative disclosures in this document are used for 
calculating regulatory capital.
The following table shows the relationship between the 
categories in the financial statements and the risk categories 
in accordance with prudential requirements.
INTRODUCTION 2020 Pillar 3 Disclosures Report
16
2020 Pillar 3 Disclosures Report

Table 1. Differences between accounting and regulatory scopes of consolidation and mapping of financial statements categories 
with regulatory risk categories (LI1)
Million euros
31 Dec. 2020
Carrying 
values as 
reported in 
published 
financial 
statements
Carrying 
values under 
scope of 
regulatory 
consolidation
Carrying values of items:
Subject to 
credit risk 
framework
Subject to the 
CCR 
framework 
Subject to 
securitisation 
framework
Subject to 
market risk 
framework
Not subject 
to capital 
requirement
s or subject 
to deduction 
from capital
Assets
Cash and cash balances at central 
banks
 
153,839  
153,907  
153,907  
—  
— 
0  
— 
Financial assets held for trading
 
114,945  
114,923  
—  
67,131  
16  
114,906  
— 
Financial assets not held for trading 
valued mandatorily at fair value 
through profit or loss
 
4,486  
3,120  
806  
—  
557  
1,758  
— 
Financial assets designated at fair 
value through profit or loss
 
48,718  
46,182  
—  
25,856  
—  
36,701  
— 
Financial assets at fair value through 
other comprehensive income
 
120,953  
106,584  
102,791  
—  
3,794  
—  
— 
Financial assets at amortised cost
 
958,378  
962,153  
928,201  
32,104  
1,801  
—  
46 
Derivatives - Hedge accounting
 
8,325  
8,325  
—  
8,325  
—  
—  
— 
Fair value changes of the hedged items 
in portfolio hedge of interest rate risk
 
1,980  
1,980  
—  
—  
—  
—  
1,980 
Investments in subsidiaries, joint 
ventures and associates
 
7,622  
8,705  
6,946  
—  
—  
—  
1,759 
Reinsurance assets
 
261  
—  
—  
—  
—  
—  
— 
Tangible assets
 
32,735  
30,572  
30,572  
—  
—  
—  
— 
Intangible assets
 
15,908  
16,135  
—  
—  
—  
—  
16,135 
Tax assets
 
24,586  
24,636  
23,539  
—  
—  
—  
1,097 
Other assets
 
11,070  
9,990  
9,354  
—  
—  
—  
635 
Non-current assets and disposal groups 
classified as held for sale
 
4,445  
4,574  
4,574  
—  
—  
—  
— 
Total assets
 
1,508,250  
1,491,784  
1,260,689  
133,416  
6,168  
153,365  
21,652 
Liabilities
Financial liabilities held for trading
 
81,167  
81,174  
—  
64,476  
—  
81,174  
— 
Financial liabilities designated at fair 
value through profit or loss
 
48,038  
27,868  
—  
14,641  
—  
27,868  
— 
Financial liabilities measured at 
amortised cost
 
1,248,188  
1,252,912  
—  
—  
—  
—  1,252,912 
Derivatives – Hedge accounting
 
6,869  
6,912  
—  
6,912  
—  
—  
— 
Fair value changes of the hedged items 
in portfolio hedge of interest rate risk
 
286  
286  
—  
—  
—  
—  
— 
Liabilities under insurance contracts
 
910  
—  
—  
—  
—  
—  
— 
Provisions
 
10,852  
10,849  
700  
—  
—  
—  
10,149 
Tax liabilities
 
8,282  
8,148  
—  
—  
—  
—  
8,148 
Other liabilities
 
12,336  
12,333  
—  
—  
—  
—  
12,621 
Total liabilities
 
1,416,928  
1,400,482  
700  
86,029  
—  
109,042  1,283,830 
INTRODUCTION 2020 Pillar 3 Disclosures Report
17

The difference in total assets between the public and the 
reserved scopes is not material and corresponds to the 
exclusion of financial institutions and the inclusion of jointly 
controlled and intragroup entities. The most notable 
differences in this regard are in financial assets at fair value 
through other comprehensive income (€14.369 billion) and in 
financial liabilities at fair value through profit or loss (€20.17 
billion). 
In addition, the sum of the carrying amounts of certain items 
is greater than the carrying amounts under the scope of 
prudential consolidation, as the financial assets held for 
trading and the financial assets at fair value through profit or 
loss are subject to the capital requirements of more than one 
risk category under the regulatory scope.
The main differences between the carrying amounts in the 
financial statements and the exposures for prudential 
purposes are shown below:
Table 2. Main sources of differences between regulatory exposure amounts and carrying amounts in the financial statements (LI2)
Million euros
31 Dec. 2020
Total
Items subject to:
Credit risk 
framework
CCR 
framework
Securitisation 
frameweork
Market risk 
framework
Asset carrying value amount under scope of regulatory 
consolidation (as per template EU LI1)
 
1,553,638  
1,260,689  
133,416  
6,168  
153,365 
Liabilities carrying value amount under regulatory scope of 
consolidation (as per template EU LI1)
 
(195,771)  
(700)  
(86,029)  
—  
(109,042) 
Total net amount under regulatory scope of consolidation
 
1,357,868  
1,259,989  
47,387  
6,168  
44,323 
Off-balance sheet amounts
 
302,547  
302,547 
 
—  
— 
Regulatory Add-on
 
34,404 
 
34,404 
 
— 
Differences in valuations
 
— 
 
— 
Differences due to different netting rules, other than those already 
included in row 2
 
(65,227) 
 
(20,904) 
 
(44,323) 
Non-eligibility of the balances corresponding to accounting hedges 
(derivatives)
 
(8,325) 
 
(8,325) 
 
— 
Securitisations with risk transfer
 
—  
(37,833) 
 
37,833  
— 
Other
 
8,611  
12,526 
 
(3,914)  
— 
Differences due to consideration of provisions
 
(15,173)  
(14,998)  
—  
(176)  
— 
Differences due to CRMs
 
(22,203)  
(6,657)  
(14,951)  
(596)  
— 
Differences due to CCFs
 
(221,067)  
(221,067)  
—  
—  
— 
Exposure amounts considered for regulatory purposes (EAD)
 
1,371,434  
1,294,507  
37,611  
39,316  
— 
This table shows a breakdown of the differences between the 
amounts of exposures for prudential purposes and the 
carrying amounts according to various parameters
The main causes in this case, result from the amount of off-
balance sheet items (+€302.547 billion) and the application of 
CCFs (-€221.067 billion). The regulatory add-on (+€34.404 
billion and the differences resulting from the various 
offsetting rules (-€65.227 billion).
The reconciliation of the public and non-public balance sheets 
is shown in Appendix VI, which is available on the Santander 
Group website.
Access file 2020 Pillar 3 
Appendices available on the 
Santander Group website
1.3.2. Substantial amendments due to a change in the 
perimeter and corporate transactions 
For more information on the main acquisitions and disposals 
of holdings in other companies and other major corporate 
transactions by Santander Group last year, refer to section 3 
of the Notes to the consolidated financial statements in the 
Audit Report section of the 2020 Annual Report.
Access 2020 Annual Report available on 
the Santander Group website
1.4. Regulatory framework
A. 2020 prudential framework: Key aspects on Solvency and 
Resolution
The financial institutions must meet a set of minimum capital 
and liquidity requirements. These minimum requirements are 
regulated by the European capital requirements regulation, 
better known as CRR, and in the Capital Requirements 
INTRODUCTION 2020 Pillar 3 Disclosures Report
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2020 Pillar 3 Disclosures Report

Directive (CRD). In June 2019 these regulations were 
significantly modified, so that references to CRR2 and CRDV 
are understood as such regulations with the latest 
modifications incorporated respectively.
Among the amendments to the CRR2, it is worth highlighting 
the introduction of the minimum requirement of TLAC (Total 
Loss Absorbing Capacity) applicable only to entities of global 
systemic importance (G-SIBs). This requirement is a minimum 
requirement for own funds and eligible liabilities (in terms of 
a percentage of the total risk exposure amount, currently 16% 
and, after the transitional period, 18%; in terms of a 
percentage of the total exposure measure, currently 6% and, 
after the transitional period, 6.75%).
The CRDV, as a directive, must be transposed into the national 
legal system to be applicable in the Member States. In Spain, 
the transposition is expected to be developed during 2021. 
The CRDV includes relevant amendments such as the 
regulation of Pillar 2 Guidance requirements. 
Regarding to the resolution regulations, financial institutions 
must have an adequate financing structure that allows them, 
in the event of financial difficulties, to recover their situation 
or to resolve it, ensuring the protection of depositors and the 
financial stability.
The directive that regulates the aforementioned resolution 
framework is the Restructuring and Resolution Directive, 
BRRD. Like CRR2 and CRDV, BRRD was amended in June 2019. 
BRRD2 refers BRRD as amended. The transposition of this 
directive in Spain is also planned for 2021.
The BRRD2 has introduced important modifications to the 
minimum requirement for own funds and eligible liabilities 
(MREL). Thus, for example, the aforementioned TLAC 
requirement is now considered a Pillar 1 resolution 
requirement for G-SIBs. For large banks (which are defined as 
those whose total assets exceed EUR 100 billion euros) or 
those that the resolution authority otherwise considers 
systemic, the BRRD2 establishes a minimum subordination 
requirement of 13.5% of risk-weighted assets, or 5% of the 
exposure of the leverage ratio, whichever is higher. Other 
entities' subordination requirement will be determined on a 
case-by-case basis by the resolution authority.
B. Regulatory response to the impacts of COVID 19
The severe economic disruption caused by the covid-19 
pandemic in 2020 has revealed the importance of institutions' 
funding functions in contributing to recovery. The competent 
authorities (national, European and international) have acted 
by reducing liquidity, capital and operational requirements so 
financial institutions can continue to provide financing to the 
economy, while ensuring that such institutions continue to act 
prudently as they can also be negatively affected by the 
deterioration of the economic situation.
As part of these measures, the European Central Bank issued 
a recommendation in March 2020 urging European banks to 
refrain from paying dividends against 2019 and 2020 financial 
years. On 27 July, the ECB extended that recommendation to 
1 January 2021. On 15 December 2020, the ECB issued its 
recommendation 2020/35, repealing previous referred 
recommendations, and by which it recommended that banks 
under the scope of its direct supervision exercise extreme 
prudence on dividends and share buy-backs. The ECB asks the 
banks to consider not distributing any cash dividends or 
conducting share buybacks, or to limit such distributions until 
30 September 2021. Given the persisting uncertainty over the 
economic impact of the covid-19 pandemic, the ECB also 
considers that it would not be prudent for credit institutions to 
consider making a distribution and share buy-backs 
amounting to more than 15% of their accumulated profit for 
the financial years 2019 and 2020, or more than 20 basis 
points in terms of the CET1 ratio, whichever is lower.
The national governments have taken measures to address 
the economic and social impact of covid-19, specifically in the 
form of legislative moratoria that were aimed at containing 
non-performing loans (NPLs) and helping the population to 
meet liquidity needs. Throughout 2020, the European 
Banking Authority (EBA) adopted a series of guidelines, 
including the Guidelines on legislative and non-legislative 
moratoria applied in the context of the covid-19 crisis on 2 
April 2020. These guidelines clarify the requirements for 
public and private moratoria to avoid classification of 
exposures affected by moratoria as forborne exposures. 
Although these guidelines were initially expected to apply to 
moratoria granted before 30 June 2020, the EBA decided on 2 
December 2020 that these guidelines would apply to 
moratoria requested before 31 March 2021.
Other measures adopted to provide flexibility in complying 
with these requirements have been the approval and entry 
into force of the 'quick fix' of the CRR (urgent and 
extraordinary regulatory measures aimed at making the 
regulatory framework more flexible in response to covid-19), 
which modifies CRR2. Among the amendments introduced by 
the quick fix, it is worth highlighting the extension of the 
transitional period granted before the pandemic due to the 
entry into force of IFRS 9, as a result of the sudden and 
significant increase in provisions for expected credit losses 
that must be recognized. Additionally, the application of 
certain provisions of CRR2 has been delayed, such as those 
relating to the leverage ratio buffer (whose application date is 
postponed until 1 January 2023), and includes the possibility 
to exclude from the calculation of such ratio exposures to 
central banks. Similarly, the date of application of other 
favourable provisions for entities, such as the support factor 
for small and medium enterprises (SMEs) and the support 
factor for infrastructure has been brought forward, as well as 
the new treatment of software assets (applicable since the 
day following the publication of the Delegated Regulation 
where it is developed).
C. Other regulations: Sustainability
With regard to the integration of sustainable finance in the 
financial sector, the Taxonomy Regulation (Regulation 
2020/852) has been published, which establishes the criteria 
for determining whether an economic activity qualifies as 
environmentally sustainable and also lays down disclosure 
obligations for the financial services sector to be applied on 
2022. This taxonomy supplements the rules on sustainability-
related disclosures in the financial services sector laid down in 
Regulation (EU) 2019/2088. In addition, the ECB and Banco de 
España (Spain's central bank) supervisory expectations will 
gradually incorporate into the supervisory dialogue the 
management and disclosure of climate and environmental 
risks.
INTRODUCTION 2020 Pillar 3 Disclosures Report
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1.4.1. Regulatory changes in 2020
The main event in 2020 was the explosion of covid-19, which 
disrupted regulatory agendas and priorities at the European 
and international levels. Regulators reacted by adopting a set 
of relief measures for capital and liquidity requirements, 
along with other operational measures, to help financial 
institutions channel funding to the economy. Against the 
backdrop of this pandemic, it has also become clear that the 
crisis management framework needs to be reviewed to 
ensure its effectiveness in systemic scenarios. The European 
legislative agenda on climate change and sustainable 
financing was already one of the key items on the agenda in 
recent years, but it is now even more of a priority given the 
way the pandemic has unfolded. The digital agenda has also 
occupied a large part of the current regulatory environment. 
This includes issues such as the possibility of adopting new 
technologies, the competition framework for large platforms 
and discussions about the supervisory and regulatory 
framework that needs to be applied to non-banking players.
International prudential framework
In 2020, international authorities acted in a coordinated way 
to implement a raft of exceptional measures in response to 
the outbreak of the covid-19 pandemic. The Basel Committee 
on Banking Supervision (BCBS) considered that priority should 
be given to the use of capital buffers to support the real 
economy and absorb losses, stating that supervisors should 
give banks sufficient time to restore their buffers. Highlights:
• Basel III standards. The BCBS has agreed to delay the 
implementation of the Basel III standards by one year, to 1 
January 2023.
• Technical guidelines on the treatment of provisions in 
relation to exceptional moratoria and guarantee measures 
and the amendment of the transitional provisions for the 
treatment of expected credit losses in regulatory capital. 
In addition to covid-19 measures, the BCBS continued to work 
on the following in 2020:
• Interaction and cooperation between prudential and anti-
money laundering supervision.  The BCBS has amended the 
guidelines on robust risk management for anti-money 
laundering and combating the financing of terrorism to 
introduce additional guidelines on cooperation and 
information exchange between prudential and anti-money 
laundering and terrorist financing supervisory authorities.  
• Pillar III disclosure requirements. During the year the BCBS 
worked on: (i) Sovereign exposure disclosure templates, the 
implementation of which is voluntary, unless requested by 
national supervisors; (ii) Revisions to market risk exposure 
disclosure templates, to reflect the changes introduced by 
the final standard on minimum capital requirements for 
market risk. Both final standards are pending publication by 
the BCBS.
• Credit valuation adjustment risk (CVA). The BCBS has 
published revisions to the CVA risk framework, which 
replaces the 2017 version. These recalibrate risk 
weightings, establish different treatment for certain 
derivatives with customer compensation and provide for a 
comprehensive recalibration of the standardised and basic 
approaches. This will come into effect on 1 January 2023. 
• Securitisations of non-performing loans. The BCBS has 
published a technical amendment establishing prudential 
treatment for securitisations of non-performing loans.
• Operational risk and operating resilience: the BCBS has 
launched a review of existing principles for good 
operational risk management and a new set of principles for 
operational resilience. These are designed to bolster banks' 
ability to withstand events such as pandemics, cyber-
incidents, technological failures and natural disasters. 
Authorities are also watching the financial sector's growing 
dependence on technology providers more closely, and 
working out how to ensure that financial institutions 
adequately manage third party risks, plus the question of 
concentration risk (e.g. in the provision of cloud services). 
The FSB and IOSCO published consultations during the year 
on these specific issues.
Crisis management framework
In 2020, the Financial Stability Board (FSB) continued 
monitoring the implementation of Total Loss-Absorbing 
Capacity (TLAC) across the various jurisdictions. It estimates 
that all G-SIBs now meet their 2022 TLAC requirement. 
In November 2020, the FSB updated the list of G-SIBs for 
2021. Santander remains within the least systemically 
important group of banks and is subject to the minimum 
additional capital buffer for global systemically important 
banks (1%).
Other
In the digital arena, the fintech phenomenon and the need to 
review the regulatory and supervisory framework are 
increasingly pressing issues for international authorities. In 
2020, various authorities (FSB, BIS, IMF) published important 
reports concerning the need for cooperation between 
authorities in the regulation and supervision of technology 
firms that provide financial services. This was specifically to 
overcome the lack of information and regulation on these 
entities, especially in the area of lending.
The OECD is leading the multilateral initiatives to address the 
tax challenges resulting from the digitalisation of the 
economy, to ensure that digital companies pay tax wherever 
they have consumers and their activities generate profits. This 
year, considerable progress has been made in defining Pillar 1 
(rules on how to establish the fiscal nexus and attribute tax 
capacity to states) and Pillar 2 (a global minimum tax), 
although negotiations have been held up by the pandemic 
and the US elections. Agreement is now expected in mid 
2021.
European regulation 
European authorities have adopted various packages of 
measures coordinated by European Union authorities to 
tackle the pandemic, many in response to actions by 
international authorities. 
Prudential European Commission 
• Implementation of Basel III standards. The European 
Commission postponed its plans to publish the legislative 
proposal after the BCBS decided to delay the 
implementation date to 1 January 2023. The legislative 
proposal is expected to be published in 2021.
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• The CRR "Quick Fix”. This amendment was published and 
came into force in June. It aims to maximise the capacity of 
financial institutions to provide financing and absorb losses 
related to the covid-19 pandemic while ensuring their 
resilience. This Quick Fix brought forward the 
implementation of certain elements of the prudential 
framework, having a positive impact on capital (such as the 
SME and infrastructure support factor and the new 
treatment of software assets,applicable since the day 
following the publication of the Delegated Regulation 
where it is developed), while delaying other elements with 
a negative impact (e.g. the global systemic institutions' 
buffer for the leverage ratio, transitional provisions in 
relation to the dynamic component of IFRS9 provisions and 
the impact of unrealised losses on the sovereign debt 
portfolio). 
• Capital Markets Recovery Package. The European 
Commission issued a legislative proposal for a capital 
market recovery plan to be published in 2021, aimed at 
making it easier for companies to raise capital in the 
markets. This modifies the regulations for MIFID II, 
prospectuses and the securitisation framework.
• Non-Performing Loans Action Plan. The European 
Commission has published a plan to prevent a potential 
build-up of non-performing loans across the European 
Union as a result of the covid-19 crisis.
• Capital Markets Union Action Plan. Following on from the 
2015 plan, and successive updates, the European 
Commission has published this new plan aimed at making 
sure funding flows smoothly through the capital market in 
Europe, to the benefit of consumers, investors and 
companies, wherever they may be. It also revises the 
prudential framework for securitisation and the capital 
requirements for long-term holdings by financial 
institutions in small and medium-sized enterprises.
EBA
• When the crisis began, the EBA issued a statement on 
measures to mitigate the impact of covid-19 in the banking 
sector, including postponing the stress test to 2021 across 
the EU and recommending that competent authorities make 
use of the flexibility contained in the regulatory framework. 
It also published clarifications of its expectations in relation 
to remuneration policies, guidance on how to implement 
flexibility in supervisory reporting obligations and 
reminders of the measures needed to prevent money 
laundering and terrorist financing.
• Guidelines on legislative and non-legislative moratoria. 
The EBA published guidelines in April. These guidelines 
clarify the cases and conditions under which granting 
moratoria would not require provisions to be made. These 
guidelines initially expired on 30 June and were 
subsequently extended to 30 September. In December, the 
EBA decided to reinstate these guidelines in light of the 
second wave of the pandemic, setting an expiration date of 
31 March 2021.
• Software. In October, the EBA published draft technical 
standards on the prudential treatment of software assets, 
to encourage banks to invest in software. Under these 
standards, banks' capital requirements are revised by only 
deducting the amount of the investment from CET1 in part, 
rather than in full. These technical standards are expected 
to be published, come into force and be implemented along 
2021. 
• Final guidelines on loan origination and monitoring, to be 
applied from 30 June 2021. These guidelines attempt to 
clarify the governance and internal control framework for 
granting credit, establish requirements to gather 
information and data from borrowers, and set out the 
documentation and requirements for assessing 
creditworthiness The guidelines also include: 
environmental, social and governance, anti-money 
laundering and counter-terrorist financing, and 
technological innovation factors. 
European Central Bank (ECB)
• The ECB has provided temporary relief in terms of capital 
and operational requirements in response to the 
coronavirus pandemic: (i) allowing banks to operate below 
the level of capital defined by P2G, the capital conservation 
buffer and the liquidity coverage ratio (LCR), (ii) allowing the 
partial use of AT1 and Tier 2 instruments to meet P2R 
requirements, by anticipating the implementation of the 
changes introduced by CRR II in this area, (iii) by issuing a 
no-objection decision on measures such as reducing the 
counter-cyclical buffer by macro-prudential authorities, and 
(iv) other measures, such as providing temporary relief from 
market risk capital requirements.
• With regard to the distribution of dividends and share 
buybacks, the ECB issued a recommendation to financial 
institutions to restrict distributions until 1 October 2020. 
This was later extended until January 2021 with clarification 
of the timetable for restoring capital buffers. In December 
2020, the ECB issued a communication allowing banks to 
distribute dividends or buy back shares provided that this 
does not exceed 15% of their accumulated profit in 
2019-2020 or 20 basis points of CET1, until 30 September 
at least, but calling on them to exercise extreme caution. 
They will only be able to do so if they are profitable and 
have robust capital positions. The ECB also called on banks 
again to exercise extreme restraint in terms of variable pay 
for executives. The regulator justified these constraints by 
pointing to the continuing uncertainty about the economic 
impact of the coronavirus pandemic.
Crisis management framework 
Europe also continues to make progress with the 
implementation of the crisis management framework. The 
Single Resolution Mechanism (SRM), the second pillar of 
Banking Union after the Single Supervisory Mechanism, has 
been operational since 1 January 2016. The Single Resolution 
Board and the national resolution authorities have defined the 
framework to determine the MREL (Minimum Requirement 
for own funds and Eligible Liabilities) and are making further 
progress in ensuring the effectiveness of the resolution 
framework.
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With regard to the Single Resolution Fund managed by the 
Single Resolution Board, the period of gradual mutualisation 
will enable transition from national resolution funds to the 
Single Resolution Fund, which will be fully implemented by 
2024. The funding target of the Single Resolution Fund is 1% 
of covered deposits in 2024.
In December 2020, it was agreed that national parliaments 
would sign and ratify a new ESM treaty in 2021. They have 
also agreed to bring forward the implementation of the 
backstop from 2024 to 2022. This backstop will mean that the 
Single Resolution Fund will have access to credit lines, which 
will subsequently have to be returned by the Fund, i.e. by the 
banks, if the amount is not enough for the resolution of one or 
more entities. ESM support is limited to the same amount as 
the Resolution Fund. 
Negotiations have resumed this year on the third pillar of the 
Banking Union, EDIS (European Deposit Insurance Scheme), 
for which the European Commission presented a proposal in 
2015. These are advancing slowly and are expected to 
continue next year. 
In late 2020, the Commission started to prepare the revision 
of the resolution and deposit guarantee directive (BRRD/
SRMR/DGSD). Consultations are planned for 2021. 
The European Commission is continuing to enhance the anti-
money laundering and counter-terrorist financing 
framework. The Commission has presented an action plan 
setting out the measures it will take over the coming months 
to improve the strengthening, monitoring and coordination of 
EU rules in this area. The key areas of the plan include 
drafting a regulation to resolve current areas of 
disagreement, and strengthening supervision by considering 
creating a European supervisory authority. 
There has been further important progress in the legislative 
agenda in relation to climate change and sustainable 
financing. In the last year a series of key initiatives have been 
approved, including the European Union Taxonomy 
Regulation, which will be used as a framework for classifying 
sustainable economic activities according to six 
environmental objectives. From 2022, companies and 
financial institutions will have to publicly demonstrate how 
their activities are aligned with the taxonomy activities, using 
a series of indicators yet to be defined. In 2021, the European 
Commission and the European Supervisory Agencies (ESAs) 
will do further work on completing the taxonomy framework, 
with criteria for the identification of the four remaining 
environmental objectives. They will also decide whether to 
extend the framework to identify activities that are harmful to 
environmental objectives (the "brown taxonomy") and 
activities with social objectives. 
In 2020, progress has been made on defining disclosure 
requirements  for financial market participants and financial 
advisers on how they are integrating sustainability factors 
into investment policies. Under the Sustainable Finance 
Disclosure Regulation adopted last year, this information will 
have to be provided on websites, in pre-contractual product 
information and in regular reports. The first requirements 
should be implemented from March 2021. ESAs are expected 
to complete the additional requirements in early 2021, for 
implementation in 2022. 
The EBA is continuing the mandates relating to sustainable 
financing received through the review of the CRD and CRR: the 
possibility of including environmental, social and corporate 
governance risks (ESG) in the SREP; greater disclosure for 
companies with regard to ESG risk; and the mandate enabling 
the EBA to analyse the viability of setting capital requirements 
for banks (green/brown factor).
In the retail arena, the Commission has published its New 
Consumer Agenda, presenting the EU's consumer policies 
from 2020 to 2025, focusing on five priority areas: the 
ecological transition, digital transformation, respect for 
consumer rights, the needs of certain groups, revision of the 
consumer credit directive and international cooperation.
This year, the European Commission also started work on the 
revision of significant directives in the retail field, particularly 
the mortgage credit directive and the consumer credit 
directive. Santander Group has and communicates views from 
the corporate and local levels on the matters being discussed 
where they affect its activities. The corporate and local Public 
Policy functions identify the regulatory alerts and establish 
Santander Group's position, in coordination with the business 
and support units concerned in each case.
The main resulting actions include:
• Santander Group is an active participant in the main banking 
associations worldwide and in Europe, and in the main 
markets in which we operate, submitting responses to 
regulatory consultations.
• Santander Group maintains proactive and constructive 
dialogue with policy-makers through all available channels  
(public hearings, consultations, forums and conferences) 
and sends individual replies to official consultations on 
issues it considers relevant.
• Because of its subsidiary and "multiple point of entry" 
resolution models, Santander Group firmly believes in the 
strength of its organisational model, with autonomous 
subsidiaries that control their own capital and liquidity, the 
benefits of our geographic diversification and the 
equivalence of the third-country jurisdictions where we 
operate. 
• Santander is also convinced that the regulatory framework 
should enable banks to play an active role in the new digital 
economy, implementing their transformations with a level 
playing field so that they can continue to respond to 
changing consumer needs.
INTRODUCTION 2020 Pillar 3 Disclosures Report
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2
Capital

2.1. Capital
25
2.1.1. Capital function
28
2.1.1.1. Organisation
28
2.1.1.2. Capital governance
29
2.1.2. Capital management and adequacy
29
2.1.3. Capital management priorities
31
2.1.4. Capital targets
32
2.1.5. Capital buffers and capital requirements
32
2.1.5.1. Global systemically important institutions
34
2.1.5.2. Domestic Systemically Important 
Institutions
35
2.2. Pillar 1 - Regulatory capital
35
2.2.1. Eligible capital
36
2.2.2. Capital requirements
38
2.2.2.1. Plan to deploy advanced internal models 
and supervisory approval
41
2.2.3. Leverage ratio
45
2.3. Pillar 2 - Economic capital
48
2.4. Recovery and resolution plans and special situations 
response framework
48
2.5. Total Loss-Absorbing Capacity (TLAC) and Minimum 
Requirement for own funds and Eligible Liabilities 
(MREL)
48

2. Capital
Table 3. Main capital figures and capital adequacy ratios
Million euros
CRR Fully loaded
CRR Phased-in
Dec-2020
Dec-2019
Dec-2020
Dec-19
Common Equity 
Tier 1 (CET1)
 69,399 
 70,497 
 69,399 
 70,497 
Tier 1
 78,126 
 78,964 
 78,501 
 79,536 
Total capital
 90,933 
 90,937 
 91,015 
 91,067 
Risk weighted 
assets
 562,580 
 605,244 
 562,580 
 605,244 
CET1 Ratio
 12.34 %
 11.65 %
 12.34 %
 11.65 %
Tier 1 Ratio
 13.89 %
 13.05 %
 13.95 %
 13.14 %
Total capital ratio
 16.16 %
 15.02 %
 16.18 %
 15.05 %
Leverage Ratio
 5.31 %
 5.11 %
 5.33 %
 5.15 %
Note: 2019 and 2020 figures are calculated applying the transitional 
arrangements of CRR  unless specified otherwise.
CET1 Fully loaded Capital evolution
%
10.55%
10.84%
11.30%
11.65%
12.34%
2016
2017
2018
2019
2020
Note: 2019 and 2020 figures are calculated applying the transitional 
arrangements of CRR  unless specified otherwise.
2.1. Capital
Capital management and control at Santander Group is a fully 
transversal process that seeks to ensure the bank’s solvency, 
while complying with regulatory requirements and 
maximising profitability. It is determined by the strategic 
objectives and risk appetite set by the board of directors. To 
achieve this, the following policies have been established that 
shape the approach that Santander Group applies to capital 
management:
• Establish adequate capital planning, so as to meet with 
needs and provide the necessary resources to cover the 
needs of the business plans, regulatory requirements and 
the associated risks in the short and medium term, while 
maintaining the risk profile approved by the board.
• Ensure that Santander Group and its companies have 
adequate capital to cover needs resulting from the increase 
in risks derived from deteriorated macroeconomic 
conditions.
• Optimise capital use through appropriate capital allocation 
among the businesses, based on the relative returns on 
regulatory and economic capital and taking the risk 
appetite, growth and strategic objectives into account.
Santander Group maintains a very comfortable capital 
adequacy position, well above the levels required by 
applicable regulations and by the European Central Bank.
Santander Group’s capital adequacy ratios at 31 December 
2020 are as shown in table 3. The phased-in ratios are 
calculated by applying the Basel III transitory schedules, while 
the fully-loaded ratios are calculated without applying any 
schedule (i.e. with the final regulations).
IFRS 9 became effective on 1 January 2018, implying changes 
in accounting that affect capital ratios. Santander decided to 
apply the transitional arrangements, which means a 7-year 
transitional period.
CAPITAL 2020 Pillar 3 Disclosures Report
25

If IFRS 9 transitional arrangement had not been applied, the 
total impact on the fully loaded CET 1 ratio as of December 
would have been -45bp. See Appendix XII for further details.
Access file 2020 Pillar 3 Appendices 
available on the Santander Group website
CET1 Ratio in December stood at 12.34%, increasing by 69 bp 
during the year. The fully-loaded capital ratio was 16.16%, up 
114 bp during the year.
Changes in main Capital ratios’ figures
11.65%
12.34%
1.49%
1.61%
1.91%
2.23%
Dec. 19
Dec. 20
Ratios %
n Tier 2
n Tier 1
n CET1
2020  CET1 evolution
 +69bps
11.65
+1.04
+0.02
-0.43
-0.14
+0.29
-0.09
12.34
Dec.19
Organic
generation
Regulatory
impacts &
models
One offs and
corporate
operations
Markets
and others
Reversal of
dividend
2019
Dividend
accrual 2020
Dec.20
CAPITAL 2020 Pillar 3 Disclosures Report
26
2020 Pillar 3 Disclosures Report

In the year, the increase was 69 basis points. Of note was the 
strong underlying capital generation of 104 pb, partially 
offset by the impact of restructuring costs, corporate 
transactions and market performance. It also includes 9 bps 
related to an accrual for 2020 dividend payments, based on 
the limit established by recommendation 2020/63 of the ECB 
on 15 December 2020, which allows a maximum payment of 
EUR cents 2.75 per share. 
From a qualitative point of view, Santander Group has solid 
ratios that are suited to its business model, the structure of its 
balance sheet and its risk profile. Santander Group exceeds 
the 2020 minimum regulatory capital requirements for the 
total ratio by 317 basis points, taking into account the 
shortfalls of AT1 and T2.
¤ For further information, see section 2.1.5.
CAPITAL 2020 Pillar 3 Disclosures Report
27

Strategic principles of the capital function
•Autonomy. The Group’s corporate 
structure is based on a legally 
independent subsidiary model, each 
responsible for its own capital and 
liquidity. This provides advantages 
when raising funds and limits the risk 
of contagion, thus reducing systemic 
risk. Under this structure, subsidiaries 
are subject to two tiers of supervision 
and internal control: local and global. 
Each unit must raise and manage its 
own financial resources accordingly in 
order to maintain the required levels of 
capital at all times. Local units must 
have the necessary capital to carry on 
their activity autonomously and meet 
local regulatory requirements and the 
expectations of their local market.
•Solvency. The Group and its subsidiaries 
must ensure at all times that the structure 
and level of their capital is suitable in view 
of the risks to which they are exposed. 
Capital must be allocated accordingly so 
as to ensure the effective management of 
the risks assumed within the subsidiaries 
and it should be assigned to these risks.
•Efficiency. The Group and its 
subsidiaries must carry out 
mechanisms to actively seek and 
promote an efficient use of capital 
and to ensure that the value created 
by an investment exceeds at least 
the cost of the capital invested. 
Capital is a scarce commodity that 
must be used as efficiently as 
possible, given the high cost of 
generating capital, whether 
organically or through the markets. 
Subsidiaries must have on - going 
monitoring mechanisms in place to 
optimise their capital consumption.
a corporate environment of global coordination and review (every business, every geography). 
The first level of monitoring, by the local units themselves, is complemented by the 
monitoring activity of the corporate units. One of the main ways the Group achieves this is by 
defining and applying standard policies, metrics, methodologies and tools across the Group, 
though these may be adapted accordingly to bring them in line with local regulations and 
supervisory requirements and to reflect the degree of progress made by each subsidiary.
2.1.1. Capital function
The core principles establish the basic guidelines governing 
the actions of Santander Group entities in capital 
management, monitoring and control processes.
2.1.1.1. Organisation
The organisational structure has been defined with the aim of 
guaranteeing compliance with the core principles in relation 
to capital and ensuring that the relationship between the 
subsidiaries and the corporate centre is maintained. This 
function allows twin objectives to be met: preserve the 
subsidiary’s financial autonomy while retaining coordinated 
monitoring at Group level.
Santander Group’s risk management and control model is 
based on three lines of defence. The first line comprises the 
business functions or activities that assume or generate 
exposure to risk. Risks undertaken or generated within the 
first line of defence must be compatible with the risk appetite 
and limits in place. The first line of defence must have the 
resources to identify, measure, address and report the risks 
assumed, to perform its function. The second line of defence 
comprises the Risk Control and Supervision function and the 
Compliance function. This second line of defence is charged 
with effective control of risks and ensures that they are 
managed in accordance with the established risk appetite.
Internal Audit is the third line of defence and the last layer of 
control, and regularly assesses policies, methods and 
procedures to ensure they are suitable, and also checks they 
are operational.
The risk control function, the compliance function and the 
internal audit function are sufficiently separate and 
independent from each other and also regarding the other 
functions they control and supervise when carrying out their 
tasks. They likewise have access to the board of directors and/
or to its committees at the highest level.
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2.1.1.2. Capital governance
Santander Group has developed a structure of agile and 
efficient governing bodies, ensuring the Capital function 
operates properly when it comes to both decision-making and 
supervision and control. This ensures the involvement of all 
the areas concerned and the necessary involvement of senior 
management. Santander Group’s characteristic subsidiary-
based structure means the governance structure of the 
Capital function must be adapted to preserve the autonomy of 
each subsidiary's capital, while allowing centralised 
monitoring and coordinated management at Group level. 
There are also various committees that have responsibilities 
at the regional level and also for coordination at Group level. 
The local committees must report to the corporate 
committees in due time.
Governance of the Capital function
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2.1.2. Capital management and adequacy
The aim of capital management and adequacy at Santander 
Group is to guarantee the entity’s solvency and maximise its 
profitability, while ensuring compliance with internal capital 
targets and regulatory requirements. 
Capital management is a fundamental strategic tool for 
decision making at both local and corporate level and serves 
to create a common framework of action by establishing 
uniform definitions of capital management criteria, policies, 
functions, metrics and processes.
Key capital figures
The Group works with the following variables relating to the concept of capital:
Regulatory capital
Return on risk-adjusted capital (RoRAC)
• Capital requirements: The minimum amount of capital the 
supervisory authority requires the entity to safeguard its 
solvency, based on the amount of risk assumed, in terms of 
credit, market and operational risk.
• Eligible capital: The capital the regulator considers eligible to 
meet with capital requirements. The main components of 
eligible capital are accounting capital and reserves.
The return (profit after tax) on internally required economic 
capital. Therefore, an increase in economic capital decreases 
RoRAC. The Group therefore requires transactions or business 
involving higher capital consumption to deliver higher returns.
RoRAC takes investment risk into account, providing a risk-
adjusted measure of return.
The use of RoRAC allows the Bank to manage its activities better, 
assess the real risk-adjusted return of businesses and be more 
efficient in itsinvestment decisions.
Economic capital
• Capital adequacy: The minimum amount of capital that the 
Group needs with a specified level of probability to absorb 
unexpected losses deriving from its current exposure to all 
risks taken on by the entity (including risks additional to those 
contemplated under the regulatory capital requirements).
• Available capital: The amount of capital the Group itself 
considers eligible, on management criteria, to meet with 
capital needs.
Return on Risk Weighted Asset (RoRWA)
Defined as the return (understood as net profit after tax) on a 
business’ risk-weighted assets.
The use of RoRWA allows the Bank to set up strategies to 
allocate regulatory capital and ensure the maximum return is 
obtained.
Cost of Capital
Value creation
The minimum return required by investors (shareholders) as 
compensation for the opportunity cost and risk assumed when 
investing their capital in the entity. This cost of capital represents 
a “cut-off rate” or “minimum return” to be achieved and allows 
comparisons between the business units to assess their 
efficiency.
Any profit generated above and beyond the cost of economic 
capital. The Bank will create value when the risk-adjusted return, 
measured by RoRAC, is higher than its cost of capital. Otherwise 
value will be destroyed. It measures the risk-adjusted return in 
absolute terms (monetary units), supplementing the RoRAC 
result.
Leverage ratio
Expected loss
A regulatory measure that monitors the financial solidity and 
strength of the financial institution by linking its size and capital. 
This is calculated as the ratio between Tier 1 and the leverage 
exposure, which takes into account the size of the balance sheet 
and adjustments due to derivatives, securities financing 
transactions and off-balance-sheet items.
Average credit risk losses that are expected over the course of an 
economic cycle. From the point of view of expected loss, defaults 
are considered a “cost” that could be eliminated or reduced 
through appropriate selection of borrowers.
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2020 Pillar 3 Disclosures Report

The Group’s Capital function is carried out on two levels:
• Regulatory capital: regulatory capital management is based 
on an analysis of the capital base, the solvency ratios as 
defined by applicable regulations and the scenarios used in 
capital planning. The objective is for the capital structure to 
be as efficient as possible, in terms of both cost and 
compliance with regulatory requirements. Active capital 
management includes strategies for the allocation of capital 
and its efficient use in business units, securitisations, asset 
sales and issuances of equity instruments (capital and 
subordinated debt hybrids).
• Economic capital: the objective of the economic capital 
model is to ensure that the Group has adequately allocated 
its available capital to cover all the risks to which it is 
exposed as a result of its activity and risk appetite. It also 
aims to optimise value creation in the Group and all of the 
business units that comprise it.
The real economic measurement of the capital needed for an 
activity, together with its return, enables value creation to be 
optimised by selecting those activities that maximise the 
return on capital. This allocation is carried out under different 
economic scenarios, both expected as well as unlikely but 
plausible, and with the level of solvency set by Santander 
Group.
2.1.3. Priorities and main activities in capital 
management
Santander Group’s most notable capital management 
activities are:
• Establishing solvency and capital contribution targets 
aligned with minimum regulatory requirements and 
internal policies, to guarantee robust capital levels 
consistent with our risk profile and efficient use of capital 
to maximise shareholder value.
• Developing a capital plan to meet those objectives, in line 
with the strategic plan. Capital planning is an essential part 
of executing the three-year strategic plan.
• Assessing capital adequacy to ensure that the capital plan is 
also consistent with our risk profile and risk appetite 
framework in stress scenarios.
• Developing the annual capital budget as part of the group’s 
budgeting process.
• Monitoring and controlling the group's budget execution 
and drawing up action plans to correct any deviations from 
the budget.
• Integrating capital metrics into business management to 
ensure consistency with Group objectives.
• Preparing internal capital reports, and reports for the 
supervisory authorities and the market.
• Planning and management of other loss absorbing 
instruments (MREL and TLAC)
Details of the most significant actions undertaken are set out 
below:
Issues of hybrid capital and other loss absorbing 
instruments 
At 31 December 2020, Banco Santander S.A. has issued a total 
of €3,756 million of subordinated debt, including €2,256 
million of T2 subordinated debt and €1,500 million of 
contingent convertible preference shares (CCPS). The 
contingent convertible preference shares were issued in place 
of the early repayment of an equivalent issue in euros.
At 31 December 2020, Banco Santander S.A. has also issued 
€7,006 million of senior non-preferred debt.
Dividend policy
In view of the ECB's recommendation calling on European 
banks not to pay dividends for financial years 2019 and 2020, 
on 2 April 2020 the board of directors decided to cancel the 
payment of the final dividend for 2019 and the dividend policy 
for 2020. On 27 July, the ECB extended its recommendation 
until 1 January 2021.
Based on this new recommendation, the board of directors 
agreed to submit the approval of a capital increase to the 
General Shareholders' Meeting on 27 October. This involves 
the distribution of new shares equivalent to €0.10 per share 
as supplementary remuneration for 2019. This brings the 
total remuneration corresponding to 2019 profit to €0.20 per 
share. The board of directors also said that it intended to pay 
€0.10 per share in 2021 from the share premium reserve, 
subject to the ECB's recommendations and provided it is 
authorised. The General Shareholders' Meeting approved 
both resolutions on 27 October.
On 15 December 2020, the ECB issued a third 
recommendation limiting the payment of interim dividends 
from the profits of 2019 and 2020 to either 15% of the 
accumulated profit in 2019 and 2020 or 0.2% of the CET1 
ratio, whichever was lower.  It also restricted the payment of 
any interim dividend from 2021 profits until September 2021.
In some areas not subject to ECB supervision, local 
supervisors have also recommended that no dividends were 
paid in 2020. As a result, subsidiaries in Poland, Portugal, 
Mexico and SCF have not paid out any dividends in 2020. 
Santander Brazil paid out 25% of its profits, as this is the legal 
minimum. The Chile and Uruguay subsidiaries were able to 
pay dividends without any constraint. The USA subsidiary has 
only paid out the dividend for the first quarter of 2020. In the 
UK, the PRA announced on 10 December 2020 that it was 
lifting the suspension on dividend payments announced in 
March 2020, limiting it to a maximum of 25% of accumulated 
profits in 2019 and 2020 or 0.2% of the CET1 ratio.
See the Corporate governance chapter (section 3.3) of the 
2020 Annual report for more information.
Access 2020 Annual Report available on 
the Santander Group website
CAPITAL 2020 Pillar 3 Disclosures Report
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2.1.4. Capital targets
Santander Group is working towards a CET1 ratio from 11% to 
12% in the medium term.
CET1 Fully loaded Capital evolution
10.55%
10.84%
11.30%
11.65%
12.34%
2016
2017
2018
2019
2020
Note: 2019 and 2020 figures are calculated applying the transitional 
arrangements of CRR  unless specified otherwise.
The continuous improvement in the capital ratios reflects 
Santander Group's profitable growth strategy and a culture of 
active capital management at all levels of the organisation.
Highlights:
•The reinforcement of teams dedicated to capital 
management and greater coordination with the corporate 
centre and local teams.
•All countries and business units have developed individual 
capital plans focused on achieving a business that 
maximises the return on capital.
•A higher weighting of capital management in incentives. 
Certain aspects relating to capital management and returns 
are taken into account when setting the variable 
remuneration payable to members of the senior 
management:
•The relevant metrics include the Group’s CET1, the 
capital contribution of the countries to the Group ratio or 
the return on tangible equity (RoTE).
•The qualitative aspects considered include the proper 
management of regulatory changes affecting capital, 
effective management of capital relating to business 
decisions, capital generation sustainable over time and 
an effective capital allocation.
At the same time, the Group has completed this year a 
programme of action to ensure the ongoing improvement of 
infrastructure, processes and methodologies that support all 
aspects relating to capital, with the aim of encouraging ever 
more active capital management, enabling the Group to 
respond in a more agile way to the numerous and growing 
number of regulatory requirements and carrying out all 
associated activities more efficiently.
2.1.5. Capital buffers and eligible capital requirements
Santander Group must always comply with the combined 
capital buffer requirement, which is defined as the total CET1 
capital necessary to meet the following obligations:
• Capital conservation buffer (CCB): mandatory for all 
entities from 1 January 2016. The buffer for banks in 2021 
is 2.5%.
• Buffers for systemically important banks (G-SIB and D-
SIB): applicable from 1 January 2016. There are two types, 
each with their own methodologies, which classify financial 
institutions into buckets. These buckets determine the 
bank's systemic risk (either global or domestic) and the 
applicable buffer rate. Where an institution is subject to 
both buffers at the same consolidation level, the higher of 
the two shall apply. The two types are:
• G-SIB (global systemically important banks) buffer: 
common methodology following the Basel 
framework. Applicable at the consolidated level. CRD 
V added an additional methodology that considers the 
eurozone as a single jurisdiction, allowing the 
competent authority to classify a G-SIB in a lower 
bucket, reducing the applicable G-SIB buffer 
accordingly. 
• D-SIB (domestic systemically important banks) buffer: 
common methodology following EBA guidelines. This 
is applied at the consolidated, sub-consolidated or 
individual level.
• Systemic risk buffer (SRB): national competent authorities 
may require this buffer to mitigate non-cyclical systemic 
risks that are not covered by the countercyclical buffer or 
the systemically important financial institutions buffer and 
that could trigger a disturbance in the financial system with 
serious consequences for both it and the real economy. 
Application by the authorities is discretionary. A buffer may 
be required for the entire financial sector or for one or more 
of its sub-sectors (households, business, etc.).
If the SRB is required for the whole financial sector, the 
highest of the three systemic buffer rates will be applied. If 
the SRB applies to one or more sectors, the SRB buffer will be 
added to the greater of the other two systemic buffers (G-SIB 
or D-SIB).The previous rule will no longer apply following the 
transposition of CRD V, so that the buffer against systemic 
risks will always be in addition to the others.  
• Countercyclical capital buffer (CCyB): this is applied when 
the national authorities consider that lending is growing 
excessively in a jurisdiction, with the aim of containing it. 
This buffer is calculated specifically for each entity or group 
and consists of the weighted average of the countercyclical 
buffer rates applied in regions in which the bank’s 
significant exposures are located. As with the other buffers, 
this has also been applicable since 1 January 2016.
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The table below summarises the required regulatory rates 
based on the different capital buffers to be applied and Banco 
Santander’s position in 2021:
Application
Buffers (% RWAs)
2021
All entities
Conservation (CCoB)
 2.5 %
Designated 
entities
G-SIB entities 
(1%-3.5%) 
(1)
100% of the buffer
D-SIB entities 
(2)
100% of the buffer
At the 
discretion of 
competent 
national 
authority
Systemic risk (SRB) 
(3)
0%-5%
Countercyclical (CCyB) 
(4)
0% - 2.5%
Consolidated combined 
buffer
CCoB + CCyB + Max 
(5) 
(G-SIB, D-SIB, SRB)
1) Bank of Spain requires a 1% buffer from Santander Group 
for 2021
2) This requirement is 0% for Santander Group
3) % countercyclical buffer applicable during 2021 according 
to data from the European Systemic Risk Board (ESRB):
a)
Exposures to customers resident in Spain: 0%, according 
to Bank of Spain data for the first quarter of 2021
b)
Exposures to customers resident in the United Kingdom: 
0% (from 11 March)
c)
Exposures to customers resident in Belgium: 0% (from 1 
April)
d)
Exposures to customers resident in Bulgaria: from 1% to 
0.5% (from 1 April)
e)
Exposures to customers resident in the Czech Republic: 
from 1% to 0.5% (from 1 July)
f)
Exposures to customers resident in Denmark: from 2% to 
0% (from 12 March)
g)
Exposures to customers resident in France: from 0.5% to 
0% (from 1 April)
h)
Exposures to customers resident in Norway: from 2.5% to 
1% (from 13 March)
i)
Exposures to customers resident in Germany: from 0.25% 
to 0% (from 1 April)
j)
Exposures to customers resident in Iceland: from 2% to 
0% (from 18 March)
k)
Exposures to customers resident in Ireland: from 1% to 
0% (from 1 April)
l)
Exposures to customers resident in Lithuania: from 1% to 
0% (from 1 April)
m) Exposures to customers resident in Luxembourg: 0.25%. 
This is expected to increase to 0.5% from 1 January 2021
n)
Exposures to customers resident in Slovakia: from 2% to 
1% (from 1 August)
o)
Exposures to customers resident in Sweden: from 2.5% to 
0% (from 16 March)
5) The highest of the three buffers applies if the SRB buffer 
covers all exposures. Otherwise, the higher of G-SIB and D-
SIB plus the SRB buffer applies.
The geographic breakdown of significant lending exposures 
for calculating the countercyclical capital buffer is available in 
Appendix XI on Santander Group's website.
Access file 2020 Pillar 3 Appendices available on 
the Santander Group website
Eligible capital requirements
The capital decision resulting from the Supervisory Review 
and Evaluation Process (SREP) under the European Central 
Bank’s (ECB) Single Supervisory Mechanism comprises a Pillar 
2 Requirement (Pillar 2R) and Pillar 2 Guidance (Pillar 2G). 
Pillar 2R is binding and failure to comply may have direct 
consequences for banks. Pillar 2G is not directly binding. 
Failure to comply has no bearing on the maximum 
distributable amount (MDA) threshold. However, the ECB 
expects compliance with Pillar 2G at all times. If a bank is not 
compliant with Pillar 2G, the ECB will carefully consider the 
reasons and circumstances and may define additional 
supervisory control measures.
At 1 January 2021, at consolidated level, the Group must 
maintain a minimum capital ratio of 8.85% of CET1 (i.e. 
4.50% of the Pillar 1 requirement, 0.84% of the Pillar 2R 
requirement, 2.50% of the capital conservation buffer 
requirement, 1.00% of the G-SIB requirement and 0.01% of 
the countercyclical capital buffer requirement).
Santander Group must also maintain a minimum capital ratio 
of 10.63% for Tier 1 and a minimum total ratio of 13.01%.
In 2020, the established target solvency ratio was achieved. 
Santander's CET1 ratio was 12.34% at year-end; 
demonstrating its organic capital generation capacity.
Regulatory Capital vs Regulatory requirement
16.18
16.18
13.01
13.01
12.34%
1.61%
2.23%
4.50%
0.84%
2.50%
1.00%
0.01%
1.50%
0.28%
2.00%
0.38%
8.85%
10.63%
Regulatory 
Ratio
n T2
n AT1
n CET1
Regulatory 
Requirement
n AT1
n T2
n CCyB
3
n G-SIB
1
n CCoB
2
n
Pillar 2 
Requirement
n Pillar 1 minimum
Regulatory 
ratios Dec. 20
Regulatory 
requirement 
2020
Minimum 
regulatory 
requirement
1. Global systemically important banks buffer
2. Capital conservation buffer
3. Countercyclical capital buffer
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At 31 December 2020, Banco Santander had a CET1 
regulatory capital ratio of 12.34% and a total ratio of 16.18% 
phased-in, applying CRR and IFRS9 transitional arrangements.
2.1.5.1. Global systemically important institutions
Santander Group is one of 30 entities designated as global 
systemically important banks (G-SIB) in 2020.
Systemically important banks may pose a risk to financial 
stability.
The insolvency of a systemically important bank, or even an 
expectation that it might become insolvent, could generate 
negative effects for the financial system and even the real 
economy that are difficult to predict.
This situation warrants special prudential treatment. This has 
led to the introduction of specific capital buffer requirements 
for both global (G-SIB) and domestic (D-SIB) systemically 
important banks.
This designation requires Santander Group to meet additional 
requirements, mainly relating to:
• Its capital buffer (Santander Group is included in the group 
of banks with the smallest capital buffer, 1%)
• TLAC (total loss-absorbing capacity) requirements
• The requirement to publish relevant information more 
often than other banks
• Stricter regulatory requirements for internal control bodies
• Special supervision
• Requirement to submit special reports to the supervisors.
The BCBS and the Financial Stability Board jointly decide 
which banks qualify as being global systemically important, 
using a method based on five indicators: size, cross-
jurisdiction activity, interconnectedness with other financial 
institutions, substitutability of financial services/
infrastructure and complexity. Each of these categories has an 
equal weighting of 20%.
This methodology has been changed and will come into effect 
from January 2022. The main changes in the methodology 
are: inclusion of a trading volume indicator, modifying the 
weighting of the remaining indicators in the substitutability 
category, and inclusion of insurance companies in the 
reporting scope. A new measurement for cross-jurisdictional 
indicators will also be included, which will consider the EU as 
one jurisdiction, possibly reducing the indicator to +/-10 bp.
Indicators for systemically important institutions
Category
Individual indicator
Supervisor jurisdiction
Size
Exposure used for the leverage ratio calculation
An indicator of the weight of the bank in the financial 
system
Cross-jurisdictional activity
Cross-jurisdictional assets
Snapshot of a bank’s global footprint
Cross-jurisdictional liabilities
Interconnectedness
Intra-financial system assets
Measures a bank’s interconnectedness with other 
financial institutions
Intra-financial system liabilities
Securities outstanding
Substitutability/financial 
infrastructure
Assets under custody
Measures whether the bank’s activity can be 
substituted by other banks
Payments activity
Transactions subscribed in debt and equity markets
Complexity
Notional amount of over-the-counter (OTC) 
derivatives
Measures the complexity of a financial entity
Level 3 assets
Held for trading and available-for-sale securities
The information needed to evaluate the indicators is 
requested yearly from banks with leverage exposure 
exceeding €200 billion, or from any other banks at the 
supervisor’s discretion: 76 banks were considered in 
December 2019. These institutions are then required to 
publish the information before 30 April of the following year.
The information is used to produce a global indicator. The 
score obtained by each bank determines the size of the capital 
buffer required of it, which is based on a set of buckets 
defined by the regulators (CET1 buffer ranging from 1% to 
3.5%).
In November 2020, the Financial Stability Board (FSB) 
published its list of global systemically important banks 
based on the December 2019 data. This will be fully 
applicable in 2022. Meeting these requirements makes 
Santander Group a more robust bank than its domestic rivals. 
Santander Group is currently subject to a systemic capital 
buffer of 1%, which will become fully effective in 2021.
For more details regarding Quantitative 
Indicators, access file “G-SIBs indicadores 
cuantitativos”, under section Shareholders 
and Investors/Other presentations (April 
month) on the Santander Group website.
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2020 Pillar 3 Disclosures Report

Global systemically important institutions
Capital buffer
Entity
5 (3.50%)
(Empty)
4 (2.50%)
JP Morgan Chase
3 (2.00%)
Citigroup
HSBC
2 (1.50%)
Bank of China
Barclays
BNP Paribas
Deutsche Bank
Goldman Sachs
Industrial and Commercial Bank of China Limited
Mitsubishi UFJ FG
Wells Fargo
1 (1,00%)
Agricultural Bank of China
Bank of New York Mellon
China Construction Bank
Credit Suisse
Group BpsCE
Group Crédit Agricole
ING Bank
Mizuho FG
Morgan Stanley
Royal Bank of Canada
Santander
Société Générale
Standard Chartered
State Street
Sumitomo Mitsui FG
UBS
Unicredit Group
2.1.5.2. Domestic Systemically Important Institutions
When identifying domestic systemically important banks (D-
SIBs), the Bank of Spain, using the methodology established 
in rule 14 of Circular 2/2016, applies a mix of guidelines 
based on size, importance, complexity (cross-jurisdiction 
activity) and the degree of interconnectedness between the 
institutions and the financial system. The Bank of Spain 
conducts an annual review of this classification. The following 
institutions are included on its 2021 list:
Systemical buffer
Domestic Systemically Important Institutions
0.25%
0.75%
1%
Caixabank
Bankia
Sabadell
BBVA
Santander
Santander Group is on the lists of both global and domestic 
systemically important banks. The Bank of Spain requires the 
higher of the two buffers to be applied, under rule 23 of 
Circular 2/2016. As both buffers are the same for Banco 
Santander, the applicable buffer in 2021 will be 1%.
2.2. Pillar 1 - Regulatory capital
The current regulatory framework for capital calculation is 
based on three pillars:
• Pillar 1 sets the minimum capital requirements for credit 
risk, market risk and operational risk, allowing internal 
ratings and models to be used. The aim is to make 
regulatory requirements more sensitive to the risks actually 
incurred by financial institutions when carrying out their 
business activities.
• Pillar 2 establishes a system of supervisory review, aimed 
at improving banks’ internal risk management and capital 
adequacy assessment in line with their risk profile.
• Pillar 3 is intended to enhance market discipline by 
developing a set of disclosure requirements that enable 
market agents to appraise key information relating to the 
application of Basel II: capital, risk exposures, risk 
assessment processes and, by extension, the bank’s capital 
adequacy.
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2.2.1. Eligible capital
Equity at 31 December 2020 stood at €91.322 billion, down 
€19.338 billion from the year before.
The reconciliation between equity and capital eligible as Tier 1 
is set out below:
Table 4. Reconciliation of accounting capital with regulatory capital
Million euros
31 Dec. 2020
31 Dec. 2019
Subscribed capital
 
8,670  
8,309 
Share premium account
 
52,013  
52,446 
Reserves
 
62,777  
56,526 
Treasury shares
 
(69)  
(31) 
Attributable profit
 
(8,771)  
6,515 
Approved dividend
 
—  
(1,662) 
Shareholders' equity on public balance sheet
 
114,620  
122,103 
Valuation adjustments
 
(33,144)  
(22,032) 
Non-controlling interests
 
9,846  
10,588 
Total equity on public balance sheet
 
91,322  
110,659 
Goodwill and intangible assets
 
(15,711)  
(28,478) 
Eligible preference shares and participating securities
 
9,102  
9,039 
Accrued dividend
 
(478)  
(1,761) 
Other adjustments
 
(5,734)  
(9,923) 
Tier 1 (Phased-in)
 
78,501  
79,536 
The following table provides a breakdown of the Group’s 
eligible capital and a comparison with the previous year:
Table 5. Eligible capital
Million euros
31 Dec. 2020
31 Dec. 2019
Common Equity Tier 1 (CET1)
 
69,399  
70,497 
Capital
 
8,670  
8,309 
(-) Treasury shares and own shares financed
 
(126)  
(63) 
Share premium
 
52,013  
52,446 
Reserves
 
64,766  
57,368 
Other retained earnings
 
(34,937)  
(22,933) 
Minority interests
 
6,669  
6,441 
Attributable profit net of dividends
 
(9,249)  
3,092 
Deductions
 
(18,407)  
(34,163) 
Goodwill and intangible assets
 
(15,711)  
(28,478) 
Others
 
(2,696)  
(5,685) 
Aditional Tier 1 (AT1)
 
9,102  
9,039 
Eligible instruments AT1
 
8,854  
9,209 
T1 excesses - subsidiaries
 
248  
(170) 
Residual value of intangibles
 
—  
— 
Deductions
 
—  
— 
Tier 2 (T2)
 
12,514  
11,531 
Eligible instruments T2
 
13,351  
12,360 
Gen. funds and surplus loan loss prov. IRB
 
—  
— 
T2 excesses - subsidiaries
 
(837)  
(829) 
Others
 
—  
— 
Total eligible capital
 
91,015  
91,067 
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Common equity Tier 1 capital (CET1) comprises the 
components of common Equity Tier 1 (after applying 
prudential filters) and CET1 deductions after applying the 
threshold exemptions specified in the CRR.
This regulation provides for a phase-in period that will give 
institutions time to adapt to the new requirements in the 
European Union. This phase-in applies to Santander Group 
under Regulation (EU) 2016/445 of the European Central 
Bank on the exercise of options and national discretions 
published on 14 March 2016.
Without considering the phase-in schedule, CET1 comprises:
• Subscribed share capital, which in December 2020 totalled 
€8,670 million, increased by a total of €361 million on the 
previous period, as a result of the issuance of 722,526,720 
ordinary shares.
• Other tier 1 capital items: (i) paid-up share premiums; (ii) 
effective and disclosed reserves generated against profits 
and amounts that are not taken to the income statement 
but are recorded under “Other reserves” (any item); (iii) 
other retained earnings, including certain valuation 
adjustments, primarily for exchange differences and for 
hedges of net investments in foreign operations.
• The paid-up portion of any non-controlling interests arising 
from the issue of ordinary shares by consolidated 
subsidiaries, subject to the limits set in the CRR.
• Profit attributable to the group, which stood at -€9,249 
million in December 2020. Due to the deterioration in the 
economic outlook in the second quarter, an adjustment was 
made to the goodwill of certain units and deferred tax 
assets amounting to €12,600 million.
• The prudential filters exclude any positive or negative 
valuation adjustments from cash flow hedges. They also 
exclude gains or losses on liabilities and derivative 
liabilities measured at fair value resulting from changes in 
the institution’s own credit quality. The prudential filters 
include the additional valuation adjustments applied 
pursuant to article 34 of the CRR.
• Deductions mainly include: treasury shares; current-year 
losses; goodwill and other intangible assets recognised in 
the balance sheet; deferred tax assets that rely on future 
earnings (subject to the limits set in the CRR); the valuation 
adjustments resulting from the requirements for prudent 
valuation; and defined benefit pension fund assets shown 
on the balance sheet.
Tier 1 capital comprises CET1 capital plus Additional Tier 1 
capital (AT1) including preferred securities issued by 
Santander Group.
Tier 2 capital comprises Tier 1 capital plus Tier 2 capital (T2) 
and includes, among other items, equity instruments and 
subordinated loans where the conditions laid down in the CRR 
are met.
Table 6. Regulatory capital. Changes
Million euros
31 Dec. 2020
Common Equity Tier 1 (CET1)
Starting figure (31/12/2018)
 
70,497 
Shares issued during the year and share premium 
account
 
(72) 
Treasury shares and own shares financed
 
(63) 
Reserves
 
4,306 
Attributable profit net of dividends
 
(9,249) 
Other retained earnings
 
(12,004) 
Minority interests
 
228 
Decrease/(increase) in goodwill and other 
intangibles
 
12,767 
Other 
 
2,988 
Ending figure (31/12/2019)
 
69,399 
Additional Tier 1 (AT1)
Starting figure (31/12/2018)
 
9,039 
Eligible instruments AT1
 
(355) 
T1 excesses - subsidiaries
 
418 
Residual value of intangibles
 
— 
Deductions
 
— 
Ending figure (31/12/2019)
 
9,102 
Tier 2 (T2)
Starting figure (31/12/2018)
 
11,531 
Eligible instruments T2
 
990 
Gen. funds and surplus loan loss prov. IRB
 
— 
T2 excesses - subsidiaries
 
(7) 
Deductions
 
— 
Ending figure (31/12/2019)
 
12,514 
Deductions from total capital
 
— 
Final figure for total capital (31/12/2019)
 
91,015 
Eligible capital over time
-0,01%
91,067
91,015
2019
2020
In addition to movements in equity, changes in regulatory 
capital reflect the €477 million dividend not distributed in 
2020, so that attributable profit net of dividends amounted to 
-€9,249 million.
CAPITAL 2020 Pillar 3 Disclosures Report
37

The movement in the other retained earnings item is mainly 
due to the impact of the depreciation of Latin American 
currencies against the euro.
In relation to goodwill and other intangible assets, of 
particular note is the write off of goodwill to the due to the 
worsening economic environment as a result of covid-19, 
which has led to a decrease of €10,100 million.
The change included in deductions and prudential filters was 
reduced as a result of changes in the shortfall of provisions for 
expected loss and the adjustments in deferred tax assets as a 
result of the write off carried out.
The fall in Tier 1 capital is mainly explained by the loss of 
eligibility of issues in the period. Banco Santander, S.A. 
launched a preference issue for €1,500 million applicable to 
Tier 1 capital.
The increase in Tier 2 capital is mainly due to the 
subordinated debt issuances made by Banco Santander, S.A. 
for the amount of €1,000 million and $1,500 million.
2.2.2. Capital requirements
This section gives details of capital requirements by 
geography (see table 8). 
Table 7 shows that capital requirements have barely changed 
from 2019, maintaining a Pillar I risk distribution similar to 
that of the prior year: credit risk 87%, market risk 3% and 
operational risk 10%.
Capital requirements for credit risk decreased by 7.2% 
compared to 2019 to EUR 39,096 million, while capital 
requirements for market risk decreased by 21.1% and those 
for operational risk another 6.8% compared to the previous 
year.
RWA Evolution
-7,05%
605,244
562,580
2019
2020
Distribution of capital requirements by risk type and geography
31 Dec. 2020
 
 
Credit Risk
87%
29%
13%
20%
13%
4%
12%
7%
2%
Market Risk
3%
68%
1%
1%
14%
8%
8%
Operational Risk
10%
19%
13%
21%
19%
5%
12%
11%
n
Spain
n
UK
n
Rest of Europe
n
USA
n
Rest of North 
America
n
Brazil 
n
Rest of South 
America
n
Others
39,096
1,441
4,469
Million euros
Million euros
Million euros
CAPITAL 2020 Pillar 3 Disclosures Report
38
2020 Pillar 3 Disclosures Report

Shown below is a general overview of the total RWAs by risk. 
The following sections provide additional breakdowns.
Table 7. Overview of RWAs (OV1)
Million euros
RWA
Minimum Capital 
Requirements
2020
Sep-20
Dec-19
2020
Credit risk (excluding CRR)
 
447,927  
441,683  
483,341  
35,834 
Of which, standardised approach 
(SA)
 
246,284  
241,109  
283,385  
19,703 
Chapter 3. Credit 
Risk
Of which, the foundation IRB (FIRB) 
approach*
 
30,797  
31,799  
35,583  
2,464 
Of which, the advanced IRB (AIRB) 
approach
 
168,096  
166,370  
161,548  
13,448 
Of which, Equity IRB under the 
Simple risk weight or the IMA
 
2,750  
2,405  
2,825  
220 
CCR
 
10,239  
10,827  
11,070  
819 
Chapter 4. 
Counterparty Credit 
Risk
Of which, mark to market method 
(IRB)
 
7,083  
7,785  
7,549  
567 
Of which, mark to market method 
(Standardised)
 
2,195  
2,163  
2,274  
176 
Of which, risk exposure amount for 
contributions to the default fund of 
a CCP
 
241  
185  
259  
19 
Of which, CVA
 
720  
694  
988  
58 
Settlement risk
 
0  
0  
2  
0 
Securitisation exposures in the 
banking book (after the cap) 
 
8,159  
7,595  
6,629  
653 
Chapter 5. Credit 
Risk - 
Securitisations
Of which, IRB approach
 
—  
—  
2,374  
— 
Of which, SEC-IRBA approach
 
4,731  
4,597  
2,030  
378 
Of which, SEC-SA approach
 
1,821  
1,580  
1,014  
146 
Of which, SEC-ERBA approach
 
1,607  
1,418  
866  
129 
Of which, standardised approach
 
—  
—  
346  
— 
Market risk
 
18,008  
19,237  
21,807  
1,441 
Chapter 6. Market 
Risk
Of which, standardised approach
 
5,071  
5,834  
7,596  
406 
Of which, IMA
 
12,936  
13,403  
14,211  
1,035 
Operational risk
 
55,865  
53,973  
59,661  
4,469 
Chapter 7. 
Operational Risk
Of which standardised approach
 
55,865  
53,973  
59,661  
4,469 
Amounts below the thresholds for 
deduction
 (subject to 250% risk weight)
 
22,382  
21,808  
22,734  
1,791 
Floor adjustment
 
—  
—  
— 
Total
 
562,580  
555,122  
605,244  
45,006 
* Includes equities under the PD/LGD approach.
As of 31 December 2020, Santander Group had no additional 
capital requirements arising from the floors set by Regulation 
(EU) No 575/2013 of the European Parliament and of the 
Council of 26 June 2013 on prudential requirements for credit 
institutions and investment firms, in Part Ten, Title 1.
CAPITAL 2020 Pillar 3 Disclosures Report
39

The table below shows capital requirements by geography:
Table 8. Capital requirements by geographical region
Million euros
31 Dec. 2020
Total
Europe
Of which, 
Spain
Of which, 
UK
North 
America
Of which, 
US
South 
America
Of which, 
Brazil Other
Credit risk
 36,401  22,492  
9,977  
5,047  6,342  
4,863  6,860  
4,340  706 
Of which, internal rating-based (IRB) approach (*)  15,884  12,574  
5,891  
3,663  1,168  
481  1,536  
1,271  605 
Central governments and Central Banks
 
31  
1  
1  
—  
1  
—  
15  
3  
15 
Institutions
 
509  
286  
72  
73  
110  
52  
35  
4  
78 
Corporates – SME
 
9,760  6,876  
3,946  
1,242  1,052  
425  1,484  
1,262  348 
of which,  Specialised Lending
 
1,283  
999  
350  
381  
167  
33  
67  
—  
50 
of which,  Other
 
1,813  1,700  
1,424  
87  
75  
1  
38  
36  
1 
Retail - Secured by real estate SME
 
65  
64  
64  
0  
1  
1  
0  
—  
0 
Retail - Secured by real estate non-SME
 
3,238  3,226  
939  
2,050  
2  
1  
1  
0  
8 
Retail - Qualifying revolving
 
321  
321  
112  
148  
0  
0  
0  
0  
0 
Retail - Other SME
 
329  
328  
201  
1  
0  
0  
0  
0  
0 
Retail - Other non-SME
 
1,631  1,472  
556  
149  
2  
0  
1  
0  155 
Other non-credit-obligation assets
 
—  
—  
—  
—  
—  
—  
—  
—  
— 
Of which, standardised approach (SA)
 19,703  9,104  
3,271  
1,384  5,174  
4,382  5,324  
3,069  101 
Central governments or central banks
 
1,197  
758  
741  
0  
83  
0  
353  
317  
2 
Regional governments or local authorities
 
17  
9  
6  
—  
0  
0  
8  
8  
— 
Public sector entities
 
31  
4  
—  
—  
14  
14  
13  
0  
0 
Multilateral Development Banks
 
—  
—  
—  
—  
—  
—  
—  
—  
— 
International Organisations
 
—  
—  
—  
—  
—  
—  
—  
—  
— 
Institutions
 
350  
118  
70  
9  
119  
109  
107  
87  
6 
Corporates
 
3,623  1,922  
358  
471  
695  
648  
994  
362  
11 
Retail
 
7,584  2,886  
296  
508  2,507  
2,206  2,111  
1,589  
81 
Secured by mortgages on immovable property
 
2,570  
872  
190  
37  
802  
615  
895  
256  
0 
Exposures in default
 
524  
262  
127  
16  
77  
51  
185  
84  
0 
Items associated with particular high risk
 
156  
28  
0  
13  
16  
16  
112  
13  
— 
Covered bonds
 
13  
13  
—  
13  
—  
—  
—  
—  
— 
Claims on institutions and corporates with a 
short-term credit assessment
 
6  
2  
2  
—  
3  
0  
2  
—  
— 
Collective investments undertakings (CIU)
 
21  
22  
7  
0  
—  
0  
—  
—  
— 
Equity exposures
 
23  
18  
—  
—  
—  
—  
5  
—  
— 
Other items
 
3,588  2,191  
1,475  
317  
859  
722  
537  
353  
1 
Of which, Equity IRB
 
814  
814  
814  
—  
—  
—  
—  
—  
— 
Simple method
 
220  
220  
220 
Under the PD/LGD method
 
594  
594  
594 
Counterparty credit risk
 
253  
153  
79  
37  
58  
48  
41  
24  
— 
Of which, standardised approach
 
176  
94  
25  
32  
53  
47  
29  
20  
— 
Of which, risk exposure amount for contributions 
to the default fund of a CCP
 
19  
19  
16  
2  
0  
—  
0  
0  
— 
Of which, CVA
 
58  
41  
37  
2  
5  
1  
12  
4  
— 
Settlement risk
 
0  
0 
Securitisations exposures in banking book (after 
cap)
653  
450  
174  
141  
188  
157  
13  
13  
2 
Market risk
 
1,441  1,002  
973  
14  
207  
7  
232  
116  
— 
Of which, Standardised approach (SA)
 
406  
274  
245  
14  
8  
7  
123  
116 
Of which, internal model approaches (IMA)
 
1,035  
728  
728  
—  
199  
—  
108  
—  
— 
Operational risk
 
4,469  2,349  
854  
566  1,078  
830  1,042  
565  
— 
Of which, Standardised approach
 
4,469  2,349  
854  
566  1,078  
830  1,042  
565  
— 
Amount below the threshold for deduction 
(subject to 250% risk weight)
 
1,791  1,242  
1,128  
20  
77  
0  
470  
399  
2 
Floor adjustments
Total
 45,006  27,688  13,184  
5,825  7,950  
5,904  8,657  
5,455  711 
* Including counterparty credit risk
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2020 Pillar 3 Disclosures Report

2.2.2.1. Plan to deploy advanced internal models and 
supervisory approval
Santander Group remains committed to adopting the Basel II 
advanced internal ratings-based (AIRB) approach for its banks, 
increasing the amount of exposure managed using internal 
models. This approach will be applied progressively over the 
coming years. The commitment to the supervisor means 
adapting the advanced approaches in Santander Group's core 
markets.
Santander Group continued to pursue this objective during 
2020 through its plan to gradually implement the necessary 
technology platforms and methodological improvements to 
enable the progressive application of advanced internal 
models for calculating regulatory capital in the rest of the 
Group’s units.
Santander Group has supervisory approval to use advanced 
approaches for calculating regulatory capital for credit risk for 
the parent and its main subsidiaries in Spain, the United 
Kingdom and Portugal, and for some portfolios in Germany, 
Mexico, Brazil, Chile, Nordic countries (Sweden, Finland and 
Norway), France and the United States.
Supervisory approval was received for the individualised 
companies portfolio in Santander Brazil during 2020.
The implementation strategy for the Basel regulations in 
Santander Group focuses on using advanced approaches for 
the main American and European banks.
The following chart shows the percentage of IRB coverage by 
geography:
IRB coverage by region
%
Stripping out sovereign bonds in local currency and non-
financial assets, which are not subject to the implementation 
plan for internal models, Santander Group reported 65% of its 
exposure at default (EAD) using IRB at December 2020.
By geography, the main contributors are Spain (28%), the 
United Kingdom (24%), the global portfolio of companies in 
Chile and the USA (1%), Brazil (3%), Portugal (3%), Germany 
(2%), Mexico (2%), the Nordic countries (1%) and France 
(1%).
The medium-term coverage objective of the Group's IRB 
approaches must be considered together with the current 
supervisory focus on the robustness and suitability of the 
approaches it has available to it, and with the simplification 
strategy recently agreed with the ECB; a practical example of 
which is the recent supervisory approval of the reversion to 
the standardised approach for sovereign bonds in foreign 
currency.
CAPITAL 2020 Pillar 3 Disclosures Report
41

The following table shows the geographical scope of the 
internal models for credit risk (AIRB or FIRB) in the various 
portfolios:
List of authorised IRB models by legal entity
Country
Legal Entity
IRB portfolio (AIRB or FIRB) 
United Kingdom
Santander UK PLC
Institutions, Corporates, Corporates SMEs, Corporates Project Finance, 
Mortgages, Qualifying Revolving, Other Retail.
Abbey National Treasury Services
Institutions, Corporates, Corporates SMEs, Corporates Project Finance.
Abbey Covered Bonds LLP
Institutions
Spain
Banco Santander, S.A.
Sovereigns, Institutions, Corporates, Corporates SMEs, Corporates Project 
Finance, Mortgages, Qualifying Revolving, Retail SMEs, Other Retail
Santander Factoring y Confirming S.A.
Institutions, Corporates, Corporates SMEs, Corporates Project Finance, 
Mortgages, Retail SMEs, Other Retail
Santander Lease, S.A. E.F.C.
Institutions, Corporates Corporates SMEs, Mortgages, Retail SMEs, Other Retail
Santander Consumer EFC, S.A.
Corporates, Corporates SMEs, Qualifying Revolving, Other Retail.
Santander Consumer Finance, S.A.
Corporates, Corporates SMEs, Qualifying Revolving, Other Retail.
Portugal
Banco Santander Totta
Institutions, Corporates, Corporates SMEs, Corporates Project Finance, 
Mortgages, Qualifying Revolving, Retail SMEs, Other Retail.
Brazil
Banco Santander Brazil
Corporates
Santander Brazil EFC
Corporates
Germany
Santander Consumer Bank AG
Corporates, Corporates SMEs, Mortages, Revolving and Other Retail
Mexico
Banco Santader Mexico
Institutions, Corporates, Corporates SMEs, Corporates Project Finance
USA
Santander Bank, National Association
Corporates
France
Société Financiére de Banque - SOFIB
Corporates, Corporates SMEs, Retail SMEs, Other Retail
Nordics
Santander Consumer Bank A.S.
Other Retail
Santander Consumer Finance OY
Other Retail
Chile
Banco Santader - Chile
Sovereigns, Institutions and Corporates
The following table shows the geographical scope of portfolios using the internal models approach (IMA) for market risk:
List of authorised IMA models by legal entity
Country
Legal entity
IMA portfolio (product)
Spain
Banco Santander, S.A.
Trading book
Santander London Branch
Trading book
Chile
Banco Santander - Chile
Trading book
Santander Agente de Valores Limitada
Trading book
Santander Investment Chile Limitada
Trading book
Santander Corredores de Bolsa Limitada
Trading book
Mexico
Banco Santander México
Trading book
Casa de Bolsa Santander, S.A. de C.V.
Trading book
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2020 Pillar 3 Disclosures Report

¤
For further information on the market risk, see chapter 6.
Santander Group currently uses the standardised approach for 
calculating regulatory capital for operational risk, as provided 
for in the CRR. In 2017, the European Central Bank granted 
authorisation for the alternative standardised approach to be 
used to calculate consolidated capital requirements at Banco 
Santander Mexico, following the approval granted in 2016 for 
Brazil.
¤
For further information on the Operational Risk,  see 
chapter 7.
As additional information, Appendix XIII shows a breakdown 
of exposure according to the capital calculation method used 
in each region and for each portfolio.
Supervisory validation process
As established by the European Parliament, the first key 
element of banking union is the Single Supervisory 
Mechanism (SSM). Under this mechanism, direct banking 
supervision falls to the European Central Bank. This ensures 
that the largest European banks are independently supervised 
by just one entity and are subject to a common set of 
standards. Eurozone states are required to participate. 
Participation is voluntary for non-eurozone EU Member 
States.
The second key element is the Single Resolution Mechanism 
(SRM), which is responsible for preparing for the worst-case 
scenario, i.e. bank failure. The objective is to ensure that such 
situations can be resolved in an orderly fashion and at the 
minimum cost to taxpayers. The focus on shielding taxpayers 
from the costs of future bank resolutions led to a change in 
the underlying regulations, namely the Bank Recovery and 
Resolution Directive (BRRD), so that the bank’s shareholders 
and creditors will bear the brunt of the resolution costs. Under 
certain circumstances, banks may also obtain supplementary 
financing from the recently-created Single Resolution Fund 
(SRF), which is financed by the banking sector. The SRF is 
expected to meet its target funding level by 2023
The SSM and the SRM are both operational: the SSM became 
effective on 4 November 2014 while the SRM became 
operational on 1 January 2016. 
The SRM started developing resolution plans for banks in 
January 2015 and has been fully operational since January 
2016, with a full range of resolution tools.
The European Central Bank has gradually been deploying its 
new structure and functions, developing into the single 
European supervisor. The European Banking Authority (EBA) 
will continue to collaborate actively in adapting the 
regulations. The responsibilities of each of these bodies are:
Supervisory validation process
CAPITAL 2020 Pillar 3 Disclosures Report
43

The European supervisor has put in place a new governance 
process, which involves:
• The Joint Supervisory Team (JST), consisting of a mixed 
team of experts, which analyses the entity’s situation and 
issues a technical report to the ECB’s Supervisory Board.
• The Supervisory Board then submits its preliminary 
decisions to the Governing Council.
• The Governing Council then issues a final decision 
authorising or rejecting the use of internal models.
The supervisor uses the documentation provided by the entity 
as the basis for its assessment of whether the minimum 
requirements for using advanced models to calculate 
regulatory capital have been met. This information must be 
sufficiently thorough and detailed to provide a third party 
with a clear idea of the entity’s rating systems, 
methodologies, technological infrastructure, capital 
calculation process and internal governance, and to be able to 
replicate the outputs of the model. The unit itself is 
responsible for preparing this documentation, which forms 
part of the formal application required for the validation 
process established by the supervisors of entities seeking to 
implement advanced models to calculate regulatory capital. 
A preparatory "pre-application" phase has been introduced as 
part of the supervisory approval process for major changes to 
advanced models to calculating regulatory capital. This 
involves the entity providing the supervisor with the 
necessary documentation beforehand, so that the supervisor 
can assess whether the minimum requirements have been 
met to continue the formal approval process. If the European 
Central Bank considers the entity to be initially ready, the 
request is sent and the supervisor begins a formal review 
process of the regulatory models.
The approval of changes in Santander Group's models 
sometimes involves supervisors from various jurisdictions, 
often subject to different legislation, criteria and 
implementation calendars. This often hinders and slows joint 
decisions on the approval of internal models on the basis of 
consolidation and may affect authorisations at the local level.
Targeted Review of Internal Models
The on-site performance of the TRIM (Targeted Review of 
Internal Models) was completed in 2019. Banco Santander 
has reviewed several portfolios through on-site inspections 
this year. The final conclusions (findings, requirements and 
limitations) of the inspections were received in 2020. It is 
expected that all the pending ECB conclusions will be 
received, and that the final horizontal results of the entire 
TRIM exercise will be published, over the next few months.
In 2018 Banco Santander launched two strategic programmes 
to improve the quality of its internal models to comply with 
regulatory expectations and requirements, and to address the 
weaknesses found during the TRIM. These have been shared 
with the ECB. They are the IRB 2.0 (internal credit risk models) 
and MRAP or Market Risk Advanced Platform (internal market 
risk models), and will be performed over the next few years. 
Furthermore, we have strengthened our focus on ensuring 
high quality models fully meeting supervisory expectations. In 
this regard, we have reinforced our organisation by 
accelerating the creation of the Global Models & Data Unit, 
aiming to deliver better, more efficient and central execution 
of model builds, whilst exploiting the synergies of combining 
models and data. The new Single Validation Office will help to 
ensure higher standards, better consistency and coordination 
among all validation activities. 
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2020 Pillar 3 Disclosures Report

2.2.3. Leverage ratio
Basel III established the leverage ratio as a non-risk-sensitive 
measure to limit excessive growth of the balance sheet 
relative to available capital.
The ratio is calculated as the ratio of Tier 1 divided by the 
leverage exposure. This exposure is calculated as the sum of 
the following components:
•Asset value, without derivatives and without elements 
considered as deductions in Tier 1 (for example, the loan 
balance is included but not goodwill).
•Off-balance-sheet accounts (mainly guarantees, undrawn 
credit limits and letters of credit) weighted by the conversion 
factors for the standardised approach to credit risk.
•Inclusion of the net value of derivatives (gains and losses 
against a single counterparty are netted, minus collateral 
when certain criteria are met) plus a buffer for potential 
future exposure.
•A buffer for the potential risk of financing securities 
transactions.
•Lastly, a buffer is included for risk relating to unhedged 
credit derivatives (CDS).
The following tables illustrate the ratios published by 
Santander Group since December 2019. These show that the 
bank’s ratio is stable with an upward trend.
CRR Fully loaded  leverage ratio*
 
5.11%
Dec. 2019
5.31%
Dec. 2020
CRR Phased-in leverage ratio*
 
         
5.15%
Dec. 2019
5.33%
Dec. 2020
*2020 and 2019 data has been calculated under application of CRR and IFRS 9 
transitional arrangements
The BCBS revised the definition of the leverage ratio in 2017. 
This involved a series of technical adjustments to the method 
for calculating total exposure (the denominator of the 
leverage ratio), mainly relating to exposure to derivatives and 
the treatment of off-balance-sheet exposure.
With the publication of CRR II, the definitive calibration of the 
leverage ratio was set at 3% for all institutions, with G-SIBs 
being subject to an additional buffer of 50% of the ratio of the 
buffer applicable to the global systemically important 
financial institution (G-SIFI). Adjustments to its calculation are 
also included, chief among which are the exclusion of certain 
exposures from the measure of total exposure: public loans, 
transfer loans and officially supported export credits.
On 24 June 2020, Regulation (EU) No 575/2013 (CRR) was 
amended in response to the covid-19 pandemic (CRR II Quick 
Fix). This allowed entities to implement two of the measures 
proposed in CRR II in advance: the exclusion of reserves at 
Eurosystem central banks from leveraged exposure and the 
special treatment of regular-way purchases and sales 
awaiting settlement under Articles 500b and 500d of 
Regulation 2020/873 respectively.
Banks must implement the final definition of the leverage 
ratio by June 2021 and comply with the new ratio calibration 
(the additional buffer for G-SIBs) from January 2023.
Santander Group’s leverage ratio at 31 December 2020 was 
as follows:
Table 9. Leverage ratio
Million euros
31 Dec. 2020
CRR Fully loaded
CRR Phased -In
Tier 1
 
78,126 
 
78,501 
Exposure
 
1,471,480 
 
1,471,480 
Leverage Ratio
 5.31 %
 5.33 %
CAPITAL 2020 Pillar 3 Disclosures Report
45

The following table gives a breakdown of the ratio calculation:
Table 10. Leverage ratio details
Million euros
31 Dec. 2020
Item
Amounts 
Consol.
Balance 
Sheet
To be
eliminated
To be
included
Leverage
exposure Comment
Derivatives
 
75,456  
75,456  
25,219  
25,219 
Substitution of carrying amount by EAD 
net of collateral
Securities financing transactions
 
67,441 
 
2,358  
69,799 
A buffer is added for these transactions 
Assets deducted in Tier 1
 
18,151  
18,151 
 
— 
Deletion to avoid duplication
DTAs
 
1,101  
1,101 
Carrying amount of the balance sheet 
asset adjusted for changes in DTAs, as a 
result of the recognition of lower reserve 
account provisions, due to the application 
of IFRS 9 transitional arrangements. 
Rest of Assets
 
1,328,442  
66,648 
 1,261,794 
Excludes Eurosystem central bank 
reserves (CRR2 quick fix)
Total Assets
 
1,490,591  
161,355  
27,577  1,356,813 
Total Off-Balance-Sheet items
 
318,873  
204,206 
 
114,668 
Balances are weighted according to their 
risk
Total Exposure (denominator)
 1,471,480 
Tier 1 (numerator)
 
78,501 
Leverage ratio
 
1,329,235 
 5.33 % Minimum recommended 3%
CAPITAL 2020 Pillar 3 Disclosures Report
46
2020 Pillar 3 Disclosures Report

The leverage ratio is calculated and monitored by 
Santander Group every month and reported to the capital 
committee and other governing bodies. This ensures 
adequate monitoring of the risk of excessive leverage under 
the most restrictive measurement: fully loaded.
The leverage ratio is a primary metric in Santander's Risk 
Appetite Framework, as part of its commitment to 
preserving robust solvency ratios. It is regularly monitored 
to ensure that the ratio comfortably exceeds the minimum 
regulatory requirements. The Bank's Risk Appetite 
Framework includes a "stressed" leverage ratio as an 
additional metric, to manage the risk of excessive leverage 
in a forward-looking way, identifying how it will perform in 
a crisis scenario.
Within this framework, the Group has established the 
necessary limits and alerts to ensure that leverage is kept 
at tolerable risk levels, consistent with sustainable growth 
in the Group's balance sheet and well above the minimum 
levels that could be considered to be a risk. Any significant 
changes in any of the main drivers of this indicator are 
therefore analysed and reported to senior management.
Additional quantitative indicators are monitored as part of 
the Group's active management of leverage risk, to 
complement the management and monitoring of the risk of 
excessive leverage, so as to understand the maturities, 
types of charges and movements of collateralised assets. 
These metrics include asset encumbrance and the Net 
Stable Funding Ratio (NSFR). As part of its capital planning, 
the Group estimates the leverage ratio over a three-year 
horizon under a range of macroeconomic scenarios, 
including recession.
Despite the covid-19 crisis, which has necessitated higher 
levels of liquidity for our customers, at no point did the 
leverage ratio rise above the limits established in the Risk 
Appetite Framework in 2020. 
Tables LRSum, LRCom, LRSpl and LRQua can be found in 
Appendix X of the Pillar 3 2020 Appendices file, which is 
available on Santander Group's website.
Access file 2020 Pillar 3 Appendices available on 
the Santander Group website
CAPITAL 2020 Pillar 3 Disclosures Report
47

2.3. Pillar 2 - Economic capital
Economic capital is the capital needed to support the risks of 
our activity with a certain level of solvency. It is measured 
using an internal model.
Our economic capital model measurements cover all 
significant risks incurred in our activity (concentration risk, 
structural interest rate risk, business risk, pensions risk, 
deferred tax assets (DTAs), goodwill and others that are 
beyond the scope of regulatory Pillar 1). It also takes 
diversification into account, which is key to determining and 
understanding our risk profile and solvency in view of our 
multinational operations and businesses.
For more information on economic capital, including RoRAC, 
value creation and capital planning, see section 3.5 of the 
Economic and financial report of the 2020 Annual report.
Access 2020 Annual Report available on 
the Santander Group website
2.4. Recovery and resolution plans 
and special situations response 
framework
For details on the main developments by Santander Group in 
crisis management, specifically in relation to viability and 
resolution plans, and the special situations management 
framework, see section 3.5 of the Economic and financial 
report of the 2020 Annual report.
Access 2020 Annual Report available on 
the Santander Group website
2.5. Total Loss-Absorbing Capacity 
(TLAC) and Minimum Requirement 
for own funds and Eligible 
Liabilities (MREL)
Information on TLAC and MREL can be found in section 3.5 of 
the Economic and financial report of the 2020 Annual Report.
Access 2020 Annual Report available on 
the Santander Group website
For further details on TLAC and MREL, see Fixed Income 
Presentation available on the Santander Group Website.
Access Fixed Income Presentation 
available on the Santander Group website.
CAPITAL 2020 Pillar 3 Disclosures Report
48
2020 Pillar 3 Disclosures Report

3
Credit risk
 
3.1.   General aspects
51
3.2.   Capital requirements for credit risk
53
3.2.1.  Internal ratings-based (IRB) approach
53
3.2.2.  Equity investments and capital 
instruments not included in the trading 
book
61
3.2.3.  Standardised approach
64
3.3.   Distribution of exposures
66
3.4.   Internal rating systems
78
3.5.   Rating assignment process and parameter 
estimation
79
3.6.   Uses of internal parameter estimates
80
3.7.   Credit risk mitigation techniques
81
3.7.1. Recognition of credit risk mitigation
83
3.8.   Internal rating system control
84
3.8.1. Model risk
85
3.8.2. Internal Audit
87
3.9.   Impairment losses: influencing factors and 
comparative analysis
88
3.10. Backtesting of IRB parameters
89
3.10.1. PD backtest
89
3.10.2. EAD backtest
89
3.10.3. Backtest of expected loss 
90
3.11. Covid-19
90

3. Credit risk
Main figures *
Million euros
EAD
RWA
2020
2019
2020
2019
Credit Risk
 1,364,381 
1.311.087
 479,587  515,897 
Of which, with 
standard method 
(SA)
 617,135  
684,054 
 261,557  300,771 
Of which, IRB 
method
 747,246  
627,033 
 218,030  215,126 
* It does not include securitisations and includes counterparty credit risk.
EAD Variation
RWA Variation
RWA by geography *
Million euros
Million euros
* Includes Counterparty Credit risk
         
                                     
4.1%
(7.0)%
1,364,381
1,311,087
2020
2019
479,587
515,897
2020
2019
29%
20%
12%
13%
13%
7%
4%
2%
n Spain
n Rest of Europe
n Brazil
n UK
n USA
n Rest of South 
America
n Rest of North 
America
n Others
Santander Group ensures that its risk profile remains within 
the defined risk appetite levels and other limits through the 
advanced and comprehensive management of all risks, in a 
robust control environment, based on pillars aligned with its 
strategy.
For further details on policies and objectives of risk 
management (CRR article 435) see Corporate Governance 
chapter and Risk Management Report (Sections 1 and 2) in the 
Annual Report.
Access 2020 Annual Report available on 
the Santander Group website
3.1. General aspects
The credit risk management process involves identification, 
assessment, control and decision-making in relation to the 
credit risk incurred in the Group’s operations. It incorporates 
operational, customer and portfolio factors, together with a 
comprehensive view of the credit risk cycle. The Business and 
Risk areas are involved in the process, along with senior 
management.
Santander Group’s profile is mainly retail, with an adequate 
diversification of credit risk between mature and emerging 
markets.
CREDIT RISK 2020 Pillar 3 Disclosures Report
   51

Table 11. Credit risk exposure and CRM effects (IRB approach) (CR4)
Million euros
31 Dec. 2020
Exposures before CCF and 
CRM
Exposures post CCF and CRM
RWAs and RW
On-balance-
sheet amount
Off-balance-
sheet amount
On-balance-
sheet amount
Off-balance-
sheet amount
RWAs
RW
Central governments or central banks
 
2,731  
1,007 
 
1,549  
51 
 
393 
 25 %
Institutions
 
35,593  
14,302 
 
30,723  
4,473 
 
6,356 
 18 %
Corporates
 
196,293  
116,973 
 
173,119  
36,689 
 
122,002 
 58 %
Of Which: Specialised Lending
 
21,245  
5,269 
 
21,179  
1,520 
 
16,037 
 71 %
Of Which: SME
 
43,733  
9,835 
 
34,322  
2,460 
 
22,666 
 62 %
Retail
 
342,228  
40,150 
 
335,776  
24,630 
 
69,799 
 19 %
Secured by real estate property
 
280,451  
15,542 
 
280,842  
10,305 
 
41,285 
 14 %
SME
 
3,471  
86 
 
3,451  
26 
 
813 
 23 %
Non-SME
 
276,980  
15,456 
 
277,390  
10,279 
 
40,472 
 14 %
Qualifying Revolving
 
3,215  
18,860 
 
3,253  
11,856 
 
4,018 
 27 %
Other Retail
 
58,562  
5,749 
 
51,681  
2,470 
 
24,496 
 45 %
SME
 
14,611  
3,749 
 
8,944  
1,336 
 
4,111 
 40 %
Non-SME
 
43,951  
2,000 
 
42,738  
1,133 
 
20,385 
 46 %
Equity
 
10,126  
— 
 
10,126  
— 
 
19,480 
 192 %
Total IRB approach
 
586,972  
172,432 
 
551,293  
65,843 
 
218,030 
 35 %
Note: Securitisations not included. Including counterparty credit risk.
Table 12. Credit risk exposure and CRM effects (Standardised approach) (CR4)
Million euros
31 Dec. 2020
Exposures before CCF and 
CRM
Exposures post CCF and CRM
RWAs and RW
On-balance-
sheet amount
Off-balance-
sheet amount
On-balance-
sheet amount
Off-balance-
sheet amount
RWAs
RW
Central governments or central banks
 
263,841  
13,887 
 
303,869  
5,980 
 
26,307 
 8 %
Regional governments or local authorities 
 
6,642  
44 
 
13,475  
808 
 
215 
 2 %
Public sector entities
 
1,713  
345 
 
1,531  
70 
 
389 
 24 %
Multilateral Development Banks
 
1,818 
0
 
4,672  
— 
 
— 
 0 %
International Organisations
 
9  
— 
 
9  
— 
 
— 
 0 %
Institutions
 
17,584  
21,981 
 
15,052  
14,668 
 
5,202 
 18 %
Corporates
 
56,539  
29,702 
 
46,550  
5,201 
 
48,299 
 93 %
Retail
 
140,932  
68,024 
 
131,741  
1,273 
 
94,860 
 71 %
Secured by mortgages on immovable property
 
85,169  
8,985 
 
84,406  
339 
 
32,125 
 38 %
Exposures in default
 
6,177  
273 
 
6,102  
179 
 
6,550 
 104 %
Items associated with particularly high risk
 
1,285  
137 
 
1,283  
15 
 
1,948 
 150 %
Covered bonds
 
1,674  
— 
 
1,674  
— 
 
167 
 10 %
Claims on institutions and corporates with a short-
term credit assessment
 
95  
190 
 
96 
0
 
79 
 82 %
Collective investments undertakings (CIU)
 
212  
1,308 
 
212  
10 
 
286 
 129 %
Equity exposures
 
282  
— 
 
282  
— 
 
282 
 100 %
Other exposures
 
69,786  
17,216 
 
71,764  
3,720 
 
44,848 
 59 %
Total Standardised approach
 
653,759  
162,093 
 
682,720  
32,263 
 
261,557 
 37 %
Note: Securitisations not included. Including counterparty credit risk.
CREDIT RISK 2020 Pillar 3 Disclosures Report
52
2020 Pillar 3 Disclosures Report

3.2. Capital requirements for 
credit risk
3.2.1. Internal ratings-based approach (IRB)
The following table shows the main changes in capital 
requirements for credit risk under the IRB approach:
Table 13. EU CR8 – RWA flow statements of credit risk 
exposures under the IRB approach
Million euros
31 Dec. 2020
RWA
Capital 
Requirements
RWA as Sep. 2020
 
200,574  
16,046 
Asset size
 
(345)  
(28) 
Asset quality
Model updates
 
3,870  
310 
Methodology and policy
 
370  
30 
Acquisitions and disposals
 
— 
Foreign exchange movements
 
371  
30 
Other
 
(3,197)  
(256) 
RWA as Dec. 2020
 
201,643  
16,131 
* Includes credit risk only excluding RWA under the STD method (see table 
7: OV1)
The variation in RWA in the fourth quarter of 2020 (+1,069 
million) was mainly due to the impact of the TRIM - 
Targeted Review of Internal Models (+3,870 million), which 
was offset by the origination of securitizations that led to 
the elimination of underlying assets (-3,197 million), 
mainly in Consumer and Spain. There was also a decline in 
Retail Banking business in Spain and the UK, partially offset 
by business growth in Santander Consumer, Brazil and 
Wholesale Banking in Europe.
The tables in this section show, for each business segment 
and credit rating (internal and Standard & Poor’s), the value 
of exposures, credit risk parameters and capital under the 
IRB approach, distinguishing between foundation IRB (FIRB) 
and advanced IRB (AIRB).
The distribution of exposures and average parameters by 
segment and geography is as follows:
CREDIT RISK 2020 Pillar 3 Disclosures Report
   53

Table 14. AIRB approach. Credit risk exposures by portfolios class and PD range (CR6)
Million euros
31 Dec. 2020
PD scale
S&P Levels
Original on-
balance-sheet 
gross exposures
Off-balance-sheet 
exposures pre-CCF
Average CCF
EAD post CRM and 
post CCF
Average PD
Number of obligors
Average LGD
Average maturity
RWA
RW
EL
Value adjustments 
and provisions
Central banks and central governments
0.00  < 0.15
AAA to BBB+
 
1,278  
216 
 21.49 %  
797 
 0.04 %
20
 45.69 %  
981  
151 
 19 %  
0  
— 
0.15  < 0.25
BBB+ to BBB
 
255  
0 
 50.00 %  
12 
 0.22 %
4
 50.00 %  
1,603  
9 
 76 %  
0  
— 
0.25  < 0.50
BBB to BB+
 
—  
0 
 26.67 %  
0 
 0.34 %
1
 50.00 %  
591  
0 
 58 %  
—  
— 
0.50  < 0.75
BB+ to BB
 
—  
— 
0  %  
— 
0  %
—
0  %  
—  
— 
0  %  
—  
— 
0.75  < 2.50
BB to B+
 
690  
19 
 20.48 %  
38 
 0.90 %
9
 50.00 %  
1,457  
49 
 129 %  
0  
— 
2.50  < 10.00
B+ to B-
 
436  
1 
 12.80 %  
15 
 5.49 %
7
 70.00 %  
1,686  
44 
 297 %  
1  
— 
10.00  < 100.00
B- to C
 
108  
1 
 49.61 %  
3 
 13.98 %
2
 85.54 %  
1,370  
12 
 456 %  
0  
— 
100.00 (Default)
D
 
—  
— 
0  %  
— 
0  %
—
0  %  
—  
— 
0  %  
—  
— 
Total 2020
 
2,767  
237 
 21.49 %  
865 
 0.21 %
43
 46.48 %  
1,024  
265 
 31 %  
1  
— 
Total 2019
 
3,008  
568 
 26.03 %  
2,761 
 0.12 %
49
 45.34 %  
1,538  
778 
 28 %  
2  
(2) 
Institutions
0.00  < 0.15
AAA to BBB+
 
22,603  
11,329 
 31.54 %  
27,907 
 0.05 %
1475
 43.28 %  
389  
3,727 
 13 %  
6  
(15) 
0.15  < 0.25
BBB+ to BBB
 
2,949  
926 
 38.14 %  
1,602 
 0.17 %
267
 42.98 %  
442  
519 
 32 %  
1  
(2) 
0.25  < 0.50
BBB to BB+
 
2,192  
277 
 37.73 %  
867 
 0.34 %
216
 43.05 %  
559  
444 
 51 %  
1  
(1) 
0.50  < 0.75
BB+ to BB
 
1,598  
114 
 29.60 %  
510 
 0.66 %
221
 43.83 %  
924  
429 
 84 %  
1  
(3) 
0.75  < 2.50
BB to B+
 
2,702  
398 
 44.50 %  
1,584 
 1.06 %
752
 16.15 %  
1,561  
655 
 41 %  
3  
(1) 
2.50  < 10.00
B+ to B-
 
452  
6 
 76.75 %  
181 
 3.32 %
68
 18.40 %  
1,472  
112 
 62 %  
1  
(1) 
10.00  < 100.00
B- to C
 
35  
— 
0%  
— 
0%
20
0%  
—  
— 
0%  
—  
— 
100.00 (Default)
D
 
19  
3 
0%  
19 
 100.00 %
40
 30.55 %  
931  
4 
 21 %  
5  
(2) 
Total 2020
 
32,550  
13,052 
 32.53 %  
32,671 
 0.20 %
3059
 41.81 %  
468  
5,890 
 18 %  
19  
(25) 
Total 2019
 
30,712  
15,179 
 37.57 %  
38,283 
 0.19 %
3,198
 42.54 %  
528  
7,718 
 20 %  
20  
(20) 
CREDIT RISK 2020 Pillar 3 Disclosures Report
54
2020 Pillar 3 Disclosures Report

Million euros
31 Dec. 2020
PD scale
S&P Levels
Original on-
balance-sheet 
gross exposures
Off-balance-sheet 
exposures pre-CCF
Average CCF
EAD post CRM and 
post CCF
Average PD
Number of obligors
Average LGD
Average maturity
RWA
RW
EL
Value adjustments 
and provisions
Corporates
0.00  < 0.15
AAA to BBB+
 
32,751  
43,544 
 38.39 %  
49,190 
 0.08 %  
4,179 
 42.76 %  
812  
11,672 
 23.73 %  
16  
(269) 
0.15  < 0.25
BBB+ to BBB
 
20,268  
16,762 
 31.06 %  
22,918 
 0.21 %  
7,031 
 44.12 %  
612  
9,495 
 41.43 %  
21  
(25) 
0.25  < 0.50
BBB to BB+
 
36,401  
19,042 
 29.48 
 
40,535 
 0.38 %  
21,521 
 46.69 %  
724  
23,467 
 57.89 %  
72  
(365) 
0.50  < 0.75
BB+ to BB
 
20,259  
7,016 
 27.28 %  
12,877 
 0.64 %  
11,390 
 45.98 %  
711  
9,530 
 74.01 %  
38  
(25) 
0.75  < 2.50
BB to B+
 
32,664  
8,754 
 29.87 %  
27,226 
 1.40 %  
50,033 
 44.40 %  
768  
22,886 
 84.06 %  
168  
(148) 
2.50  < 10.00
B+ to B-
 
17,159  
4,591 
 29.89 %  
12,575 
 4.47 %  
30,736 
 41.36 %  
775  
13,393 
 106.50 %  
230  
(268) 
10.00  < 100.00
B- to C
 
4,626  
543 
 29.90 %  
2,753 
 17.18 %  
4,143 
 43.58 %  
886  
5,462 
 198.40 %  
203  
(200) 
100.00 (Default)
D
 
7,900  
1,112 
 22.45 %  
8,149 
 100.00 %  
9,793 
 46.07 %  
865  
1,390 
 17.05 %  
3,703  
(3,456) 
Total 2020
 
172,028  
101,363 
 33.39 %  
176,223 
 5.61 %  
138,825 
 44.39 %  
753  
97,295 
 55.21 %  
4,450  
(4,754) 
Total 2019
 
158,340  
88,731 
 33.68 %  
168,004 
 5.81 %  
106,043 
 43.05 %  
774  
83,936 
 49.96 %  
3,639  
(3,530) 
Of which, SMEs
0.00  < 0.15
AAA to BBB+
 
42  
28 
 28.46 %  
50 
 0.09 %  
2,024 
 41.02 %  
897  
8 
 16.68 %  
0  
— 
0.15  < 0.25
BBB+ to BBB
 
1,216  
159 
 27.68 %  
521 
 0.22 %  
4,150 
 41.38 %  
907  
151 
 29.02 %  
0  
(1) 
0.25  < 0.50
BBB to BB+
 
7,697  
1,770 
 30.18 
 
7,226 
 0.37 %  
14,518 
 47.54 %  
913  
3,203 
 44.33 %  
12  
(318) 
0.50  < 0.75
BB+ to BB
 
3,173  
525 
 33.34 %  
2,674 
 0.62 %  
7,740 
 48.56 %  
844  
1,470 
 54.98 %  
8  
(5) 
0.75  < 2.50
BB to B+
 
16,284  
2,893 
 30.86 %  
12,276 
 1.47 %  
40,780 
 44.83 %  
845  
8,309 
 67.68 %  
80  
(75) 
2.50  < 10.00
B+ to B-
 
9,958  
2,060 
 32.90 %  
6,951 
 4.74 %  
25,592 
 40.51 %  
862  
5,927 
 85.27 %  
132  
(111) 
10.00  < 100.00
B- to C
 
1,247  
165 
 27.36 %  
1,096 
 18.59 %  
3,115 
 39.57 %  
1,167  
1,487 
 135.61 %  
79  
(56) 
100.00 (Default)
D
 
4,156  
148 
 22.78 %  
4,190 
 100.00 %  
7,203 
 45.59 %  
909  
662 
 15.81 %  
1,887  
(1,816) 
Total 2020
 
43,773  
7,748 
 31.11 %  
34,984 
 14.14 %  
105,122 
 44.69 %  
881  
21,218 
 60.65 %  
2,199  
(2,382) 
Total 2019
 
27,991  
7,403 
 31.59 %  
30,196 
 8.68 %  
63,019 
 43.31 %  
813  
17,512 
 58.00 %  
935  
(909) 
CREDIT RISK 2020 Pillar 3 Disclosures Report
55

Table 15. FIRB approach. Credit risk exposures by portfolios class and PD range (CR6)
Million euros
31 Dec. 2020
PD scale
S&P 
Levels
Original 
on-
balance-
sheet 
gross 
Off-
balance-
sheet 
exposures 
pre-CCF
Average 
CCF
EAD
Average 
PD
Number 
of 
obligors
Average 
LGD
Average 
maturity
RWA
RW
EL
Value 
adjustme
nts and 
provisions
Central banks and central governments
0.00  < 0.15
AAA to BBB+
 
735  
— 
0%  
735 
 0.04 %  
2 
 45.00 %  
900  
128 
 17.37 %  
0  
— 
0.15  < 0.25
BBB+ to BBB
 
—  
— 
0%  
— 
0%  
— 
0%  
—  
— 
0%  
—  
— 
0.25  < 0.50
BBB to BB+
 
—  
— 
0%  
— 
0%  
— 
0%  
—  
— 
0%  
—  
— 
0.50  < 0.75
BB+ to BB
 
—  
— 
0%  
— 
0%  
— 
0%  
—  
— 
0%  
—  
— 
0.75  < 2.50
BB to B+
 
—  
— 
0%  
— 
0%  
— 
0%  
—  
— 
0%  
—  
— 
2.50  < 10.00
B+ to B-
 
—  
— 
0%  
— 
0%  
— 
0%  
—  
— 
0%  
—  
— 
10.00  < 100.00
B- to C
 
—  
— 
0%  
— 
0%  
— 
0%  
—  
— 
0%  
—  
— 
100.00 (Default)
D
 
—  
— 
0%  
— 
0%  
— 
0%  
—  
— 
0%  
—  
— 
Total 2020
 
735  
— 
0%  
735 
 0.04 %  
2 
 45.00 %  
900  
128 
 17.37 %  
0  
0 
Total 2019
 
488  
— 
0%  
488 
 0.02 %  
1 
 45.00 %  
900  
65 
 13.28 %  
0  
0 
Institutions
0.00  < 0.15
AAA to BBB+
 
2,122  
1,664 
 12.05 %  
2,323 
 0.06 %  
243 
 44.96 %  
226  
336 
 14 %  
1  
— 
0.15  < 0.25
BBB+ to BBB
 
76  
106 
 10.55 %  
87 
 0.18 %  
54 
 44.16 %  
507  
40 
 45 %  
0  
— 
0.25  < 0.50
BBB to BB+
 
80  
179 
 5.43 %  
90 
 0.32 %  
57 
 45.00 %  
810  
65 
 73 %  
0  
— 
0.50  < 0.75
BB+ to BB
 
19  
23 
 3.35 %  
20 
 0.66 %  
34 
 45.00 %  
764  
20 
 101 %  
0  
— 
0.75  < 2.50
BB to B+
 
0  
24 
 19.96 %  
5 
 1.09 %  
7 
 45.00 %  
255  
5 
 107 %  
0  
— 
2.50  < 10.00
B+ to B-
 
0  
0 
0%  
0 
 2.89 %  
1 
 45.00 %  
900 
0
 165 %  
0  
— 
10.00  < 100.00
B- to C
 
—  
— 
0%  
— 
0%  
— 
0%  
—  
— 
0%  
—  
— 
100.00 (Default)
D
 
—  
— 
0%  
— 
0%  
— 
0%  
—  
— 
0%  
—  
— 
Total 2020
 
2,297  
1,995 
 11.37 %  
2,525 
 0.08 %  
396 
 44.94 %  
261  
466.08 
 18.46 %  
1  
0 
Total 2019
 
2,386  
1,648 
 15.04 %  
2,634 
 0.09 %  
372 
 44.64 %  
429  
609.49 
 23.14 %  
1  
(1) 
Corporates
0.00  < 0.15
AAA to BBB+
 
821  
546 
 52.63 %  
1,237 
 0.07 %  
21 
 45.00 %  
863  
347 
 28.01 %  
0  
— 
0.15  < 0.25
BBB+ to BBB
 
1,048  
1,267 
 59.99 %  
1,904 
 0.16 %  
67 
 45.00 %  
789  
803 
 42.17 %  
1  
(1) 
0.25  < 0.50
BBB to BB+
 
1,633  
165 
 51.99 %  
1,656 
 0.32 %  
1,460 
 45.00 %  
885  
973 
 58.79 %  
2  
(5) 
0.50  < 0.75
BB+ to BB
 
1,078  
309 
 5.39 %  
942 
 0.55 %  
401 
 45.00 %  
893  
723 
 76.71 %  
2  
(4) 
0.75  < 2.50
BB to B+
 
2,402  
761 
 12.61 %  
2,250 
 1.29 %  
1,777 
 44.36 %  
900  
2,248 
 99.89 %  
13  
(25) 
2.50  < 10.00
B+ to B-
 
2,289  
373 
 15.88 %  
2,317 
 3.75 %  
2,562 
 43.74 %  
903  
2,950 
 127.32 %  
38  
(71) 
10.00  < 100.00
B- to C
 
311  
82 
 6.53 %  
313 
 13.69 %  
625 
 43.48 %  
906  
626 
 199.92 %  
19  
(15) 
100.00 (Default)
 
258  
20 
 46.65 %  
267 
 100.00 %  
267 
 45.00 %  
789  
— 
0%  
120  
(128) 
Total 2020
 
9,839  
3,522 
 37.46 %  
10,887 
 4.04 %  
7,180 
 44.56 %  
872  
8,670 
 79.63 %  
196  
(250) 
Total 2019
 
12,284  
3,070 
 40.93 %  
13,235 
 4.06 %  
7,053 
 44.56 %  
889  
9,420 
 71.18 %  
238  
(154) 
CREDIT RISK 2020 Pillar 3 Disclosures Report
56
2020 Pillar 3 Disclosures Report

Table 16. AIRB approach. Credit risk exposures by portfolios class and PD range. Retail portfolios (CR6)
Million euros
31 Dec. 2020
PD scale
S&P Levels
Original on-
balance-sheet 
gross exposures
Off-balance-sheet 
exposures pre-CCF
Average CCF
EAD
Average PD
Number of obligors
Average LGD
RWA
RW
EL
Value adjustments 
and provisions
Residential Mortgages
0.00  < 0.15
AAA to BBB+
 
42,071  
1,015 
 100.71 %  
43,093 
 0.07 %  
643,347 
 14.45 %  
1,274 
 2.96 %  
5  
(57) 
0.15  < 0.25
BBB+ to BBB
 
15,488  
966 
 80.21 %  
16,262 
 0.20 %  
188,989 
 19.40 %  
1,345 
 8.27 %  
6  
(9) 
0.25  < 0.50
BBB to BB+
 
69,050  
9,381 
 63.01 %  
75,041 
 0.36 %  
537,963 
 7.90 %  
3,848 
 5.13 %  
22  
(21) 
0.50  < 0.75
BB+ to BB
 
20,071  
1,415 
 63.73 %  
21,020 
 0.59 %  
194,321 
 9.10 %  
1,738 
 8.27 %  
11  
(10) 
0.75  < 2.50
BB to B+
 
76,720  
2,429 
 62.68 %  
78,408 
 1.23 %  
500,738 
 9.02 %  
10,532 
 13.43 %  
89  
(71) 
2.50  < 10.00
B+ to B-
 
38,453  
240 
 60.74 %  
38,665 
 4.37 %  
254,730 
 11.27 %  
13,895 
 35.94 %  
200  
(102) 
10.00  < 100.00
B- to C
 
11,536  
55 
 44.68 %  
11,589 
 26.27 %  
98,222 
 11.76 %  
7,073 
 61.03 %  
336  
(172) 
100.00 (Default)
D
 
7,066  
38 
 6.34 %  
7,068 
 100.00 %  
84,992 
 24.70 %  
1,579 
 22.34 %  
1,709  
(1,540) 
Total 2020
 
280,454  
15,539 
 66.31 %  
291,146 
 4.54 %  
2,503,302 
 10.91 %  
41,285 
 14.18 %  
2,378  
(1,982) 
Total 2019
 
288,444  
16,498 
 66.89 %  
299,878 
 5.08 %  
2,554,419 
 11.33 %  
44,537 
 14.85 %  
3,031  
(2,692) 
Qualifying Revolving
0.00  < 0.15
AAA to BBB+
 
431  
5,147 
 54.11 %  
3,216 
 0.08 %  
2,511,939 
 58.87 %  
100 
 3.10 %  
2  
(3) 
0.15  < 0.25
BBB+ to BBB
 
101  
4,770 
 85.43 %  
4,176 
 0.17 %  
6,485,042 
 67.47 %  
280 
 6.70 %  
5  
(2) 
0.25  < 0.50
BBB to BB+
 
124  
2,575 
 35.68 %  
1,043 
 0.30 %  
1,657,020 
 48.01 %  
78 
 7.44 %  
2  
(91) 
0.50  < 0.75
BB+ to BB
 
125  
1,016 
 63.21 %  
768 
 0.60 %  
772,209 
 55.29 %  
120 
 15.60 %  
3  
(2) 
0.75  < 2.50
BB to B+
 
732  
3,745 
 61.11 %  
3,025 
 1.37 %  
3,400,195 
 56.21 %  
874 
 28.90 %  
23  
(11) 
2.50  < 10.00
B+ to B-
 
992  
1,309 
 71.78 %  
1,943 
 4.95 %  
2,011,713 
 60.28 %  
1,467 
 75.52 %  
58  
(37) 
10.00  < 100.00
B- to C
 
486  
264 
 77.92 %  
712 
 25.69 %  
673,165 
 59.77 %  
1,075 
 150.90 %  
108  
(68) 
100.00 (Default)
D
 
224  
33 
 0.26 %  
224 
 100.00 %  
130,317 
 81.89 %  
24 
 10.89 %  
182  
(169) 
Total 2020
 
3,215  
18,860 
 62.86 %  
15,108 
 3.72 %  17,641,600 
 60.35 %  
4,018 
 26.60 %  
382  
(382) 
Total 2019
 
3,481  
17,944 
 60.78 %  
14,427 
 3.72 %  17,107,586 
 61.19 %  
4,174 
 28.93 %  
347  
(258) 
CREDIT RISK 2020 Pillar 3 Disclosures Report
57

Million euros
31 Dec. 2020
PD scale
S&P Levels
Original on-
balance-sheet 
gross exposures
Off-balance-sheet 
exposures pre-CCF
Average CCF
EAD
Average PD
Number of obligors
Average LGD
RWA
RW
EL
Value adjustments 
and provisions
Retail Others
0.00  < 0.15
AAA to BBB+
 
1,531  
294 
 52.92 %  
1,681 
 0.08 %  
214,114 
 41.89 %  
158 
 9.42 %  
1  
(2) 
0.15  < 0.25
BBB+ to BBB
 
6,158  
610 
 45.78 %  
5,759 
 0.20 %  
836,131 
 44.46 %  
1,040 
 18.06 %  
5  
(5) 
0.25  < 0.50
BBB to BB+
 
6,741  
698 
 73.82 %  
6,850 
 0.34 %  
742,366 
 42.71 %  
1,748 
 25.52 %  
10  
(55) 
0.50  < 0.75
BB+ to BB
 
8,621  
336 
 50.44 %  
7,114 
 0.59 %  
763,836 
 47.76 %  
2,606 
 36.63 %  
20  
(65) 
0.75  < 2.50
BB to B+
 
19,627  
1,281 
 50.71 %  
17,630 
 1.21 %  
1,897,351 
 47.10 %  
8,929 
 50.65 %  
101  
(91) 
2.50  < 10.00
B+ to B-
 
12,099  
987 
 60.66 %  
10,254 
 4.04 %  
1,071,970 
 47.65 %  
6,929 
 67.57 %  
196  
(148) 
10.00  < 100.00
B- to C
 
2,744  
165 
 46.67 %  
2,515 
 27.86 %  
417,757 
 47.60 %  
2,592 
 103.06 %  
342  
(212) 
100.00 (Default)
D
 
2,323  
98 
 25.67 %  
2,348 
 100.00 %  
392,313 
 75.33 %  
494 
 21.04 %  
1,730  
(1,703) 
Total 2020
 
59,843  
4,468 
 55.27 %  
54,151 
 6.93 %  
6,335,838 
 47.54 %  
24,496 
 45.24 %  
2,404  
(2,281) 
Total 2019
 
51,346  
7,386 
 46.89 %  
54,254 
 6.59 %  
8,055,306 
 47.48 %  
25,753 
 47.47 %  
2,133  
(1,859) 
Of which, SMEs
0.00  < 0.15
AAA to BBB+
 
26  
251 
 52.99 %  
158 
 0.07 %  
66,061 
 54.97 %  
12 
 7.79 %  
0  
— 
0.15  < 0.25
BBB+ to BBB
 
1,439  
219 
 43.56 %  
857 
 0.20 %  
69,952 
 54.44 %  
154 
 18.01 %  
1  
(1) 
0.25  < 0.50
BBB to BB+
 
724  
326 
 56.96 %  
555 
 0.35 %  
48,822 
 48.27 %  
123 
 22.13 %  
1  
(2) 
0.50  < 0.75
BB+ to BB
 
2,781  
290 
 45.66 %  
1,408 
 0.65 %  
94,242 
 54.15 %  
510 
 36.24 %  
5  
(51) 
0.75  < 2.50
BB to B+
 
4,950  
814 
 43.01 %  
3,138 
 1.28 %  
234,505 
 47.03 %  
1,328 
 42.33 %  
19  
(21) 
2.50  < 10.00
B+ to B-
 
4,202  
583 
 66.38 %  
2,754 
 3.86 %  
190,811 
 45.98 %  
1,473 
 53.48 %  
49  
(32) 
10.00  < 100.00
B- to C
 
668  
93 
 34.25 %  
476 
 24.33 %  
63,128 
 46.09 %  
399 
 83.76 %  
54  
(48) 
100.00 (Default)
D
 
912  
84 
 25.60 %  
934 
 100.00 %  
86,449 
 81.69 %  
112 
 11.96 %  
754  
(727) 
Total 2020
 
15,701  
2,659 
 50.26 %  
10,280 
 11.76 %  
853,970 
 51.64 %  
4,111 
 39.99 %  
883  
(881) 
Total 2019
 
9,388  
3,073 
 42.00 %  
10,116 
 11.45 %  
775,900 
 50.65 %  
4,453 
 44.02 %  
757  
(710) 
CREDIT RISK 2020 Pillar 3 Disclosures Report
58
2020 Pillar 3 Disclosures Report

The distribution of exposures and average parameters by 
segment and geography are as follows:
Table 17. Exposures and parameters by segment and geography*
Million euros
31 Dec. 2020
Central 
governments 
and central 
banks
Institutions
Corporates
Retail 
Mortgages
Retail SME 
Retail Other
Retail 
Qualifying 
Revolving
Total
Santander Group
EAD
 
1,600 
 
35,177 
 
178,693 
 
284,078 
 
9,346 
 
42,457 
 
14,884 
 
566,235 
Average LGD in %
 45.80 %
 42.03 %
 43.60 %
 10.02 %
 47.63 %
 44.95 %
 59.87 %
 27.26 %
Average PD in %
 0.13 %
 0.14 %
 0.82 %
 2.17 %
 2.95 %
 2.66 %
 2.27 %
 1.66 %
Europe
EAD
 
865 
 
30,908 
 
138,325 
 
284,078 
 
9,346 
 
42,457 
 
14,884 
 
520,862 
Average LGD in %
 46.48 %
 43.26 %
 43.46 %
 10.02 %
 47.63 %
 44.95 %
 59.87 %
 25.88 %
Average PD in %
 0.21 %
 0.08 %
 1.11 %
 2.17 %
 2.95 %
 2.66 %
 2.27 %
 1.82 %
Latam
EAD
 
735 
 
1,643 
 
26,427 
 
— 
 
1 
 
— 
 
— 
 
28,806 
Average LGD in %
 45.00 %
 44.90 %
 44.98 %
0  %
 60.49 %
0  %
0  %
 44.98 %
Average PD in %
 0.04 %
 0.09 %
 1.00 %
0  %
 0.46 %
0  %
0  %
 0.92 %
North America
EAD
 
— 
 
2,626 
 
13,941 
 
— 
 
— 
 
— 
 
— 
 
16,568 
Average LGD in %
0  %
 25.70 %
 42.33 %
0  %
0  %
0  %
0  %
 39.69 %
Average PD in %
0  %
 0.81 %
 0.80 %
0  %
0  %
0  %
0  %
 0.80 %
*
EAD and parameters without default.
*
EAD does not include neither equities nor specialised lending.
*
North America includes the United States and Mexico
Table 18. Specialised lending (CR10)
Million euros
31 Dec. 2020
Regulatory Categories
Remaining 
maturity
On-balance-
sheet amount
Off-balance-
sheet amount
RW
EAD
RWA
Expected loss
Category 1
< 2,5 years  
660  
161 
 41 %  
742  
302  
0 
>= 2,5 years  
2,615  
613 
 59 %  
2,789  
1,634  
14 
Category 2
< 2,5 years  
5,272  
1,475 
 67 %  
5,689  
3,796  
31 
>= 2,5 years  
10,199  
2,609 
 76 %  
10,932  
8,306  
89 
Category 3
< 2,5 years  
391  
21 
 102 %  
393  
401  
10 
>= 2,5 years  
1,429  
418 
 93 %  
1,528  
1,421  
33 
Category 4
< 2,5 years  
35  
0 
 222 %  
35  
77  
3 
>= 2,5 years  
41  
23 
 223 %  
46  
102  
4 
Category 5
< 2,5 years  
174  
3 
0%  
176  
—  
88 
>= 2,5 years  
365  
11 
0%  
369  
—  
184 
Total
< 2,5 years  
6,531  
1,660 
 65 %  
7,034  
4,575  
132 
>= 2,5 years  
14,648  
3,674 
 73 %  
15,664  
11,462  
324 
CREDIT RISK 2020 Pillar 3 Disclosures Report
59

The following tables show the distribution by portfolio of the 
EAD weighted averages for PD and LGD, as well as the 
exposure in millions of euros and the percentage of EAD it 
represents.
EAD-weighted average PD
EAD-weighted average LGD
%
%
         
0.21%
0.20%
5.61%
14.14%
4.54%
3.72%
6.93%
11.76%
0.08%
4.04%
0.12%
0.19%
5.81%
8.68%
5.08%
3.72%
6.59%
11.45%
0.09%
4.06%
2020
2019
Sovereigns
Institutions
Corporates
Of which, SMEs
Mortgages
Credit cards
Other retail
Of which, SMEs
FIRB institutions
FIRB corporates
46.48%
41.81%
44.39%
44.69%
10.91%
60.35%
47.54%
51.64%
44.94%
44.56%
45.34%
42.54%
43.05%
43.30%
11.33%
61.19%
47.48%
50.65%
44.64%
44.56%
2020
2019
Sovereigns
Institutions
Corporates
Of which, SMEs
Mortgages
Credit cards
Other retail
Of which, SMEs
FIRB institutions
FIRB corporates
Exposure
RWA/EAD
Million euros
%
         
865
32,671
176,223
34,984
291,146
15,108
54,151
10,280
2,525
10,887
2,761
38,283
168,004
30,196
299,878
14,427
54,254
10,116
2,634
13,235
2020
2019
Sovereigns
Institutions
Corporates
Of which, SMEs
Mortgages
Credit cards
Other retail
Of which, SMEs
FIRB institutions
FIRB corporates
30.65%
18.03%
55.21%
60.65%
14.18%
26.60%
45.24%
39.99%
18.46%
79.63%
28.20%
20.16%
49.96%
58.00%
14.85%
28.93%
47.47%
44.02%
23.14%
71.18%
2020
2019
Sovereigns
Institutions
Corporates
Of which, SMEs
Mortgages
Credit cards
Other retail
Of which, SMEs
FIRB institutions
FIRB corporates
CREDIT RISK 2020 Pillar 3 Disclosures Report
60
2020 Pillar 3 Disclosures Report

The following chart depicts exposures using the IRB approach 
approved in December 2020 (excluding Equities and 
Specialised Lending), based on the internal credit quality 
associated with its external rating.
For EAD distribution including guarantees, expected losses 
have been assigned to the different tranches of PD taking a 
LGD of 45% in each bucket. It shows that the risk profile of 
the whole portfolio improves significantly when factoring in 
guarantees, especially mortgage collateral.
Distribution of IRB exposures associated with its external rating (Dec. 2020)
Million euros
n 
n 
EAD excluding collaterals
EAD including collaterals
48,830
58.96
118,900
183,390
115,910
35,300
4,950
18,080
65,490
123,100
144,430
143,690
72,740
14,490
2,310
18,080
AAA to AA
AA to A-
BBB+ to BBB-
BB+ to BB
BB- to B+
B to B-
CCC to C
0
3.2.2. Equity investments and capital instruments not 
included in the trading book
This section provides definitions of investments in associates, 
equity instruments classified as other financial assets at fair 
value through other comprehensive income, and financial 
assets with mandatory classification at fair value through 
profit or loss. It also defines the accounting policies and 
measurement methods applied. Information is also provided 
on the amounts of those equity instruments not included in 
the held-for-trading portfolio.
Investments in associates are those stakes affording 
Santander Group significant influence, but not control or joint 
control. This capacity usually involves 20% or more of the 
voting rights at the investee. 
Equity instruments not held for trading issued by entities 
other than subsidiaries, jointly controlled entities and 
associates are required to be classified at fair value through 
profit or loss, unless the entity opts to classify them as 
financial assets at fair value through other comprehensive 
income, irrevocably, on initial recognition.
Investments in associates are recognised at cost and 
Santander Group periodically tests for their impairment.
Equity instruments classified as other financial assets at fair 
value through other comprehensive income are recognised 
and measured at fair value with a corresponding entry in 
equity, under valuation adjustments. Instruments classified as 
financial assets with mandatory recognition at fair value 
through profit or loss are recognised and measured at fair 
value with a corresponding entry in profit or loss.
CREDIT RISK 2020 Pillar 3 Disclosures Report
61

Table 19. Equities (CR10)
Million euros
31 Dec. 2020
Tranches:
Weighted 
average PD
Original 
exposure
EAD
EAD-
weighted 
average LGD
RWA
PE/EAD
RW
PD/LGD Approach
1
 0.09 %  
9 
 
9 
 65.0 %  
6 
 0.06 %
 70 %
2
 0.13 %  
977 
 
977 
 88.2 %  
1,108 
 0.11 %
 113 %
3
 0.15 %  
1,584 
 
1,584 
 90.0 %  
1,937 
 0.13 %
 122 %
4
 0.26 %  
1,328 
 
1,328 
 88.3 %  
2,068 
 0.23 %
 156 %
5
 2.20 %  
1,078 
 
1,078 
 65.0 %  
2,308 
 1.43 %
 214 %
Default
 100.00 %
 45 %
 45 %
 65.0 %
0  %
 65.00 %
0  %
Total 2020
 0.63 %  
4,977 
 
4,977 
 83.7 %  
7,427 
 0.44 %
 149 %
Total 2019
 0.49 %  
6,243 
 
6,243 
 82.8 %  
9,125 
 0.35 %
 146 %
Simple-risk weighted 
approach
Exposure in private equity
 
1,392 
 
1,392 
0%  
2,645 
 0.80 %
 190 %
Exposure in equity traded 
in organised markets
 
36 
 
36 
0%  
105 
 0.80 %
 290 %
Other exposures in 
equities
Total 2020
 — 
 
1,428 
 
1,428 
 — 
 
2,750 
 — 
 — 
Total 2019
 — 
 
1,439 
 
1,439 
 — 
 
2,825 
 — 
 — 
Internal models approach 2020
 
— 
 
— 
 — 
 
— 
 — 
 — 
Internal models approach 2019
 
— 
 
— 
 — 
 
— 
 — 
 — 
Financial participations Dec. 2020
 
3,722 
 
3,722 
 — 
 
9,304 
 250 %
Financial participations Dec. 2019
 
3,049 
 
3,049 
 — 
 
7,622 
 — 
 250 %
Total 2020
 
10,126 
 
10,126 
 
19,480 
Total 2019
 — 
 
10,731 
 
10,731 
 — 
 
19,572 
 — 
 — 
 Note: Grupo Santander does not hold off-balance sheet exposures in equities.
The total unrealised losses on equity and equity instruments 
not included in the trading book included in CET1 at December 
2020 amounted to €284 million.
Table 20. Equity instruments through other comprehensive income
Million euros
31 Dec. 2020
Carrying value
Fair value
Valuation adjustment
Quoted
 
1,425  
1,425  
493 
Unquoted
 
1,360  
1,360  
(765) 
Total
 
2,784  
2,784  
(272) 
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2020 Pillar 3 Disclosures Report

Table 21. Equity instruments mandatorily at fair value 
through profit and loss
Million euros
31 Dec. 2020
Fair Value
Quoted
 
90 
Investment funds
 
350 
Unquoted
 
1,318 
Total
 
1,758 
Refer to notes 2.d.iii and 8 of the auditor’s report and 
financial statements in the annual report for further 
information on the portfolio of equity instruments classified 
as other financial assets at fair value through other 
comprehensive income and with mandatory classification 
at fair value through profit or loss.
Access 2020 Annual Report available on 
the Santander Group website
Table 22. Equity instruments through other comprehensive 
income. Consolidated gross valuation adjustments
Million euros
Valuation 
adjustment
Prior-year balance
 
644 
Revaluation gains and losses
 
(916) 
Current-year balance
 
(272) 
Refer to note 29 of the auditor’s report and financial 
statements in the annual report for further information on 
the portfolio of equity instruments classified as other 
financial assets at fair value through other comprehensive 
income.
Access 2020 Annual Report available on 
the Santander Group website
With respect to holdings accounted for using the equity 
method at year-end 2020, the amounts for associates and 
jointly controlled entities were EUR 6,161 million and EUR 
530 million respectively.
There are also investments in Group entities totalling EUR 
2,014 million which are accounted for using the full 
consolidation method in the public perimeter.
The Group tests these investments for impairment on a 
regular basis. No evidence of significant impairment was 
found in 2020.
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63

3.2.3. Standardised approach
Santander Group uses the external rating agencies designated 
as eligible by the ECB (European Central Bank) for calculation 
of regulatory capital under the standardised approach. The 
agencies used for the capital calculation as of 31 December 
2020 are Fitch, Moody’s, DBRS, Standard & Poor’s and Japan 
Credit Rating Agency.
For the central government and central banks category, if the 
requirements of article 137 of the CRR are met, Santander 
Group uses the OECD’s Country Risk Classification of the 
Participants to the Arrangement on Officially Supported 
Export Credits.
Different risk weights are applied to credit exposures 
depending on the rating assigned by the credit rating agencies 
(e.g. Fitch, Moody’s and Standard & Poor’s for the segments 
approved under Part III, Title II, Chapter II of the CRR) or the 
minimum export insurance premium rating (e.g. OECD for the 
central government and central bank segment, as explained 
above).
The assignment of risk weights according to credit ratings is 
compliant with the regulatory requirements, aligning the 
alphanumeric scale of each agency used with the credit 
quality steps set down in Chapter II, Section II of the CRR, as 
follows:
Credit quality 
step
S&P
Moody's
Fitch
DBRS
Japan Credit Rating 
Agency
1
AAA a AA-
AAA a AA3
AAA a AA-
AAA a AAL
AAA a AA
2
A+ a A-
A1 a A3
A+ a A-
AH a AL
A 
3
BBB+ a BBB-
BAA1 a BAA3
BBB+ a BBB-
BBBH a BBBL
BBB
4
BB+ a BB-
BA1 a BA3
BB+ a BB-
BBH a BBL
BB
5
B+ a B-
B1 a B3
B+ a B-
BH a BL
B
6
Inferior a B-
Inferior a B3
Inferior a B-
CCCH e inferior
CCC a inferior
Credit quality 
step
Central 
governments and 
central banks
Public sector 
entities
Institutions ≤ 3 
months rated
Institutions > 3 
months rated
Institutions not 
rated
Corporates
1
0%
20%
20%
20%
20%
20%
2
20%
50%
20%
50%
50%
50%
3
50%
100%
20%
50%
100%
100%
4
100%
100%
50%
100%
100%
100%
5
100%
100%
50%
100%
100%
150%
6
150%
150%
150%
150%
150%
150%
Santander Group does not currently have a process in place 
for assigning the credit ratings of publicly issued securities to 
comparable assets that are not included in the trading 
portfolio.
In accordance with article 150 of the CRR, Santander Group 
always uses the standardised approach for sovereign 
exposures denominated and funded in the Member State’s 
local currency, applying a 0% risk weighting.
The tables below show the value of the net exposure value 
after impairment loss allowances after risk mitigation, by 
segment and credit quality grade.
Guarantees are applied by reallocating exposures to the 
corresponding asset categories and risk weightings.
When credit institutions use some of their qualifying financial 
collateral as a credit risk mitigation technique, the valuation 
of this collateral for the calculation of risk-weighted exposure 
amounts can either follow the simple valuation method for 
financial collateral under Article 222 of the CRR or the 
comprehensive method under Article 223.
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2020 Pillar 3 Disclosures Report

Table 23. Standardised approach (including a breakdown of exposures post conversion factor and post mitigation techniques) (CR5)
Million euros
31 Dec. 2020
Risk Weight
Total
Of which 
unrated
0%
2%
4%
10%
20%
35%
50%
70%
75%
100%
150%
250%
370% 1250%
Other
Deduc.
Central governments or central 
banks
 287,320  
—  
—  
—  
612  
—  
2,970  
—  
—  
11,579  
13  
5,231  
—  
—  
— 
 
307,724 
302,467 
Regional government or local 
authorities
 
13,853  
—  
—  
—  
269  
—  
0  
—  
—  
161  
—  
—  
—  
—  
— 
 
14,283  
14,007 
Public sector entities
 
452  
—  
—  
—  
898  
—  
84  
—  
—  
167  
0  
—  
—  
—  
— 
 
1,601  
596 
Multilateral development banks
 
4,672  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
— 
 
4,672  
4,672 
International organisations
 
9  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
— 
 
9  
9 
Institutions
 
—  
—  
—  
—  13,403  
—  
769  
—  
—  
1,471  
34  
—  
—  
—  
— 
 
15,677  
4,690 
Corporates
 
—  
—  
—  
—  
530  
—  
62  
—  
—  
49,094  
518  
—  
—  
—  
— 
 
50,205  
49,501 
Retail
 
—  
—  
—  
—  
—  
1,548  
—  
—  
131,427  
—  
—  
—  
—  
—  
— 
 
132,975  
132,975 
Secured by mortgages on 
immovable property
 
—  
—  
—  
—  
—  67,583  12,320  
—  
2,573  
2,261  
8  
—  
—  
—  
— 
 
84,745  
84,738 
Exposures in default
 
—  
—  
—  
—  
—  
—  
—  
—  
—  
5,743  
538  
—  
—  
—  
— 
 
6,281  
6,281 
Exposures associated with 
particularly high risk
 
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
1,299  
—  
—  
—  
— 
 
1,299  
1,299 
Covered bonds
 
—  
—  
—  
1,674  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
— 
 
1,674 
0
Institutions and corporates with a 
short-term credit assessment
 
—  
—  
—  
—  
1  
—  
42  
—  
—  
46  
8  
—  
—  
—  
— 
 
97  
20 
Collective investment undertakings
 
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
—  
212 
 
212  
212 
Equity
 
—  
—  
—  
—  
—  
—  
—  
—  
—  
282  
—  
—  
—  
—  
— 
 
282  
282 
Other items
 
21,387  197  
—  
—  11,287  
—  
18  
—  
71  
42,525  
—  
—  
—  
—  
— 
 
75,484  
75,484 
Total 
 327,692  197  
—  
1,674  26,998  69,130  16,264  
—  
134,071  113,328  
2,419  
5,231  
—  
—  
212  
—  
697,218  
677,234 
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3.3. Distribution of exposures
The tables below give a breakdown of the exposures to credit 
and dilution risk of Santander Group:
• Exposure category
• Business sector
• Geographical area
• Residual maturity
Information is also presented on non-performing exposures, 
impairment loss allowances, and provisions for contingent 
liabilities and commitments.
The amounts shown in the tables in this section include the 
amounts for counterparty credit risk excluding securitisations.
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2020 Pillar 3 Disclosures Report

Table 24. Credit quality of exposures by exposure classes and instruments (CR1-A)
Million euros
31 Dec. 2020
Gross carrying values of
Specific 
credit risk 
adjustment
Accumulated 
write-offs
Credit risk 
adjustment 
charges of 
the period
Net values
Defaulted 
exposures
Non-
defaulted 
exposures
IRB approach
Central governments or central banks
 
—  
3,738  
1  
—  
—  
3,738 
Institutions
 
22  
49,873  
26  
0  
—  
49,869 
Corporates
 
9,845  
303,422  
5,321  
1,143  
810  
307,945 
Of which, Specialised Lending
 
556  
25,957  
315  
2  
21  
26,198 
Of which, SME
 
4,441  
49,127  
2,511  
203  
186  
51,057 
Retail
 
9,782  
372,597  
4,645  
486  
909  
377,733 
Secured by real estate property
 
7,104  
288,889  
1,982  
60  
146  
294,011 
SME
 
1,210  
2,347  
353  
33  
18  
3,205 
Non-SME
 
5,894  
286,542  
1,629  
28  
129  
290,806 
Qualifying Revolving
 
257  
21,817  
382  
55  
112  
21,692 
Other Retail
 
2,421  
61,890  
2,281  
370  
651  
62,030 
SME
 
996  
17,364  
881  
85  
132  
17,479 
Non-SME
 
1,425  
44,526  
1,400  
285  
519  
44,551 
Equity
0  
10,126  
—  
—  
—  
10,126 
Total IRB approach
 
19,649  
739,755  
9,992  
1,630  
1,719  
749,412 
Standard approach
Central governments or central banks
 
3  
277,736  
8  
0  
0  
277,728 
Regional governments or local authorities 
 
7  
6,688  
2  
0  
1  
6,686 
Public sector entities
 
7  
2,060  
2  
0  
0  
2,058 
Multilateral Development Banks
 
—  
1,818  
—  
—  
0  
1,818 
International Organisations
 
—  
9  
—  
—  
—  
9 
Institutions
 
4  
39,584  
18  
46  
44  
39,566 
Corporates
 
1,518  
87,357  
1,115  
722  
634  
86,242 
of which, SME
 
260  
19,511  
161  
287  
291  
19,350 
Retail
 
6,743  
214,969  
6,013  
6,066  
8,398  
208,956 
of which, SME
 
971  
39,244  
679  
415  
777  
38,565 
Secured by mortgages on immovable property
 
4,591  
94,749  
594  
206  
516  
94,154 
of which, SME
 
841  
19,490  
184  
29  
204  
19,306 
Items associated with particularly high risk
 
158  
1,502  
80  
2  
—  
1,421 
Covered bonds
 
—  
1,674 
0  
—  
—  
1,674 
Claims on institutions and corporates with a short-term 
credit assessment
 
—  
285 
0  
—  
—  
285 
Collective investments undertakings (CIU)
 
—  
1,521  
—  
—  
—  
1,521 
Equity exposures
 
—  
282  
—  
—  
—  
282 
Other exposures
 
190  
87,554  
552  
43  
30  
87,001 
Total Exposures in default (STD Approach only)
 
6,612  
—  
—  
6,450 
Total Standardised approach
 
13,062  
817,788  
14,998  
7,085  
9,624  
815,852 
Total
 
32,711  1,557,543  
24,990  
8,715  
11,343  1,565,264 
Notes:
1) The row of Total Exposures in default (SA approach only) is the sumatory of all the defaulted exposures and is included to show the defaulted exposures’ Specific credit risk 
adjustment.
2) Non-performing exposures do not include high-risk exposures.
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The following two tables show all exposures by industry and geographical area:
Table 25. Credit quality of exposures by industry or counterparty type (CR1-B)
Million euros
31 Dec. 2020
Gross carrying values of:
Adjustment for 
specific Credit risk
Accumulated 
write-offs
Credit risk 
adjustment 
charges
Net values
Defaulted 
exposures
Non-defaulted 
exposures
Agriculture, forestry and fishing
 
860  
12,152  
535  
139  
250  
12,478 
Mining and quarrying
 
181  
4,590  
64  
24  
945  
4,707 
Manufacturing 
 
2,125  
59,619  
1,580  
415  
2,192  
60,163 
Electricity, gas, steam and air 
conditioning supply
 
361  
16,807  
234  
125  
1,298  
16,935 
Water supply
 
17  
668  
15  
1  
428  
668 
Construction
 
781  
16,429  
651  
113  
3,027  
16,560 
Wholesale and retail trade 
 
1,368  
53,366  
1,193  
209  
2,037  
53,539 
Transport and storage
 
896  
16,056  
467  
38  
1,108  
16,485 
Accommodation and food service 
activities 
 
707  
7,159  
514  
66  
820  
7,352 
Information and communication
 
7  
2,399  
10  
2  
972  
2,396 
Real estate activities
 
951  
47,584  
932  
157  
16,433  
47,603 
Professional, scientific and technical 
activities 
 
404  
13,276  
289  
286  
3,183  
13,392 
Administrative and support service 
activities
 
95  
2,028  
81  
4  
924  
2,041 
Public administration and defence, 
compulsory social security
 
158  
295,405  
133  
17  
92  
295,432 
Education
 
136  
5,958  
100  
30  
96  
5,994 
Human health services and social work 
activities
 
450  
28,063  
452  
316  
966  
28,061 
Arts, entertainment and recreation
 
31  
989  
19  
2  
334  
1,001 
Other services
 
23,183  
974,997  
17,722  
6,769  
230,902  
980,457 
Total
 
32,711  
1,557,543  
24,990  
8,715  
266,007  
1,565,264 
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2020 Pillar 3 Disclosures Report

Table 26. Credit quality of exposures by geography (CR1-C)
Million euros
31 Dec. 2020
Gross carrying values of:
Specific credit risk 
adjustment
Accumulated 
write-offs
Credit risk 
adjustment 
charges of the 
period
Net values
Defaulted 
exposures
Non-defaulted 
exposures
Europe
 
23,882  
1,040,186  
13,526  
2,503  
2,333  
1,050,543 
Of which, Spain
 
16,159  
404,991  
7,861  
1,236  
1,500  
413,289 
Of which, UK
 
2,545  
359,346  
1,518  
282  
345  
360,374 
North America
 
2,413  
241,210  
5,535  
3,108  
5,250  
238,089 
Of which, USA
 
1,599  
171,845  
4,435  
2,227  
4,522  
169,009 
South America
 
6,001  
238,732  
5,665  
3,031  
3,596  
239,068 
Of which, Brazil
 
3,820  
145,131  
4,104  
2,393  
2,180  
144,847 
Others
 
415  
37,414  
265  
72  
164  
37,564 
Total
 
32,711  
1,557,543  
24,990  
8,715  
11,343  
1,565,264 
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The following table presents an overview of the credit quality 
of restructured or refinanced exposures:
Table 27. Credit quality of forborne exposures
Million euros
31 Dec. 2020
Gross carrying amount/nominal amount of 
exposures with forbearance measures
Accumulated impairment, 
accumulated negative 
changes in fair value due to 
credit risk and provisions
Collateral received and financial 
guarantees received on forborne 
exposures
Performing 
forborne
Non-performing forborne
On 
performing 
forborne 
exposures
On non-
performing 
forborne 
exposures
Of which collateral and 
financial guarantees received 
on non-performing exposures 
with forbearance measures
Of which 
defaulted
Of which 
impaired
Loans and advances
 
14,308  15,162  
15,162  
15,161  
(1,784)  
(6,295)  15,823  
7,247 
Central banks
 
—  
—  
—  
—  
—  
—  
—  
— 
General governments
 
25  
5  
5  
5  
—  
(1)  
7  
3 
Credit institutions
 
—  
—  
—  
—  
—  
—  
—  
— 
Other financial 
corporations
 
50  
84  
84  
84  
(2)  
(23)  
88  
59 
Non-financial 
corporations
 
5,009  8,123  
8,123  
8,122  
(350)  
(3,552)  7,024  
3,725 
Households
 
9,224  6,950  
6,950  
6,950  
(1,432)  
(2,719)  8,704  
3,460 
Debt Securities
 
25  
338  
338  
327  
(1)  
(206)  
73  
73 
Loan commitments given
 
478  
75  
75  
75  
3  
1  
107  
39 
Total
 
14,811  15,575  
15,575  
15,563  
(1,782)  
(6,500)  16,003  
7,359 
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2020 Pillar 3 Disclosures Report

The following table breaks down performing and non-performing exposures according to the 
number of days past due:
 
Table 28. Credit quality of performing and non-performing exposures by past due days
Million euros
31 Dec. 2020
Gross carrying amount/nominal amount
Performing exposures
Non-performing exposures
Not past due 
or past due  
30 days
Past due > 
30 days ≤ 90 
days
Unlikely to Pay 
that are not 
past due or 
are past due ≤ 
90 days
Past due
> 90 days
≤ 180 days
Past due
> 180 days
≤ 1 year
Past due
> 1 year ≤ 2 
years
Past due
> 2 years ≤ 5 
years
Past due
> 5 years ≤ 7 
years
Past due > 7 
years
Of which, in 
default
Loans and advances
 
984,663  
979,213  
5,450 
 
31,566  
13,149  
3,266  
3,119  
3,963  
4,084  
1,398  
2,587  
31,566 
Central banks
 
21,993  
21,993  
— 
 
—  
—  
—  
—  
—  
—  
—  
—  
— 
General governments
 
22,852  
22,843  
9 
 
32  
15  
1  
1  
5  
3  
4  
3  
32 
Credit institutions
 
49,644  
49,644  
— 
 
—  
—  
—  
—  
—  
—  
—  
—  
— 
Other financial corporations
 
68,416  
68,409  
7 
 
232  
25  
6  
143  
27  
20  
1  
10  
232 
Non-financial corporations
 
300,415  
299,593  
822 
 
14,362  
6,292  
917  
947  
1,703  
2,380  
647  
1,476  
14,362 
      Of which SMEs
 
118,726  
118,104  
622 
 
8,381  
2,694  
570  
688  
1,212  
1,795  
412  
1,010  
8,381 
Households
 
521,343  
516,731  
4,612 
 
16,940  
6,817  
2,342  
2,028  
2,228  
1,681  
746  
1,098  
16,940 
Debt securities
 
121,082  
121,082  
— 
 
419  
419  
—  
—  
—  
—  
—  
—  
419 
Central banks
 
5,412  
5,412  
— 
 
—  
—  
—  
—  
—  
—  
—  
—  
— 
General governments
 
86,183  
86,183  
— 
 
—  
—  
—  
—  
—  
—  
—  
—  
— 
Credit institutions
 
6,979  
6,979  
— 
 
3  
3  
—  
—  
—  
—  
—  
—  
3 
Other financial corporations
 
13,449  
13,449  
— 
 
—  
—  
—  
—  
—  
—  
—  
—  
— 
Non-financial corporations
 
9,059  
9,059  
— 
 
416  
416  
—  
—  
—  
—  
—  
—  
416 
Off-balance-sheet exposures
 
317,928 
 
947 
 
947 
Central banks
 
— 
 
— 
 
— 
General governments
 
4,120 
 
3 
 
3 
Credit institutions
 
27,487 
 
5 
 
5 
Other financial corporations
 
22,089 
 
15 
 
15 
Non-financial corporations
 
159,398 
 
797 
 
797 
Households
 
104,834 
 
127 
 
127 
Total
 1,423,673  1,100,295  
5,450 
 
32,932  
13,568  
3,266  
3,119  
3,963  
4,084  
1,398  
2,587  
32,932 
CREDIT RISK 2020 Pillar 3 Disclosures Report
71

The following table displays performing and non-performing exposures including provisions 
by  stage:
Table 29. Performing and non-performing exposures and related provisions
Million euros
31 Dec. 2020
Gross carrying amount/nominal amount
Accumulated impairment, accumulated negative changes in fair 
value due to credit risk and provisions
Accumulated 
partial write-
off
Collateral and financial 
guarantees received
Performing exposures
Non-performing exposures
Performing exposures – 
accumulated impairment and 
provisions
Non-performing exposures – 
accumulated impairment, 
accumulated negative changes 
in fair value due to credit risk 
and provisions 
On 
performing 
exposures
On non-
performing 
exposures
Of which, 
stage 1
Of which, 
stage 2
Of which, 
stage 2
Of which, 
stage 3
Of which, 
stage 1
Of which, 
stage 2
Of 
which, 
stage 2
Of which, 
stage 3
Loans and advances
 
984,663  871,937  66,082 
 31,566  
—  31,549 
 (10,081)  
(4,393)  
(5,688)  (13,859)  
—  (13,853)  
(631) 
 658,314  
13,616 
Central banks
 
21,993  
12,512  
— 
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
 
— 
 
10,223  
— 
General governments
 
22,852  
19,962  
244 
 
32  
—  
31 
 
(16)  
(13)  
(3)  
(17)  
—  
(17)  
— 
 
3,708  
3 
Credit institutions
 
49,644  
37,507  
— 
 
—  
—  
— 
 
(6)  
(6)  
0 
 
—  
—  
— 
 
— 
 
21,123  
— 
Other financial corporations
 
68,416  
51,467  
514 
 
232  
—  
232 
 
(56)  
(47)  
(9)  
(77)  
—  
(77)  
— 
 
43,301  
152 
Non-financial corporations
 
300,415  
263,936  
30,756 
 14,362  
—  
14,357 
 (3,136)  
(1,352)  
(1,784)  
(6,586)  
—  
(6,585)  
(557) 
 
175,722  
6,230 
          Of which SMEs
 
118,726  
104,444  
12,712 
 8,381  
—  
8,377 
 (1,282)  
(556)  
(726)  
(4,193)  
—  
(4,192)  
(196) 
 
82,282  
3,424 
Households
 
521,343  
486,553  
34,568 
 16,940  
—  
16,929 
 (6,867)  
(2,975)  
(3,892)  
(7,179)  
—  
(7,174)  
(74) 
 
404,237  
7,231 
Debt securities
 
121,082  120,129  
73 
 
419  
—  
402 
 
(26)  
(24)  
(2)  
(264)  
—  
(257)  
— 
 
883  
73 
Central banks
 
5,412  
5,412  
— 
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
 
— 
 
—  
— 
General governments
 
86,183  
86,176  
8 
 
—  
—  
— 
 
(7)  
(7)  
— 
 
—  
—  
— 
 
— 
 
448  
— 
Credit institutions
 
6,979  
6,978  
— 
 
3  
—  
3 
 
(1)  
(1)  
— 
 
—  
—  
— 
 
— 
 
—  
— 
Other financial corporations
 
13,449  
12,889  
— 
 
—  
—  
— 
 
(1)  
(1)  
— 
 
—  
—  
— 
 
— 
 
435  
— 
Non-financial corporations
 
9,059  
8,674  
65 
 
416  
—  
399 
 
(17)  
(15)  
(2)  
(264)  
—  
(257)  
— 
 
—  
73 
Off-balance-sheet exposures
 
317,928  310,977  
6,950 
 
947  
—  
947 
 
554  
372  
182 
 
145  
—  
145 
 
5,808  
187 
Central banks
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
 
—  
— 
General governments
 
4,120  
4,005  
115 
 
3  
—  
3 
 
1  
1  
— 
 
—  
—  
— 
 
10  
— 
Credit institutions
 
27,487  
27,485  
2 
 
5  
—  
5 
 
6  
6  
— 
 
—  
—  
— 
 
221  
— 
Other financial corporations
 
22,089  
21,868  
221 
 
15  
—  
15 
 
11  
10  
1 
 
—  
—  
— 
 
133  
1 
Non-financial corporations
 
159,398  
153,723  
5,675 
 
797  
—  
797 
 
297  
163  
134 
 
132  
—  
132 
 
4,894  
182 
Households
 
104,834  
103,896  
937 
 
127  
—  
127 
 
239  
192  
47 
 
13  
—  
13 
 
550  
4 
Total
 1,423,673  1,303,043  73,105 
 32,932  
—  32,898 
 (9,553)  
(4,045)  
(5,508)  (13,978)  
—  (13,965)  
(631) 
 665,005  
13,876 
CREDIT RISK 2020 Pillar 3 Disclosures Report
72
2020 Pillar 3 Disclosures Report

The following table shows the collateral obtained through 
repossession and foreclosure processes:
 
Table 30. Collateral obtained by taking possession and execution processes
Million euros
31 Dec. 2020
Collateral obtained by taking possession
Value at initial 
recognition
Accumulated negative 
changes
Property, plant and equipment (PP&E)
 
—  
— 
Other than PP&E
 
8,040  
3,208 
Residential immovable property
 
1,223  
282 
Commercial Immovable property
 
6,531  
2,884 
Movable property (auto, shipping, etc.)
 
219  
42 
Equity and debt instruments
 
67  
— 
Other
 
—  
— 
Total
 
8,040  
3,208 
The following table shows the annual changes in provisions 
for loans:
Table 31. EU CR2-A – Changes in the stock of general and specific credit risk adjustments - write offs
Million euros
31 Dec. 2020
Stage 3 
Stage 1 and 2
Opening balance
 
14,553  
8,482 
Increases due to amounts set aside for estimated loan losses during the period
 
13,018  
8,153 
Decreases due to amounts reversed for estimated loan losses during the period
 
(3,905)  
(3,709) 
Decreases due to amounts taken against accumulated credit risk adjustments - writte offs
 
(8,715)  
— 
Impact of exchange rate differences
 
(1,318)  
(1,275) 
Other adjustments
 
476  
(1,544) 
Closing balance
 
14,110  
10,107 
Recoveries on credit risk adjustments recorded directly to the statement of profit or loss
 
1,231 
Specific credit risk adjustments recorded directly to the statement of profit or loss
 
—  
— 
The following table shows the stock of loans and debt 
instruments classified as default between the close of the 
previous year and the end of current year.
Table 32. EU CR2-B – Changes in the stock of defaulted and impaired loans and debt securities
Million euros
31 Dec. 2020
Gross book value of defaulted 
exposures
Opening balance
 
35,526 
Loans and debt securities that have defaulted or impaired since the last reporting period (1)
 
11,292 
Returned to non-defaulted status and other changes
 
(10,073) 
Amounts written off
 
(8,715) 
Closing balance
 
32,869 
CREDIT RISK 2020 Pillar 3 Disclosures Report
   73

Table 33. Net amount of exposures (CRB-B)
Million euros
31 Dec. 2020
Net exposure at the end of the period
Avarege exposure over 
the period
Central governments or central banks
 
3,738  
3,703 
Institutions
 
49,869  
51,834 
Corporates
 
307,945  
305,915 
Of Which: Specialised Lending
 
26,198  
26,238 
Of Which: SME
 
51,057  
46,812 
Retail
 
377,733  
373,662 
Secured by real estate property
 
294,011  
291,245 
SME
 
3,205  
3,548 
Non-SME
 
290,806  
287,697 
Qualifying Revolving
 
21,692  
21,328 
Other Retail
 
62,030  
61,088 
SME
 
17,479  
15,688 
Non-SME
 
44,551  
45,400 
Equity
 
10,126  
10,387 
Total IRB approach
 
749,412  
745,501 
Central governments or central banks
 
277,728  
242,002 
Regional governments or local authorities 
 
6,686  
6,722 
Public sector entities
 
2,058  
9,559 
Multilateral Development Banks
 
1,818  
1,946 
International Organisations
 
9  
28 
Institutions
 
39,566  
43,966 
Corporates
 
86,242  
81,542 
of which: SME
 
19,350  
14,892 
Retail
 
208,955  
214,637 
of which: SME
 
38,565  
35,456 
Secured by mortgages on immovable property
 
94,154  
97,298 
of which: SME
 
19,306  
21,057 
Exposures in default
 
6,450  
6,219 
Items associated with particularly high risk
 
1,421  
1,411 
Covered bonds
 
1,674  
1,840 
Claims on institutions and corporates with a short-term credit assessment
 
285  
183 
Collective investments undertakings (CIU)
 
1,521  
1,732 
Equity exposures
 
282  
288 
Other exposures
 
87,001  
80,728 
Total Standardised approach
 
815,852  
790,101 
Total
 
1,565,264  
1,535,602 
Note: Securitisations not included.
Santander Group’s average net exposure decreased by 0.68%, 
mainly due to the drop of exposure in the categories of regional 
governments or local authorities, corporates and  secured by 
mortgages on immovable property under the standardised 
approach.
The following graph shows the distribution, by geographical 
area, of Santander Group’s exposure to credit and dilution risk.
CREDIT RISK 2020 Pillar 3 Disclosures Report
74
2020 Pillar 3 Disclosures Report

Table 34. EU CRB-C – Geographical breakdown of exposures
Million euros
31 Dec. 2020
Net original exposure
Europe
Of which, 
Spain
Of which, 
UK
North 
America
Of which, 
USA
South 
America
Of which, 
Brazil
Others
Total
IRB Approach
Central governments or central 
banks
 
1,667  
434  
112  
205  
194  
788  
47  
1,079  
3,738 
Institutions
 
31,462  
15,553  
5,947  
9,361  
6,338  
2,689  
268  
6,357  
49,869 
Corporate
 215,138  
109,910  
44,263  
40,169  
24,385  
35,918  
28,515  
16,720  
307,945 
Retail
 372,042  
110,126  
211,625  
257  
149  
180  
55  
5,255  
377,733 
Equity
 
9,784  
9,751  
—  
—  
—  
342  
311  
—  
10,126 
Total IRB Approach
 630,093  
245,773  
261,948  
49,991  
31,065  
39,916  
29,195  
29,411  
749,412 
Standard Approach
Central governments or central 
banks
 177,622  
84,467  
50,866  
44,970  
22,870  
52,180  
36,427  
2,956  
277,728 
Regional governments or local 
authorities
 
6,413  
4,282  
0  
15  
15  
254  
186  
4  
6,686 
Public sector entities
 
431  
0  
—  
1,467  
1,467  
160  
—  
—  
2,058 
Multilateral Developments Banks
 
1,818  
—  
1,530  
—  
— 
0
0  
—  
1,818 
International Organizations
 
—  
—  
—  
—  
—  
9  
—  
—  
9 
Institutions
 
18,621  
11,550  
1,908  
10,730  
8,802  
6,773  
5,829  
3,442  
39,566 
Corporate
 
47,678  
8,977  
13,035  
21,471  
17,988  
16,840  
6,077  
252  
86,242 
Retail
 
80,801  
11,132  
20,747  
55,617  
45,603  
71,063  
45,157  
1,474  
208,955 
Secured by mortgages on 
immovable property
 
27,980  
6,387  
906  
34,409  
27,509  
31,757  
8,952  
9  
94,154 
Exposures in default
 
3,221  
1,585  
183  
960  
630  
2,264  
999  
6  
6,450 
Items associated with particularly 
high risk
 
311  
0  
188  
173  
173  
937  
109  
—  
1,421 
Covered Bonds
 
1,674  
—  
1,579  
—  
—  
—  
—  
—  
1,674 
Claims on institutions and 
corporates with a short-term 
credit assessment
 
210  
20  
—  
49  
—  
26  
—  
—  
285 
Collective investments 
undertakings (CIU)
 
210  
52  
1  
1,310  
2  
1  
1  
—  
1,521 
Equity exposures
 
221  
—  
—  
—  
—  
61  
—  
—  
282 
Other exposures
 
53,236  
39,064  
7,483  
16,927  
12,885  
16,827  
11,915  
10  
87,001 
Total SA approach
 420,449  
167,516  
98,426  188,097  
137,944  199,153  115,652  
8,153  
815,852 
Total
 1,050,543  
413,289  
360,374  238,089  
169,009  239,068  144,847  
37,564  
1,565,264 
Note: Securitisations not included.
The geographical distribution of standard portfolios is 
concentrated mainly in Brazil, Spain and the United States. 
The most important segments remain central 
administrations (with strong presence in Spain, Brazil and 
the UK), retailers and corporates, which have a prominent 
presence in Brazil, the United States and the UK.
Most of the exposure in IRB portfolios is concentrated in the 
retail and corporate segments in Spain and the UK.
Exposures by geographical area
27%
23%
18%
9%
11%
6%
4%
2%
n
Spain
n
UK
n
Rest of 
Europe
n
Brasil
n
USA
n
Rest of South 
America
n
Rest of North 
America
n
Others
CREDIT RISK 2020 Pillar 3 Disclosures Report
   75

Table 35. EU CRB-D – Concentration of exposures by industry or counterparty types
Million euros
31 Dec. 2020
Net original exposure
Real estate activities
Accommodation and 
food service activities 
Construction
Manufacturing 
Other services
Other Retail 
(Individuals)
Primary Sector
PublicSector
Professional Services
Utilities
 Transport and storage
Total
IRB Approach
Central governments or central banks
 
—  
—  
—  
—  
2,997  
—  
—  
741  
—  
—  
—  
3,738 
Institutions
 
1,141  
2,580  
1,138  
2,062  
35,195  
—  
166  
2,736  
2,754  
1,360  
736  
49,869 
Corporates
 
11,101  
15,542  
5,422  
33,759  
201,545  
—  
8,183  
10,006  
5,027  
9,848  
7,514  
307,945 
Retail
 
8,760  
5,145  
2,318  
3,114  
1,448  
329,379  
3,357  
19,888  
1,181  
2,000  
1,142  
377,733 
Equity
 
1,255  
6  
866  
46  
6,269  
—  
3  
—  
1,623  
—  
61  
10,126 
Total IRB approach
 
22,257  
23,273  
9,744  
38,980  
247,454  
329,379  
11,709  
33,370  
10,585  
13,208  
9,453  
749,412 
Standardised Approach
Central governments or central banks
 
—  
—  
—  
—  
—  
—  
—  
277,728  
—  
—  
—  
277,728 
Regional governments or local authorities 
 
—  
—  
—  
—  
—  
—  
—  
6,686  
—  
—  
—  
6,686 
Public sector entities
 
—  
—  
—  
—  
—  
—  
—  
2,058  
—  
—  
—  
2,058 
Multilateral Development Banks
 
—  
—  
—  
—  
1,818  
—  
—  
—  
—  
—  
—  
1,818 
International Organisations
 
—  
—  
—  
—  
9  
—  
—  
—  
—  
—  
—  
9 
Institutions
 
—  
—  
—  
—  
39,566  
—  
—  
—  
—  
—  
—  
39,566 
Corporates
 
7,252  
18,406  
2,966  
13,287  
29,664  
—  
2,903  
1,880  
740  
4,191  
4,953  
86,242 
Retail
 
1,466  
10,470  
1,557  
4,668  
405  
187,096  
743  
746  
542  
91  
1,172  
208,956 
Secured by mortgages on immovable property
 
15,846  
3,384  
790  
2,406  
65,131  
—  
1,472  
963  
3,405  
94  
663  
94,154 
Exposures in default
 
562  
743  
252  
723  
3,484  
—  
328  
48  
146  
16  
147  
6,450 
Items associated with particularly high risk
 
164  
9  
1,184  
7  
56  
—  
1  
— 
0  
—  
—  
1,421 
Covered bonds
 
—  
—  
—  
—  
1,674  
—  
—  
—  
—  
—  
—  
1,674 
Claims on institutions and corporates with a short-
term credit assessment
 
—  
— 
0  
—  
285  
—  
—  
—  
—  
—  
—  
285 
Collective investments undertakings (CIU)
 
—  
—  
—  
—  
1,521  
—  
—  
—  
—  
—  
—  
1,521 
Equity exposures
 
—  
—  
—  
—  
282  
—  
—  
—  
—  
—  
—  
282 
Other exposures
 
55  
4,606  
67  
92  
82,024  
—  
29  
13  
15  
4  
96  
87,001 
Total standardised approach
 
25,346  
37,618  
6,816  
21,183  
225,919  
187,096  
5,476  
290,121  
4,849  
4,396  
7,032  
815,852 
Total
 
47,602  
60,891  
16,560  
60,164  
473,373  
516,475  
17,185  
323,492  
15,433  
17,604  
16,485  
1,565,264 
Note: Securitisations not included
CREDIT RISK 2020 Pillar 3 Disclosures Report
76
2020 Pillar 3 Disclosures Report

Some sectors have been grouped, taking them from 19 to 11, 
based on the representative nature of their figures, to simplify 
analysis of the exposure:
• Primary sector: Agriculture, forestry and fishing; Mining and 
quarrying.
• Utilities: Electricity, gas, steam and air conditioning supply; 
Water supply.
• Accommodation and food service activities; Wholesale and 
retail trade.
• Professional Services: Professional, scientific and technical 
activities; Administrative and support service activities.
• Other services: Information and communication; education; 
arts, entertainment & recreation and another services.
• Public sector: Public administration and defense, 
compulsory social security; human health services and 
social work activities
The business sectors with the highest percentage exposure 
under the standardised approach are: individuals, other 
services and industrial. The sectors with the highest exposure 
under the IRB approach are individuals, the public sector and 
other services.
Table 36. EU CRB-E – Maturity of exposures
Million euros
31 Dec. 2020
Net values of on-balance-sheet exposures
On demand
<= 1 year
r > 1 year <= 
5 years
> 5 years
No stated 
maturity
Total
IRB Approach
Central governments or central banks
 
—  
262  
2,173  
—  
—  
2,435 
Institutions
 
763  
13,442  
8,903  
1,968  
3  
25,079 
Corporates
 
272  
59,797  
110,950  
9,834  
429  
181,281 
Retail
 
4,439  
16,112  
119,300  
195,650  
2,075  
337,575 
Equity
 
—  
—  
—  
—  
10,126  
10,126 
Total IRB approach
 
5,474  
89,613  
241,326  
207,451  
12,633  
556,497 
Standardised Approach
Central governments or central banks
 
131,292  
52,952  
28,602  
44,843  
6,152  
263,841 
Regional governments or local authorities 
 
0  
2,923  
609  
3,108  
1  
6,642 
Public sector entities
 
13  
235  
386  
1,080  
0  
1,713 
Multilateral Development Banks
 
—  
96  
1,381  
341  
—  
1,818 
International Organisations
 
—  
9  
—  
—  
—  
9 
Institutions
 
575  
4,368  
2,842  
9,501  
298  
17,584 
Corporates
 
1,458  
11,777  
26,963  
13,030  
3,312  
56,539 
Retail
 
18,161  
24,977  
68,743  
21,433  
7,619  
140,932 
Secured by mortgages on immovable property
 
649  
1,043  
7,686  
75,618  
174  
85,169 
Exposures in default
 
219  
958  
1,054  
3,878  
69  
6,177 
Items associated with particularly high risk
 
0  
665  
468  
152  
—  
1,285 
Covered bonds
 
—  
45  
1,397  
231  
—  
1,674 
Claims on institutions and corporates with a short-
term credit assessment
 
—  
—  
95  
—  
—  
95 
Collective investments undertakings (CIU)
 
—  
—  
212  
—  
—  
212 
Equity exposures
 
—  
—  
—  
—  
282  
282 
Other exposures
 
2,502  
23,665  
8,817  
2,165  
32,637  
69,786 
Total standardised approach
 
154,869  
123,714  
149,254  
175,380  
50,542  
653,759 
Total
 
160,343  
213,327  
390,581  
382,831  
63,175  
1,210,256 
Note: Securitisations not included.
CREDIT RISK 2020 Pillar 3 Disclosures Report
   77

3.4. Internal rating systems
Santander Group uses its own internal rating and scoring 
models to measure the credit quality of customers and 
transactions since 1993. Each rating or scoring indicates a 
probability of default, measured on the basis of the bank’s 
historical default experience (except in the case of low default 
portfolios). More than 400 internal rating models are used in 
Santander Group’s credit approval and risk monitoring 
process.
The global rating tools are those used for SCIB segments: 
corporates, financial institutions and specialised funding, 
which are managed centrally in Santander Group, in terms of 
both allocating the rating and risk monitoring. The rating 
these tools assign to each customer is obtained using an 
expert-judgement model, which relies on an analyst’s opinion 
supported by a quantitative or automatic module based on 
balance sheet ratios or macroeconomic variables.
In the global models, the quantitative module is calibrated 
using the market price of credit default swaps. A model has 
been constructed that relates the market-implied probability 
of default (PD) extracted from the CDS spreads to country 
macroeconomic data or company balance sheet data. 
Consequently, this data can be used to estimate PD even for 
entities for which no liquid CDS quotes are available.
The analyst takes this information as a reference but revises 
and adjusts it to obtain the final rating, which is therefore 
heavily based on expert judgement. Occasionally, as in the 
case of SCIB Corporates, ratings are also adjusted when the 
company belongs to a group from which it receives explicit 
support.
The parent entity of Santander Group has established a single 
methodology for constructing a rating in each country for the 
Corporates and Institutions segment (including the SMEs with 
the highest turnover). In this case the rating is determined by 
an automatic module which uses initial analyst input that may 
be supplemented at a later stage. The automatic module 
determines the rating in two phases: a quantitative phase and 
a qualitative phase. The qualitative phase is based on a 
corrective questionnaire, which allows the analyst to modify 
the automatic score by a limited number of rating points. 
Santander Group is moving towards a new rating 
methodology that aims to incorporate all available 
information (internal behaviour, external sources, etc.) in a 
more structured manner. This will assign a weight to the 
(automatic) objective score and the (expert) subjective score 
statistically in accordance with the customer’s characteristics 
and the analyst’s view of the capacity to contribute value. This 
will simplify and improve the assignment of ratings.
Customer ratings are reviewed regularly to take into account 
the new information that becomes available. Ratings are 
reviewed more frequently when certain automatic alerts are 
triggered and for customers placed on special watch. The 
rating tools are also reviewed, to refine the ratings they 
generate.
Santander Group has scoring tools for the Retail segment 
(Individuals and SMEs) that automatically assign scores to 
transactions submitted for approval.
These credit approval systems are supplemented by 
behavioural rating models, which provide greater 
predictability of the assumed risk. These are used not only 
when accepting new risks but also when monitoring and 
setting limits.
The models committee has approved the following list of 
internal ratings and their probability of default for global 
portfolios.
Mapping of internal ratings and PD
Corporate
Banks
Financial 
institutions 
non banks
Rating
PD
Rating
PD
Rating
PD
 
9.3 
 0.008 %
9.3
 0.008 %
9.3
 0.002 %
 
9.2 
 0.008 %
9.2
 0.009 %
9.2
 0.002 %
 
9.0 
 0.010 %
9.0
 0.011 %
9.0
 0.003 %
 
8.5 
 0.017 %
8.5
 0.018 %
8.5
 0.006 %
 
8.0 
 0.029 %
8.0
 0.030 %
8.0
 0.012 %
 
7.5 
 0.049 %
7.5
 0.050 %
7.5
 0.024 %
 
7.0 
 0.083 %
7.0
 0.083 %
7.0
 0.050 %
 
6.5 
 0.140 %
6.5
 0.138 %
6.5
 0.103 %
 
6.0 
 0.236 %
6.0
 0.229 %
6.0
 0.212 %
 
5.5 
 0.397 %
5.5
 0.378 %
5.5
 0.437 %
 
5.0 
 0.668 %
5.0
 0.624 %
5.0
 0.900 %
 
4.5 
 1.122 %
4.5
 1.030 %
4.5
 1.853 %
 
4.0 
 1.879 %
4.0
 1.694 %
4.0
 3.814 %
 
3.5 
 3.128 %
3.5
 2.776 %
3.5
 7.853 %
 
3.0 
 5.166 %
3.0
 4.515 %
3.0
 16.169 %
 
2.5 
 8.415 %
2.5
 7.264 %
2.5
 33.289 %
 
2.0 
 13.418 %
2.0
 11.483 %
2.0
 45.000 %
 
1.5 
 20.723 %
1.5
 17.687 %
1.5
 45.000 %
 
1.0 
 30.600 %
1.0
 26.248 %
1.0
 45.000 %
These PDs are applied uniformly across the whole Santander 
Group, consistently with the global management of the 
portfolios. As we can see, the PD assigned to any given 
internal rating is not exactly the same in every portfolio. 
Regulatory requirements require differentiated calibration.
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2020 Pillar 3 Disclosures Report

3.5. Rating assignment process 
and parameter estimation
Measuring the credit risk of a transaction involves calculating 
both the expected and the unexpected loss on the transaction. 
Unexpected loss is the basis for the calculation of both 
regulatory and economic capital. It refers to a very high, 
though improbable, level of loss that is not considered a 
recurring cost and must be absorbed by capital. Measuring 
risk involves two separate steps: estimating the risk and then 
assigning the credit risk parameters: PD, LGD and EAD.
PD (probability of default) estimates the likelihood that a 
customer or a contract will default within the following 12 
months. The PD used for regulatory capital is long-term, or 
TtC (through-the-cycle) PD, as it is not linked to a specific 
point in the cycle.
The default event being modelled is based on the definition in 
article 178 of the European Central Bank
1 Solvency 
Regulation, which considers default to be defined for a 
customer/contract when at least one of the following 
circumstances arises:
• The entity considers there is reasonable doubt about the 
obligor meeting their credit obligations in full.
• The customer/contract is past due by more than 90 days on 
any material credit obligation.
The event to be modelled in non-retail portfolios is customer 
default, whereas PD is estimated at the contract level in retail 
portfolios.
Calculations of PD are based on the entity’s own internal 
experience, i.e. on past observations of defaults by rating 
level or scoring.
LGD (loss given default) is the mathematical expectation of 
the percentage loss in the event of a default event. LGD is 
calculated using internal data on the income and expenses 
incurred by the institution during the recovery process once 
the default event has arisen, discounted to the start date of 
the default.
The LGD calculated to determine regulatory capital is 
downturn LGD, that is the LGD considered for a worst-case 
scenario in the economic cycle.
In addition to the estimation of downturn LGD to be used for 
performing transactions, a specific loss estimate is made for 
those in default. This is determined using the LGD and ELBE 
(expected loss best estimate) parameters. ELBE attempts to 
provide the best estimate of economic loss at a particular 
time based mainly on the time during which the operation has 
been in default, with due regard to the prevailing economic 
situation, while LGD for transactions in default is increased by 
any further unexpected losses that may be reported during 
the recovery period.
Finally, EAD (exposure at default) is calculated. This is defined 
as the value of the debt at the time of default. For lending 
products or any product with no off-balance-sheet amount, 
EAD equals the balance of the transaction plus any interest 
accrued but not yet payable. For products providing facilities it 
is necessary to estimate any future drawings that will be 
made between the present time and any possible future 
default event. The CCF (credit conversion factor)  is calculated 
for this reason, showing the percentage of the balance not 
currently utilised (off-balance-sheet amount) that would be 
being utilised at the time of default
Past information on portfolios is essential for estimating 
regulatory parameters, as established in EU regulations 
(Regulation No 575/2013). The minimum data periods to be 
used in estimates are between five and seven years, 
depending on the parameter and the portfolio, although the 
period used in the estimate can be longer, depending on the 
historical information available. The Bank has an internal data 
model containing historical information on portfolios, which is 
subject to review by the internal supervisory divisions 
(Validation and Audit) and by the supervisory authorities.
The methodology used to estimate the credit risk parameters 
will be updated under the new regulatory guidelines, mainly 
established in the “Guidelines on PD estimation, LGD 
estimation and the treatment of defaulted assets", to 
incorporate the requirements and interpretations deriving 
from these regulatory provisions. They also consider the new 
definition of default included in "Guidelines on default 
definition" and the materiality thresholds set by the 
competent authorities.
As mentioned before, for regulatory purposes, observations of 
frequency of default and associated losses must be averaged 
out over an entire economic cycle, in the case of PD, or 
represent a downturn situation in the case of LGD or EAD, or 
represent the current economic cycle in the case of ELBE for 
non-performing transactions.
For this reason, recent observations are not directly 
comparable with the regulatory parameters and backtesting 
exercises should be treated with due caution,considering the 
current economic environment. As explained in section 3.10, 
recent observed default frequencies (ODFs) are below the 
regulatory PDs in geographies with growth rates above the 
average for the cycle. Conversely, in regions where economic 
growth is below average, the ODFs may exceed the 
regulatory PDs.
The risk parameters must be estimated separately for each 
entity, country and segment, and must be reviewed at least 
once a year.
The parameters are then assigned to the transactions 
recorded on each unit’s balance sheet, to calculate the 
expected losses and capital requirements associated with the 
unit’s exposure.
In certain portfolios there is so little experience of default that 
alternative approaches to parameter estimation must be 
adopted. These are known as low default portfolios.
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   79
1 Regulation (EU) No 575/2013 of the European Parliament and Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.

Low default portfolios: Corporates, Banks, Non-bank 
financial institutions and Central governments
Estimates of PD and LGD in low default portfolios rely chiefly 
on studies performed by external rating agencies, which 
reflect the pooled experience of the large numbers of entities 
and countries rated by the agencies. These databases contain 
in-depth historical information to help identify complete 
economic cycles and analyse downturn situations.
The definition of default employed by the agencies is 
compared in detail with the regulatory requirements. Even 
though this does not produce a perfect match, there are 
sufficient points in common to enable this approach to be 
used.
For PD, the agencies do not directly report Through the Cycle 
(TtC) estimates, but rather the annual observed frequency of 
default. The observations are averaged out over an economic 
cycle by external rating levels to obtain the TtC PD. This TtC 
PD is assigned to all counterparties with external ratings, 
which later helps to calibrate the internal rating. The PD 
therefore, does not depend on the counterparty’s external 
rating but on its internal rating, and this also is applied to 
customers with no external rating.
The parameters estimated for global portfolios are the same 
for all Santander Group units. Thus, a financial institution with 
a rating of 8.5 will have the same PD, regardless of the unit in 
which the exposure is recognised.
Corporates (including SMEs, specialised lending and 
receivables)
The estimation is based on the entity’s own internal 
experience for portfolios of customers that have an account 
manager assigned to them with sufficient experience of 
internal defaults. The PD is calculated for customers by 
observing new NPLs in the portfolio and relating these to the 
ratings assigned to the customers concerned. To this end, 
long-run observed default frequencies (LR ODFs) are 
calculated for a rating or group of ratings and are adjusted to 
the average PD observed for each portfolio over a complete 
economic cycle.
In contrast to low default portfolios, Corporates portfolios 
have specific rating systems in each Santander Group unit, 
requiring specific PD calibrations in each case.
In Corporates portfolios, LGD is calculated on the basis of 
observed recoveries of defaulted transactions. This 
calculation takes into account not only the cash inflows and 
outflows associated with the recovery process but also the 
timing of these flows, so as to calculate their present value, 
and direct and indirect recovery costs. LGD estimates must be 
associated with a period of economic crisis or downturn for 
regulatory use. The existence of major variables (known as 
drivers) is modelled to explain the emergence of various LGDs 
for different groups of transactions. The main drivers used 
include the age of the transactions, whether there are any 
guarantees, the type of guarantee and the loan to value ratio. 
These explanatory variables must be of statistical significance 
and make good business sense. Estimated ELBE and LGD are 
also calculated for transactions in default.
Finally, EAD is estimated by comparing the percentage use of 
committed facilities at the time of default and in normal 
circumstances, to estimate the extent to which customers 
make more use of their credit facilities as they approach 
default. To estimate the CCF, information on past defaults is 
gathered from databases and balances (on and off the 
balance sheet) are compared between the time of default and 
earlier times when the downturn in the customer’s credit 
quality had yet to be observed.
Retail
In portfolios where customers do not have an account 
manager assigned to them but are treated on a pooled or 
standardised basis, PDs are estimated based on the entity’s 
internal experience, although the reference for assigning PD 
is the transaction, not the customer.
PDs are calculated by observing new defaults and relating 
each new default to the score assigned to the transaction at 
the time of approval or, for transactions beyond a certain age, 
to the customer's rating. As with the Corporates portfolios, 
LGD is calculated on the basis of an observed recovery 
process, adjusted to downturn conditions. Estimated ELBE 
and LGD are also calculated for transactions in default. The 
EAD estimation is also similar to that for Corporates.
For further details, see Appendix XIV, which contains several 
tables summarising the parameter models used in the 
geographies.
Access file 2020 Pillar 3 Appendices 
available on the Santander Group 
website
3.6. Uses of internal parameter 
estimates
One major application of the PD, LGD and EAD credit risk 
parameters is to determine minimum capital requirements 
within the CRR framework.
The CRR states that these parameters and their associated 
metrics, including expected and unexpected loss, are to be 
used not only for regulatory purposes but also for internal 
credit risk management.
The Group has adapted its projection methodology to IFRS 9, 
resulting in an impact on the estimation of expected loss and 
the other relevant credit risk metrics arising from the 
parameters obtained, thus making full use of the risk 
parameters (PD, LGD and EAD) in its management through 
the calculation of provisions and allowances.
The internal credit risk parameter estimates are also used in a 
variety of management tools, including pre-classifications, 
economic capital allocation, the RoRAC (return on risk-
adjusted capital) calculation, stress testing and scenario 
analyses, the results of which are reported to senior 
management through various internal committees.
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The pre-classification tool is used to assign limits to 
customers based on their risk characteristics. For the 
Corporate Investment Banking (SCIB) segment, limits are 
established for capital at risk (CaR), nominal CAP
2. Limits for 
financial institutions are managed using credit risk equivalent 
(CRE) models.
Through the calculation and allocation of economic capital, all 
the various types of risks arising from the lending business 
are integrated in a single measurement, combining 
measurement of credit risk with that of other risks, including 
market, operational, business and on-balance-sheet interest 
rate risk. The economic capital allocation at the business unit 
level provides a view of the distribution of risk by business 
activity and geographical area, taking the benefits of 
diversification into account. By relating economic capital to 
financial results, it is possible to calculate the risk-adjusted 
return (RoRAC), which can be compared to the cost of capital 
to get an idea of how each unit is contributing to value 
creation in Santander Group.
The use of economic capital figures in determining 
compensation and setting capital and RoRAC-related targets 
for the business units further reinforces the integration of 
economic capital into management.
In scenario analyses, the credit risk parameters (including 
provisions under IFRS 9) are related to macroeconomic 
variables, such as the unemployment rate, GDP growth and 
interest rates, using statistical models. This allows credit risk 
to be quantified under different macroeconomic scenarios 
and, in particular, assessment of potential risk levels in stress 
situations.
For further details on IFRS 9, see the Risk management and 
control chapter (section 3.4) of the 2020  annual report.
Access 2020 Annual Report available on the 
Santander Group website
3.7. Credit risk mitigation 
techniques
The Group applies various credit risk mitigation techniques, 
based on factors such as customer and product type. Some 
are inherent to specific operations (such as real estate 
collateral) while others apply to a series of transactions (such 
as netting or collateral).
The mitigation techniques can be grouped into the following 
categories:
Personal guarantees
This type of guarantee grants the creditor a personal right or 
entitlement affecting the equity of the guarantor. Examples 
include bonds, guarantees and stand-by letters of credit. Only 
personal guarantees provided by persons who meet the 
minimum requirements established by the supervisor can be 
recognised in capital calculations.
Guarantees arising on credit derivatives
Credit derivatives are financial instruments that are mainly 
used to hedge credit risk. By buying protection from a third 
party, the Bank transfers the risk of the issuer of the 
underlying instrument. Credit derivatives are over-the-
counter (OTC) instruments that are traded on non-organised 
markets. Hedging with credit derivatives is contracted with 
leading financial institutions, mainly using credit default 
swaps.
The distribution of personal guarantees and credit derivatives 
for the corporates, banks, non-financial institutions and 
sovereigns segments by rating grade is shown below, in 
compliance with one of the transparency recommendations 
originally issued by the Basel Committee:
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   81
2 Maximum nominal amount of a risk transaction, excluding market transactions and with maximum terms according to the type of transaction.

Table 37. Guarantees by external rating
Million euros
31 Dec. 2020
Corporates
External Rating
Exposures in default
Exposures not in 
default
AAA/AA
 
—  
310 
A
 
—  
8,186 
BBB
 
—  
17,920 
BB
 
12  
3,871 
B
 
0  
1,174 
Resto
 
167  
484 
Sin rating
 
—  
— 
Total
 
179  
31,944 
Banks
External Rating
Exposures in default
Exposures not in 
default
AAA/AA
 
—  
4,512 
A
 
—  
2,616 
BBB
 
—  
180 
BB
 
—  
— 
B
 
—  
— 
Resto
 
—  
— 
Sin rating
 
—  
— 
Total
 
—  
7,309 
Other financial institutions
External Rating
Exposures in default
Exposures not in 
default
AAA/AA
 
—  
23 
A
 
—  
7,755 
BBB
 
—  
808 
BB
 
—  
— 
B
 
—  
— 
Resto
 
—  
5 
Sin rating
 
—  
— 
Total
 
—  
8,591 
Sovereign
External Rating
Exposures in default
Exposures not in 
default
AAA/AA
 
—  
10,097 
A
 
—  
28,896 
BBB
 
—  
4,056 
BB
 
—  
11 
B
 
—  
— 
Resto
 
—  
— 
Sin rating
 
—  
— 
Total
 
—  
43,060 
Around  99.50% of transactions involved 15 financial 
institutions, all of them with a BBB+ rating or higher ( 97.65% 
with an A- rating or above) and only two institutions with a 
BBB- and BBB+ rating, on the Standard & Poor’s scale.
Collateral
This is collateral pledged on assets (movable or immovable) 
or rights that are specific and determinate. These are rights 
that secure performance of the main obligation for the 
creditor via the attachment of an asset. As a result of this 
attachment, in the event of default on the secured obligation, 
the creditor may realise the economic value of the asset 
through a regulated procedure and collect the proceeds; 
preference over other creditors may be upheld in this 
collection method. Pledged collateral may also be classified 
as follows:
• Real estate guarantees implemented as first lien real estate 
mortgages. The property can be buildings and parts of 
finished buildings (homes, offices, commercial premises, 
multi-purpose buildings, non multi-purpose buildings and 
hotels), urban land and land for urban development, and 
other property (buildings under construction, developments 
in progress, etc.). 
• Pledges on financial instruments (cash deposits, debt 
instruments).
A relevant kind of financial collateral is the posted collateral, 
that is used for reducing counterparty risk in the same way as 
netting technique does. Collateral consists of instruments 
with certain economic value and high liquidity that are 
deposited or transferred by one party in favour of another to 
guarantee or reduce any counterparty credit risk arising from 
portfolios of risk-bearing transactions between the two. 
Transactions backed by collateral are marked to market 
periodically (usually daily) and the parameters defined in the 
collateral agreement are applied, obtaining an amount of 
collateral (usually cash or securities) to be called from, or 
returned to, the counterparty.
•  Other collateral (second lien or subsequent mortgages).
As a general rule, and from a risk acceptance perspective, 
lending criteria are linked to the borrower’s capacity to fulfil 
all of their financial obligations in due time and proper form, 
although this is no impediment to seeking the highest level of 
collateral or personal guarantees.
Payment capacity is assessed on the basis of the funds or net 
cash flows from their businesses or usual sources of income, 
without depending on guarantors or assets delivered as 
collateral. These must always be taken into account when 
considering approval of the transaction as a second and 
exceptional method of recovery when the first method has 
failed. As a general rule, security is defined as a reinforcement 
that is added to a credit operation for the purpose of 
mitigating any loss arising from default on the payment 
obligation.
Effective guarantees, for these purposes, are collateral and 
personal guarantees whose validity is demonstrated as 
mitigating the credit risk and whose valuation is compliant 
with the policies and procedures described in this document. 
The analysis of the effectiveness of the guarantee must 
consider, among other things, the time necessary for the 
execution of the security and the capacity to make the 
guarantees effective.
Only collateral that meets the minimum quality requirements 
specified in the Basel agreements is taken into account for 
regulatory capital calculation purposes.
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Implementation of mitigation techniques follows the 
minimum requirements established in the guarantee 
management policy: legal certainty (possibility of legally 
requiring the settlement of guarantees at all times); the lack 
of a substantial positive correlation between the counterparty 
and the value of the collateral; the correct documentation of 
all guarantees; the availability of the documented 
methodologies used for each mitigation technique and 
appropriate monitoring, traceability and regular monitoring of 
the items or assets used for the guarantee.
Establishing a net balance by counterparty
The concept of netting involves offsetting gains and losses on 
multiple transactions of the same type under the umbrella of 
a master agreement such as an ISDA or similar (CSA, OSLA, 
ISMA, GMRA, etc.).
Market gains and losses on derivative transactions between 
Santander and a counterparty are offset against one another, 
so that if the counterparty defaults, it owes (or Santander 
owes, if the net amount is negative) a single net amount, 
rather than a large number of positive and negative amounts 
relating to the individual transactions entered into with that 
counterparty. 
An important feature of a master netting agreement is that it 
entails a single legal obligation, encompassing all the 
transactions covered by the agreement. This is what makes it 
possible to offset the risks of all the transactions covered by 
the agreement with a counterparty.
There are two methodologies for the measurement of 
exposure: a mark-to-market (MtM) methodology, involving 
replacement cost in the case of derivatives, plus an add-on for 
potential future exposure; and a methodology including 
calculation of exposure using Monte Carlo simulation, which 
is used in certain regions and for some products. We also 
calculate capital at risk or unexpected loss, i.e. the loss in 
economic capital once expected loss is subtracted, net of 
guarantees and recoveries.
Exposures are recalculated at market close, adjusting all 
transactions to their new time horizon. Potential future 
exposure is adjusted and mitigation measures (netting, 
collateral, etc.) are applied, so that exposures can be checked 
on a daily basis against the limits approved by senior 
management. Risk control is performed through an integrated 
system in real time, enabling the exposure limit available 
with any counterparty to be known at any time.
3.7.1. Recognition of credit risk mitigation
Credit risk mitigation techniques affect the value of the risk 
parameters used to determine capital when calculating 
regulatory capital. Identifying and valuing the security 
associated with the contracts is essential here and a 
distinction is drawn between the types of security: collateral 
and personal guarantees. This mitigation process is 
performed whenever the validity of the guarantee has been 
checked and it is believed they may be enforced. The 
mitigation process is described in the following section.
Firstly, personal guarantees are assessed in portfolios where 
PD is assigned at the customer level. Personal guarantees 
affect the final PD value by effectively replacing the 
counterparty’s PD in the transaction with the guarantor’s PD. 
Here, we compare the Risk Weight (RW) of the transaction 
obtained by applying the customer’s PD with the RW of the 
transaction calculated by employing the guarantor’s PD. The 
final PD is the one that generates the lowest RW value.
Secondly, the existence of any associated collateral is verified 
for all transaction types (retail and non-retail). Under the IRB 
approach, the existence of collateral impacts the final value of 
the LGD used to calculate capital. The process also factors in 
potentially significant factors such as product type and the 
transaction balance. In the case of mortgage collateral, the 
LGD of the transaction will depend on the loan-to-value (LTV) 
ratio.
The tables below show the original exposure covered by type 
of guarantee and by exposure category. Only in cases where 
the guarantee could have been used to mitigate the capital 
requirements:
Table 38. Credit risk mitigation techniques - IRB and SA (CR3)
Million euros
31 Dec. 2020
Exposures 
unsecured – 
Carrying amount
Exposures secured - 
carrying amount
Exposures secured 
by collateral
Exposures secured 
by financial 
guarantees
Exposures secured 
by credit derivatives
Total IRB exposures (after CCFs)
 
415,700  
323,586  
316,381  
7,205  
— 
of which, default
 
6,151  
6,352  
6,133  
218  
— 
Total STD exposures
 
774,589  
41,263  
18,722  
22,541  
— 
of which, default
 
6,374  
76  
74  
3  
— 
Note: Net original expousure. Equity not included.
CREDIT RISK 2020 Pillar 3 Disclosures Report
   83

Table 39. IRB approach. Credit risk mitigation techniques: credit derivatives and personal guarantees
Million euros
31 Dec. 2020
31 Dec. 2019
Original hedged exposure by collateral type and 
exposure category
Financial guarantees
Personal guarantees
Financial Guarantees
Personal guarantees
IRB Approach
Central administrations and banks
 
—  
2,426  
—  
3,041 
Institutions
 
144  
12,984  
149  
11,862 
Corporates
 
1,707  
46,386  
7,207  
32,069 
Retail
 
—  
8,188  
—  
589 
Total
 
1,852  
69,984  
7,356  
47,560 
The following table shows the impact of the credit derivatives 
used as credit mitigation techniques in RWAs.
Table 40. Effect on RWA of credit derivatives used as CRM techniques (CR7)*
Million euros
31 Dec. 2020
Pre-credit 
derivatives 
RWAs
Actual RWAs
Exposures under Foundation IRB
Central governments or central banks
 
128  
128 
Institutions
 
466  
466 
Corporates - SME
 
1,449  
1,449 
Corporates - Specialised Lending
 
16,037  
16,037 
Corporates - Other
 
7,221  
7,221 
Exposures under Advanced IRB
Central governments or central banks
 
265  
265 
Institutions
 
5,850  
5,890 
Corporates - SME
 
21,218  
21,218 
Corporates - Specialised Lending
 
— 
Corporates - Other
 
76,324  
76,077 
Retail - Secured by real estate SME
 
813  
813 
Retail - Secured by real estate non-SME
 
40,472  
40,472 
Retail - Qualifying revolving
 
4,018  
4,018 
Retail - Other SME
 
4,111  
4,111 
Retail - Other non-SME
 
20,385  
20,385 
Equity IRB
 
19,480  
19,480 
Other non credit-obligation assets
Total 
 
218,236  
218,030 
*It does not include CCPs.
3.8. Internal rating system control
A crucial part of the process carried out by Santander Group to 
implement advanced models entails the Internal Validation 
and Internal Audit areas establishing robust control and 
review mechanisms to effectively monitor and validate the 
valuation models and their integration into risk management, 
risk parameters, the integrity and quality of information, 
documentation of the capital calculation process, governance, 
the risk model and the technological environment.
The functional segregation model applicable to Santander 
Group involves a model with various levels of control 
structured around three lines of defence with a clearly 
defined and independent organisational structure and 
functions:
•1st line (model owner and methodology),
•2nd line (Model Risk, Internal Validation, Capital Risk, and 
Risk Control and Supervision Units) and
•3rd line (Internal Audit).
This separate organisational and functional structure ensures 
compliance with the regulatory requirements established for 
the IRB models:
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a) Existence of a strong governance for the models.
b) Existence, separation and independence of the Risk Control 
and Supervision, Internal Validation and Internal Audit 
areas.
c) Independent annual reviews by Internal Validation and 
Internal Audit.
d)Communication procedures with management, which 
ensure all associated risks are reported.
3.8.1. Model risk 
1. Introduction
A model is a system, approach or quantitative method that 
uses theories, techniques and statistical, economic, financial 
or mathematical assumptions to transform input data into 
quantitative estimations. These are simplified representations 
of real-world relationships between characteristics, values 
and observed facts that allow Santander Group to focus on 
specific aspects. 
We use models mainly for processes associated with 
acceptance (score/rating), capital calculation, performance, 
provisions, market and operational risk, compliance and 
liquidity.
The use of models implies the existence of model risk. This 
risk comprises the potentially negative consequences of 
taking decisions that are based on incorrect or inadequate 
models or an incorrect use of such models.
The sources of this risk are:
• The model itself, due to incorrect or incomplete data or the 
modelling method used in the systems.
• Improper use or implementation of the model.
Model risk may lead to financial loss, inadequate commercial 
and strategic decisions or losses in Santander Group's 
transactions.
Santander Group has been defining, managing and controlling 
model risk for several years.  After years of work, the role of 
model risk has been reinforced and consolidated across the 
Group. This role is fulfilled at both the corporate level and by 
the main entities. Santander Group has defined a set of 
policies and procedures to ensure proper model risk 
management, which establish the principles, responsibilities 
and processes of the models' life cycles and describe their 
organisation, governance, management and validation 
processes. 
Supervision and control of model risk is proportional to the 
importance of each model. The tiering concept is the main 
attribute used to summarise the level of importance of a 
model and determines the intensity to be applied to risk 
management.
Our multi-year strategy plan, Model Risk Management 2.0 
(MRM 2.0), was launched to improve model risk management 
in the Group. The governance phase of each model has been 
reviewed and adapted to the ECB's 2018 Guide to internal 
models. The MRM 2.0 plan is currently underway and a large 
number of initiatives have already been completed. In 
particular, the project has covered several initiatives during 
2020, focusing on the following topics:
• Key aspects: Several initiatives have been rolled out in 
relation to strengthening governance, defining risk appetite, 
the scope of risk management and simplifying risk policies, 
with the improvement of our framework for regulatory 
models taking center stage.
• Processes: Various actions have been carried out to improve 
the model life cycle phases, focusing on increasing the 
degree of automation of our main processes. 
• Reports: Senior management have become more aware of 
model risk issues; we have a strong forward-looking agenda 
where relevant issues are regularly analysed and escalated, 
where appropriate. 
• Model risk facilitators: Continuous improvement of our 
infrastructure and tools, as well as contributing to 
disseminate the model culture across the Group. 
We have continued to make progress on our strategic MRM 
2.0 plan, ensuring that all new regulatory requirements are 
properly incorporated.
In addition to MRM 2.0, which is focused on model 
governance, we have two specific projects underway with our 
regulatory credit and market risk models under scope. Both 
projects have the target to follow up on the TRIM (Targeted 
Review of Internal Models) actions, and to ensure the 
fulfilment of the new regulatory requirements for the coming 
years. 
The main focus in 2021 will be to continue strengthening our 
regulatory model landscape, in order to fulfil ECB 
requirements by 2022. A high number of model changes will 
be delivered to the ECB, which will require formal approval 
before implementation.
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2. Model Risk Management
Model risk management and control are structured processes 
known as the "model life cycle". At Santander Group, the 
model life cycle phases are:
1.- Identification
The models identified should be included in the control 
perimeter of model risk.
A complete inventory of all models used is essential to ensure 
proper management of model risk.
Santander Group keeps a centralised inventory, based on a 
uniform taxonomy for all the models used in the business 
units. This inventory contains detailed information on each 
model, allowing close monitoring, according to their 
importance and to tiering criteria.
2.- Planning
This is an annual internal exercise, approved by the governing 
bodies of the local units and validated by the global team. It 
establishes a strategic action plan for the models included in 
the model risk function management area. It identifies 
resource requirements relating to the models to be 
developed, reviewed and implemented over the year.
3.- Development
Development is the construction phase of the risk model's life 
cycle, based on econometric factors and carried out by 
specialists in methodology. The models are developed 
according to the unit's needs, as specified in the annual model 
plan. 
In order to ensure the quality and consistency of the models, 
the development must be in line with the Group's common 
methodological standards, defined by the global team. The 
recent creation of the Global Models and Data Unit is aimed 
towards a better, more efficient and centralised execution of 
modelling, while taking advantage of the synergies of 
combining models and data.
4.- Internal validation
Independent validation of models is a regulatory requirement 
and a key feature of our management and control of model 
risk.
An independent specialist unit, integrated into the model risk 
function, analyses and issues technical opinions on the 
suitability of internal models. The validation opinion of each 
model is expressed through a rating which summarises the 
model risk associated with it. Internal validation covers all 
models in the model risk control domain; the intensity and 
frequencies of validation tasks are well defined and follow a 
risk-based approach. 
The scope of the validation includes the theory, the 
methodology, the technological systems and the quality of 
the data used to ensure their effectiveness. This also includes 
a detailed analysis of the model's performance, as well as 
other aspects of risk management (controls, reports, uses and 
senior management involvement, among others).
A key task in internal validation is the consistency analysis 
process carried out by those in charge of validation, who 
review the recommendations issued, their severity and the 
ratings assigned. This acts as an important point of control for 
the uniformity and comparability of the validation tasks. The 
validation tasks are only concluded once this consistency 
stage has been passed. In addition, the Single Validation 
Office plays a key role in ensuring maximum consistency 
between validations of all the Group's models.
5.- Approval
Before implementation and use, each model must be 
submitted to the internal governing bodies for approval. For 
our inventory of models, there is a governance path that 
varies depending on the model tiering.
6.-  Implementation and use
During this phase, the new models developed are 
implemented in the technological systems. This 
implementation phase is another possible source of model 
risk. Therefore, the technical teams and model owners must 
carry out tests to certify that the model has been 
implemented according to its methodological definition and 
that it works as planned and expected.
7.-  Monitoring and control 
We must regularly review the models to ensure that they are 
working correctly and are suitable for their intended use. If 
not, they must be adapted or redesigned.
Control teams must ensure that model risk management 
procedures are carried out in accordance with the principles 
and standards laid down in the model risk framework and all 
related internal rules and regulations.
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3. Key metrics
The risk level of a model is reflected in the rating assigned to 
it. This is usually generated by independent validation of the 
model.
The risk appetite at the Group and local levels establishes 
various thresholds, based on the average rating of the 
models. Changes in the distribution of the ratings are also 
monitored, focusing on the lowest ratings.
Therefore, the model risk appetite metrics focus on the 
quality of the models, based on internal validation ratings. 
Appetite levels differ depending on the relevance of the 
models and are most demanding for the main models, 
including regulatory models.
The metrics are monitored on a monthly basis and action 
plans must be prepared if there are any deviations from 
established levels. Monitoring of recommendations and the 
inclusion of the impact on metrics in the planning process are 
natural management processes to align the quality of the 
models with the risk appetite path in the event of deviation.
3.8.2. Internal Audit
Internal Audit applies the definition of internal audit by the 
Institute of Internal Auditors. Internal Audit is a permanent 
function and is independent of all other functions and units. 
Its mission is to provide the board of directors and senior 
management with independent assurance with regard to the 
quality and efficacy of the systems and internal control, risk 
(current and emerging) management and governance 
processes, helping to safeguard the organisation’s value, 
solvency and reputation. Internal Audit evaluates:
• the efficacy and efficiency of the processes and systems 
referred to above;
• compliance with applicable legislation and the 
requirements of supervisory bodies;
• the reliability and integrity of financial and operating 
information;
• and the integrity of capital.
The scope of Internal Audit's work encompasses: 
• all Group entities over which the Group exercises effective 
control;
• separate asset pools (for example, investment funds) 
managed by the entities mentioned in the previous section;
• all entities (or separate asset pools) not included in the 
previous points for which there is an agreement for the 
Group to provide internal audit functions.
The scope defined in the preceding sections includes the 
activities, businesses and processes carried out (directly and 
through outsourcing), the existing organisation and 
commercial networks. Internal Audit is guided by the 
following principles in this work: (i) Independence, objectivity 
and impartiality, (ii) integrity, ethical behaviour and 
confidentiality of the information handled and its findings, (iii) 
competence and professional qualifications of the auditors, 
(iv) quality of the work, (v) value creation, (vi) adequate 
collaboration with other control functions in the Group and 
with the external auditors and other assurance providers 
working within the organisation, (vii) a smooth relationship 
with the supervisors and (viii) compliance with international 
standards for the function.
Internal Audit is the third line of defence, acting 
independently from the others. Internal Audit organises its 
activities with the flexibility necessary to adapt to the Group's 
current structure and circumstances and to achieve its 
objectives with maximum effectiveness and efficiency. 
Internal Audit's authority comes directly from the board of 
directors. Internal Audit reports to the audit committee and 
complies with the information requirements it receives from 
the committee in the discharge of its duties. However, as an 
independent unit, it reports regularly to the board of 
directors, at least twice a year, and has direct access to the 
board when it considers this appropriate.
The Group chief audit executive is responsible for submitting 
a corporate framework for Internal Audit to the board of 
directors for approval. This corporate framework sets out the 
global function and the way in which it is to be performed, as 
well as any changes that arise from its regular reviews.
Internal Audit prepares a plan based on an assessment of the 
risks to which the Group is exposed. This is approved by the 
audit committee. In terms of solvency, this plan is defined in 
accordance with the cycle of capital audits, taking into 
account the results of engagements in previous years and 
other criteria, such as the rate of implementation of 
recommendations issued, the results of regulatory 
inspections and changes in mandatory regulations.
The Internal Audit function uses this cycle to issue a full 
opinion on the key capital processes defined by Santander 
Group in the period established, using specialised capital 
teams. It also performs other tasks focusing on transversal 
issues with significant impact on the Group's solvency, such 
as analysis of credit portfolios and accounting provisions, risk 
management processes, and crisis management and 
resolution.
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In accordance with the "ECB Guide to Internal Models" of 
October 2019, a risk assessment exercise is performed on the 
models used to calculate capital. This focused on the aspects 
in each geography that present the greatest risks in the 
following major lines of action:
1.
Reviewing compliance with Santander Group's internal 
governance model and supervisory requirements for the 
approval and maintenance of advanced models. 
2.
Managing models and their adequacy and integration.
3.
Analysis of the accuracy of risk measurement. Checking, 
through analysis and tests on the consistency and 
integrity of the Basel databases, that the methodology 
used in constructing the risk parameter models is 
consistent with their intended uses and complies with 
corporate standards and regulatory requirements, and 
verifying the replication of the calculations.
4.
Reviewing the regulatory capital calculation and 
reporting process.
5.
Analysing the technical aspects and applications of the 
technological environment.
3.9. Impairment losses: influencing 
factors and comparative analysis
In addition to the advanced models described (which are 
detailed in the economic capital section), others standard 
metrics are used to help ensure prudent and effective credit 
risk management based on an assessment of losses on the 
portfolios.
Credit risk should be monitored continuously and 
comprehensively, to ensure the early identification of 
incidents involving risk that could affect customers’ credit 
ratings. This monitoring involves regular reviews of all 
customers, the allocation of a monitoring score, the 
establishment of pre-defined actions associated with each 
category and the implementation of specific measures 
(predefined or ad-hoc) to correct any deviations that could 
impact the entity.
The analysis of credit risk involves continuous and systematic 
comparison to budgets, limits and standards, and assessing 
the effects of future external events and strategic decisions, 
to establish measures that ensure the risk profile and volume 
are within the established parameters and aligned with the 
appetite established by the Group.
The key metrics used to measure and control the cost of credit 
risk at Santander Group include:
• Cost of credit: this ratio quantifies loan-loss provisions 
arising from credit risk over a defined period of time for a 
given loan portfolio. As such, it acts as an indicator of the 
Group's credit quality. 
• Concentration: in the individuals and SMEs segments, the 
monitoring of high risk profile (HRP) portfolios prevents 
concentration in portfolios with a risk profile that does not 
match the Group’s medium-low risk target. For SCIB 
segments, corporates and institutions concentration limits 
are monitored for sectors, single names, large exposures, 
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underwriting, specialised lending and counterparties with 
ratings of <5.0.
• EL (expected loss): the value of expected credit losses is the 
estimate of the present value of non-payment at the due 
date considering a time horizon of the next twelve months 
or over the expected life of the financial instrument. The 
basic structure for the impairment recognition phases is as 
follows, from lower to higher credit quality impairment 
(phases 1 to 3):
• Phase 1: expected credit losses over the next twelve 
months
• Phase 2: forecast of the expected credit losses over the 
life of the instrument
• Phase 3: recognition of the expected credit losses over 
the life of the instrument
Therefore, a significant impairment in credit quality 
determines the transition from the first phase to the second 
phase.
The Recovery function also includes the management of non-
productive assets (NPAs) relating to the forborne loan, 
doubtful loan and foreclosed asset portfolios, and the write-
off portfolio, where the Bank can use accelerated reduction 
mechanisms, such as sales of loan books or foreclosed assets.
While these metrics measure the same reality and therefore 
converge in the long term, differences may exist at certain 
points in time. These are especially significant at the start of a 
change of cycle. These differences may be due to accounting 
law and regulations (for example, the write-off timeline for 
mortgages is different to that for consumer loans), changes in 
policies (such as coverage or write-off), changes in portfolio 
composition, doubtful assets acquired from new investees, 
changes in accounting regulations (such as IFRS 9) and 
portfolio sales.
For further details on credit risk key metrics’, see the Risk 
Management and Control chapter (section 3.4) on the 2020 
Annual Report.
Access 2020 Annual Report available on 
the Santander Group website
3.10. Backtesting of IRB 
parameters
3.10.1. PD backtest
The aim of backtesting PD is to assess the suitability of 
regulatory PDs by comparing them with Observed Default 
Frequencies (ODFs) during the most recent period.
This comparison applies the quantitative study required by 
the European Banking Authority (EBA) in its Guidelines on 
disclosure requirements under part eight of the capital 
requirements regulation (EU) No 575/2013, of August 2017.
This proposes disclosing information for the backtesting of PD 
in accordance with EBA Template 24: – IRB approach – 
Backtesting of PD per exposure class.
Detailed information on backtesting of PD, reported in the 
table CR9, can be found in Appendix XV. A summary of the 
conclusions from the results obtained can be found below.
1) There is no major difference between the average 
exposure-weighted PD and the simple average in each 
band, indicating that exposure is fairly uniformly 
distributed among the various transactions.  This result is 
quite typical of retail portfolios, but less so in the case of 
corporate portfolios, where certain individuals may have 
significant exposures.  However, as may be observed in 
the results shown below, there are no appreciable 
differences in the corporate portfolios either.
2) In general, regulatory PDs are fairly similar to the actual 
default rates observed for all the major group portfolios, 
although the following material facts should be noted:
•
In general, regulatory PDs are on average higher than 
actual default rates. However, there are some 
differences to this rule. For example, for the band 10% 
<= PD < 100% in portfolios such as SC Spain Corporates 
and Corporates Mexico
•
The situation during this last year is the reflection of an 
environment of economic crisis which puts the actual 
default rates above their historical averages in a large 
number of local portfolios, and all the more so for PD 
bands in which the population with average and low 
credit quality is located. 
For further details on PD backtesting, see Appendix XV.
Access file 2020 Pillar 3 Appendices 
available on the Santander Group website
3.10.2. EAD backtest
Credit Conversion Factors (CCF) were tested by comparing the 
balance at the time the transactions defaulted with the 
regulatory EAD assigned 12 months prior to the default.
The ratio of estimated EAD to actual EAD: this is known as the 
coverage ratio and gives an idea of the accuracy of the EAD 
estimate.
The tables and diagrams provide a comparison between 
estimated EAD and actual EAD for the most significant 
portfolios with committed limits.
The data is broken down by the percentage use of the limits, 
as this is the main driver used to estimate CCFs and, 
therefore, to allocate EAD.
It should be pointed out that coverage ratios are very finely 
tuned in some cases, where the total ratio is around 100%. 
This is the case of Spain Retail Cards, UK Mortgages, Spain 
Cards, Germany Corporates and Germany retail.
In other portfolios, EAD estimates are slightly conservative, 
since the relationship between exposure and balance in 
default generates a ratio around an interval of [114-134]%. 
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This is the case for Portugal, Spain Retail Credit and SC Spain 
Corporates. Meanwhile, other Spanish and Brazilian portfolios 
(Corporates) have more conservative coverage ratios, and the 
ratio rises for bands with lower percentage uses, especially in 
Cards portfolios. Finally, a high coverage ratio has also been 
observed for the band with the highest off-balance sheet 
exposure in the UK Mortgages portfolio.
For further details on EAD backtesting, see Appendix XVI.
Access file 2020 Pillar 3 Appendices 
available on the Santander Group website
3.10.3. Backtest of expected loss 
To compare regulatory expected loss with actual losses on 
the portfolio, a procedure has been devised to compare the 
observed loss figures with estimated losses under 
regulatory parameters. This allows us to reach conclusions 
on the following points:
• The stability of estimated losses over the life of the study 
period.
• The volatility of observed losses based on the 
macroeconomic environment, meaning the extent to 
which these values exceed estimated losses in periods of 
economic recession and undershoot the estimates in 
periods of expansion.
It is important to note that the study period for various 
portfolios is largely characterised as being a period of 
economic recession, whereas estimated losses are based on 
parameters that embrace a longer period in which periods 
of recession and expansion better reflect a typical economic 
cycle.
Data from the recovery processes concluded in each year 
analysed were used to estimate Observed Loss.
The following tables and charts refer to the key portfolios in 
each geography.
Estimated losses based on regulatory parameters remain 
stable in the period under analysis for the majority of 
geographies. In the case of observed losses, the results are 
more volatile, as expected. Aside from the fluctuations 
caused by the macroeconomic climate, it is important to 
bear in mind that the method of carrying out this 
comparison is very sensitive to any one-off recovery policies 
that may occur in a particular year, where the losses 
observed in that year may be attributed to default events 
originating in previous years. 
Specifically, the following can be seen:
1) In most portfolios, levels of expected loss are well 
above those of observed losses during the same 
period. 
2) For some geographies, in the years under analysis, a 
rise was seen in observed losses to above estimated 
losses during periods associated with a worse 
economic environment. This is mainly driven by the 
large number of defaults that occurred during the 
economic recession and one-off recovery measures 
affecting new default events during the same period.
3) However, in more recent years (2018, 2019 and 2020), a 
certain convergence towards average levels of observed 
losses has been seen in these geographies, which puts 
them below estimated losses, in general, with the gap 
between the two growing wider as the national 
economy improves.
For further details on backtesting, of expected loss, see 
Appendix XVII.
Access file 2020 Pillar 3 Appendices 
available on the Santander Group website
3.11. Covid-19
In response to the negative economic impact derived from the 
crisis caused by covid-19, the European Union implemented a 
series of measures to support the real economy of the 
financial sector. As part of these measures, Member States 
implemented a series of legislative moratoriums on loan 
repayments, in order to alleviate the operational and liquidity 
challenges faced by debtors. 
During 2020, the EBA published the 2020/02 Guidelines on 
legislative and non-legislative moratoriums on loan 
repayments implemented in light of the covid-19 crisis, which 
defined the scope, nature and criteria for granting  
moratoriums.
In order to truck the moratoriums and additional support 
measures devised, as well as to provide homogeneous public 
breakdowns, the EBA published the 2020/07 Guidelines on 
reporting and disclosure of exposures subject to measures 
applied in response to the covid-19 crisis.
For more information and details on the measures related to 
covid-19, please refer to section 3.3 Credit Risk Management 
- covid-19, within the Risk Management and Compliance 
block of the 2020 Annual Report. And in the Notes 6, 7, 10 and 
53 of the Financial Statements. 
Access 2020 Annual Report available on 
the Santander Group website
In accordance with the requirements of Annex 3 of the 
aforementioned EBA 2020/07 Guidelines, the following is a 
breakdown of the required quantitative templates:
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The first table shows a generic summary of those loans and advances subject to moratorium.
Table 41: Information on loans and advances subject to legislative and non-legislative moratoria
Gross carrying amount
Performing
Non performing
Of which: 
exposures with 
forberance 
measures
Of which: 
Instruments with 
significant increase in 
credit risk since initial 
recognition but not 
credit-impaired 
(Stage 2)
Of which: exposures 
with forberance 
measures
Of which:
Unlikely to pay that 
are not past-due or 
past-due <= 90 days
Loans and advances subject to 
moratorium
 
111,836  
108,143  
3,668  
16,256  
3,694  
1,149  
1,605 
of which: Households
 
89,887  
87,063  
3,224  
11,400  
2,825  
711  
1,034 
    of which: Collateralised by 
residential immovable 
 
69,937  
68,390  
1,034  
8,093  
1,547  
403  
550 
of which: Non-financial 
corporations
 
21,947  
21,080  
444  
4,851  
867  
439  
571 
    of which: Small and 
Medium-sized Enterprises
 
10,241  
9,717  
240  
1,715  
524  
259  
339 
    of which: Collateralised by 
commercial immovable 
property
 
3,950  
3,591  
53  
927  
359  
262  
296 
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Table 41: Information on loans and advances subject to legislative and non-legislative moratoria
Accumulated impairment, accumulated negative changes in fair value due to credit risk
Gross carrying 
amount
Performing
Non performing
Inflows to non-
performing 
exposures
Of which: exposures 
with forberance 
measures
Of which: 
Instruments with 
significant increase 
in credit risk since 
initial recognition 
but not credit-
impaired (Stage 2)
Of which: exposures 
with forberance 
measures
Of which:
Unlikely to pay that 
are not past-due or 
past-due <= 90 
days
Loans and advances subject to 
moratorium
 
(4,276)  
(2,850)  
(911)  
(1,452)  
(1,426)  
(453)  
(661)  
1,144 
of which: Households
 
(3,484)  
(2,411)  
(866)  
(1,166)  
(1,073)  
(272)  
(424)  
797 
    of which: Collateralised by 
residential immovable property
 
(435)  
(223)  
(30)  
(165)  
(212)  
(71)  
(117)  
252 
of which: Non-financial corporations
 
(792)  
(439)  
(45)  
(285)  
(353)  
(181)  
(237)  
347 
    of which: Small and Medium-sized 
Enterprises
 
(548)  
(305)  
(36)  
(200)  
(243)  
(119)  
(149)  
217 
    of which: Collateralised by 
commercial immovable property
 
(170)  
(57)  
(4)  
(42)  
(113)  
(94)  
(105)  
50 
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The following table shows the volume of loans and advances subject to legislative and non-
legislative moratoriums divided by their residual maturity
Table 42: Breakdown of loans and advances subject to legislative and non-legislative moratoria by residual maturity of moratoria
Number of 
obligors
Gross carrying amount
Of which: 
legislative 
moratoria
Of which: 
expired
Residual maturity of moratoria
<= 3 months
> 3 months
<= 6 meses
> 6 months
<= 9 months
> 9 months
<= 12 months
> 1 year
Loans and advances for which 
moratorium was offered
 
5,063  
119,804 
Loans and advances subject to 
moratorium
 
4,821  
111,836  
70,178  
88,509  
11,695  
4,717  
380  
6,486  
50 
of which: Households
 
89,887  
60,995  
72,660  
9,626  
4,360  
289  
2,951  
0 
    of which: Collateralised by 
residential immovable property
 
69,937  
56,935  
55,019  
7,917  
3,886  
258  
2,857  
0 
of which: Non-financial 
corporations
 
21,947  
9,182  
15,846  
2,068  
357  
91  
3,535  
50 
    of which: Small and Medium-
sized Enterprises
 
10,241  
6,161  
6,754  
991  
176  
48  
2,262  
10 
    of which: Collateralised by 
commercial immovable 
property
 
3,950  
1,814  
1,936  
285  
37  
34  
1,649  
10 
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Finally, the last table collects the information of those new 
loans and advances that are subject to new guarantee 
programs derived in response to the covid-19 crisis
Table 43: Information on newly originated loans and advances provided under newly 
applicable public guarantee schemes introduced in response to COVID-19 crisis
Gross carrying amount
Maximum 
amount of the 
guarantee that 
can be 
considered
Gross carrying 
amount
of which:  
forborne
Public 
guarantees 
received
Inflows to non-
performing 
exposures
Newly originated loans and 
advances subject to public 
guarantee schemes
 
38,313  
9  
29,088  
50 
of which: Households
 
1,688 
 
3 
of which: Collateralised by 
residencial immovable property  
2 
 
— 
of which: Non-financial 
corporations
 
36,620  
9  
27,720  
47 
    of which: Small and Medium-
sized Enterprises
 
28,178 
 
43 
    of which: Collateralised by 
commercial immovable 
property
 
125 
 
— 
CREDIT RISK 2020 Pillar 3 Disclosures Report
94
2020 Pillar 3 Disclosures Report

4
Counterparty 
credit risk

4.1.  Counterparty credit risk definition and framework
97
4.2.  Collateral agreements and guarantees
98
4.3.  Wrong-way risk
98
4.4.  Credit rating downgrade
98
4.5.  Credit value adjustment (CVA)
98
4.6.  Central counterparties
99
4.7.  Credit counterparty credit risk indicators
100

4. Counterparty 
credit risk
Main figures
Million euros
EAD
RWA
2020
2019
2020
2019
Counterparty 
credit risk
 
32,533  
33,925 
 
10,239  
11,070 
Of which, market 
appreciation
 
24,311  
24,863 
 
9,278  
9,823 
Of which, CCP 
default
 
507  
587 
 
241  
259 
Of which, CVA
 
7,715  
8,475 
 
720  
988 
EAD variation*
RWA variation*
Million euros
Million euros
          
                                                                                            
(2.2)%
(5.5)%
                                                  
24,863
24,311
2019
2020
9,823
9,278
2019
2020
Note: Does not include CCPs or CVA.
Note: Does not include CCPs or CVA.
4.1 Counterparty credit risk 
definition and framework
Chapter 6 of the CRR (Regulation (EU) No 575/2013) describes 
counterparty credit risk as the risk a counterparty to a 
transaction could default before the final settlement of the 
transaction’s cash flows. It includes the following transaction 
types: derivative instruments, repurchase agreements, 
securities or commodities lending, long settlement 
transactions and lending transactions with margin 
replacement.
Santander Group includes counterparty credit risk in its credit 
risk framework. For management purposes, it also has a 
specific counterparty credit risk model and policy.
This risk is controlled using an integrated system that 
provides real-time information so that exposures can be 
checked on a daily basis against the limits approved by senior 
management for any counterparty, product or maturity, in any 
Santander Group unit.
There are two methodologies for the measurement of credit 
risk equivalent (CRE): a mark-to-market (MtM, replacement 
cost in the case of derivatives) methodology with an add-on 
for potential future exposure; and a methodology including 
calculation of exposure using Monte Carlo simulation, which 
is used in certain regions and for some products.
COUNTERPARTY CREDIT RISK 2020 Pillar 3 Disclosures Report
 97

We also calculate the capital at risk or unexpected loss, i.e. 
the loss in economic capital once expected loss is subtracted, 
net of guarantees and recoveries.
4.2. Collateral agreements and 
guarantees
Transactions subject to collateral agreements are marked to 
market daily and the parameters agreed in the collateral 
agreement are applied, giving an amount of collateral to be 
called from, or returned to, the counterparty. The 
counterparty that receives the margin call checks the 
valuation, at which point discrepancies may arise.
A monitoring committee (discrepancies committee) meets 
weekly to analyse transactions in which significant 
discrepancies have been detected, and manages them with 
Risk teams to ensure they are valued correctly.
4.3. Wrong-way risk
Wrong-way risk exists when the potential exposure of a 
transaction with a counterparty is highly and positively 
(adversely) correlated with the credit rating of the 
counterparty, i.e. if the counterparty’s credit rating 
deteriorates, potential exposure increases.
The criterion used by Santander Group for calculating the 
credit exposure of derivatives with specific wrong way risk 
(WWR) is very conservative, as exposure to derivatives with 
WWR resembles exposure to basic financing. In very specific 
exceptions, a decision may be taken to calculate the stressed 
credit exposure for the derivative, to provide incentives for 
short-term transactions with customers with good ratings and 
liquid underlyings with collateralisation mechanisms in the 
derivatives.
The Group has defined criteria to identify transactions subject 
to specific wrong way risk on the basis of the legal connection 
between the counterparty and the issuer of the underlying 
instrument. A method for measuring general wrong way risk 
has also been defined.
Where most collateral is in cash, there is practically no risk of 
adverse effects arising from specific correlations between the 
collateral and the collateral provider. Any adverse effects 
arising from correlations in non-cash collateral are immaterial 
since issuances from the same counterparty and its 
subsidiaries are excluded from collateral eligibility policies.
4.4. Credit rating downgrade
It is estimated that if Santander Group’s credit rating was 
downgraded and it was required to post additional collateral, 
the impact of collateral would be relatively limited. This is 
because the Group’s credit rating affects only a small 
percentage of its current collateral agreements. In the event 
of a hypothetical one-notch downgrade in the parent’s credit 
rating, it is estimated that the resulting impact of the 
collateral it would have to post would be €121 million.
4.5. Credit value adjustment (CVA)
The team responsible for managing counterparty credit risk in 
each geography charges the corresponding treasury desk a 
credit premium at the start of each transaction, in exchange 
for assuming the credit risk involved. The team can then cover 
the CVA sensitivities through a combination of credit 
derivatives, interest rate derivatives, currency derivatives and 
other instruments.
CVA regulatory capital is also calculated. The purpose of this 
charge is to improve the resilience of banks to potential losses 
of market value associated with a reduction in the solvency of 
counterparties in derivatives transactions that are not settled 
through clearing houses.
The following table shows the credit valuation adjustment 
(CVA) for the counterparty.
Table 44. Credit valuation adjustment capital charge (CCR2)*
Million euros
31 Dec. 2020
Exposure value
RWA
Total portfolios subject to the Advanced Method
(i) VaR component (including the 3×multiplier)
 
—  
— 
(ii) Stressed VaR component (including the 3×multiplier)
 
—  
— 
All portfolios subject to the Standardised Method
 
7,715  
720 
Based on Original Exposure Method
 
—  
— 
Total subject to the CVA capital charge
 
7,715  
720 
* Figures applying 1 year floor.
COUNTERPARTY CREDIT RISK 2020 Pillar 3 Disclosures Report
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2020 Pillar 3 Disclosures Report

4.6. Central counterparties
The clearing of transactions through central counterparties is a 
common market practice for Santander Group. As a member of 
the clearing houses with which it operates, the Bank contributes 
to their risk management framework through payments into 
the default fund, in addition to daily margin calls.
The risk associated with this type of counterparty is managed 
through the credit risk framework.
The following tables show central counterparty (CCP) exposure 
following risk mitigation techniques.
Table 45. Exposures to central counterparties (CCR8) 
Million euros
31 Dec. 2020
EAD (post CRM)
RWA
Exposures to QCCPs (total)
 
13,807  
507 
Exposures for trades at QCCPs (excluding initial margin and default fund contributions); of 
which
 
10,078  
202 
(i) OTC derivatives
 
7,993  
160 
(ii) Exchange-traded derivatives
 
—  
— 
(iii) Securities financing transactions
 
2,086  
42 
(iv) Netting sets where cross-product netting has been approved
 
—  
— 
Segregated initial margin
 
—  
— 
Non-segregated initial margin
 
3,222  
64 
Pre-funded default fund contributions
 
507  
241 
Alternative calculation of own funds requirements for exposures
 
—  
— 
Exposures to non-QCCPs (total)
 
—  
— 
Exposures for trades at CCPs non-qualified (excluding initial margin and fund contributions); of 
which
 
—  
— 
(i) OTC derivatives
 
—  
— 
(ii) Exchange-traded derivatives
 
—  
— 
(iii) Securities financing transactions
 
—  
— 
(iv) Netting sets where cross-product netting has been approved
 
—  
— 
Segregated initial margin
 
—  
— 
Non-segregated initial margin
 
—  
— 
Pre-funded default fund contributions
 
—  
— 
Alternative calculation of own funds requirements for exposures
 
—  
— 
COUNTERPARTY CREDIT RISK 2020 Pillar 3 Disclosures Report
 99

4.7. Credit counterparty
credit risk indicators
The following table shows a breakdown of derivatives exposure 
by the type of product, category, geographical area and rating of 
the counterparty:
      
Derivatives exposure by product
Derivatives exposure by category
%
%
                                  
            
56%
32%
10%
1%
1%
n Interest rate
n Exchange rate
n Equity
n Raw materials
n Credit
51%
41%
8%
n Corporates
n Institutions
n Sovereign
Derivatives exposure by geography
Derivatives exposure by rating
%
%
          
                        
22%
28%
9%
17%
18%
6%
n UK
n Rest of Europe
n USA
n Spain
n Latam
n Others
11%
36%
21%
8%
1%
9%
14%
n AAA
n AA
n A
n BBB
n BB
n B
n Rest
In 2020, exposure to counterparty credit risk from derivative 
transactions was concentrated in counterparties with high credit 
quality, so that around 76% of the exposure was with 
counterparties rated A or higher. The distribution by type of 
counterparty was 41% Institutions and 51% Corporates.
As regards geographic distribution, 22% of the exposure was 
accounted for by UK counterparties (mainly Santander UK’s 
operations) with the remainder being accounted for by Spain 
(17%), the rest of Europe (28%), Latin America (18%), the 
United States (9%) and the rest of the world (5%).
COUNTERPARTY CREDIT RISK 2020 Pillar 3 Disclosures Report
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2020 Pillar 3 Disclosures Report

The following table shows exposure to counterparty credit risk 
depending on the calculation methodology used.
Table 46. Analysis of the counterparty credit risk (CCR) exposure by approach (CCR1)*
Million euros
31 Dec. 2020
Notional
Replacement 
cost/ Current 
market value
Potential 
future 
exposure
EEPE
Multiplier
EAD 
postCRM
RWA
Mark to market
 
181,948  
11,552 
 
22,047  
8,757 
Original exposure
Standardised approach
Internal Model Method (for derivatives 
and SFTs)
Of which securities financing transactions
Of which derivatives and long settlement 
transactions
Of which from contractual cross-product 
netting
financial collateral simple method (for 
SFTs)
 
395  
13 
Financial collateral comprehensive 
method (for SFTs)
 
1,869  
242 
VaR for SFTs
Total
 
9,012 
*Does not include CCPs
COUNTERPARTY CREDIT RISK 2020 Pillar 3 Disclosures Report
 101

EAD fell in comparison to the previous year, largely due to lower exposure with sovereign 
counterparties in local currency.
The following table details the breakdown of counterparty credit risk exposures calculated 
using the standardised approach, by portfolio (counterparty type) and risk weighting (degree of 
risk resulting from the standardised approach):
Table 47. Standardised approach – CCR exposures by regulatory portfolio and risk (CCR3)
Million euros
31 Dec. 2020
Risk Weight 
 0 %
 2 %
 4 %
 10 %
 20 %
 35 %
 50 %
 70 %
 75 %
 100 %
 150 %
Deduc.
Others
Of which 
unrated
Central governments or central banks
 2,050 
 
— 
 
— 
 
— 
 
47 
 
— 
 
26 
 
— 
 
— 
 
2 
 
— 
 2,125  
68 
Regional government or local authorities
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
0 
 
— 
 
0 
Public sector entities
 
0 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
0 
Multilateral development banks
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
International organisations
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
Institutions
 
— 
 13,301  
— 
 
— 
 222 
 
— 
 416 
 
— 
 
— 
 105 
 
— 
 14,043  
763 
Corporates
 
— 
 
— 
 
— 
 
— 
 
2 
 
— 
 
4 
 
— 
 
— 
 1,536 
 
5 
 1,546  
84 
Retail
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
40 
 
— 
 
— 
 
40 
Institutions and corporates with a short-term credit 
assessment
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
Exposure against collective investment institutions (CIIs)
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
10 
 
— 
 
10 
Other items
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
 
— 
Total
 2,050 
 13,301  
— 
 
— 
 270 
 
— 
 446 
 
— 
 
40 
 1,653 
 
5 
 17,764  
915 
COUNTERPARTY CREDIT RISK 2020 Pillar 3 Disclosures Report
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2020 Pillar 3 Disclosures Report

The following table shows a breakdown of counterparty 
credit risk exposure by portfolio and PD scale (excluding CCPs 
and specialised lending).
Table 48. IRB approach- CCR exposures by portfolio and PD scale (CCR4)
31 Dec. 2020
 PD Scale 
 EAD post 
CRM Average PD
 Number of 
obligors 
Average 
LGD
Average 
maturity
 RWA 
RW
AIRB. Central banks and central governments
0.00  < 0.15
 
296 
 0.05 %  
12 
 48.44 %  
3.45  
37 
 12.57 %
0.15  < 0.25
 
— 
0  %  
— 
0  %  
—  
— 
0  %
0.25  < 0.50
 
— 
0  %  
— 
0  %  
—  
— 
0  %
0.50  < 0.75
 
— 
0  %  
— 
0  %  
—  
— 
0  %
0.75  < 2.50
 
— 
0  %  
— 
0  %  
—  
— 
0  %
2.50  < 10.00
 
— 
0  %  
— 
0  %  
—  
— 
0  %
10.00  < 100.00
 
— 
0  %  
— 
0  %  
—  
— 
0  %
100.00 (Default)
 
— 
0  %  
— 
0  %  
—  
0 
0  %
Sub-total
 
296 
 0.05 %  
12 
 48.44 %  
3.45  
37 
 13 %
AIRB. Institutions
0.00  < 0.15
 
7,411 
 0.06 %  
923 
 44.35 %  
1.86  
1,060 
 14.30 %
0.15  < 0.25
 
279 
 0.19 %  
74 
 44.28 %  
2.32  
104 
 37.44 %
0.25  < 0.50
 
117 
 0.33 %  
97 
 43.67 %  
0.60  
47 
 40.01 %
0.50  < 0.75
 
205 
 0.65 %  
59 
 44.62 %  
3.80  
193 
 93.96 %
0.75  < 2.50
 
70 
 1.12 %  
25 
 44.91 %  
2.93  
76 
 109.35 %
2.50  < 10.00
 
11 
 2.88 %  
1 
 45.00 %  
1.91  
14 
 126.91 %
10.00  < 100.00
 
— 
0  %  
— 
0  %  
—  
— 
0  %
100.00 (Default)
 
3 
 100 %  
5 
 99.69 %  
1.08  
0 
 0.07 %
Sub-total
 
8,096 
 0.14 %  
1,184 
 44.38 %  
1.91  
1,494 
 18 %
AIRB. Corporates
0.00  < 0.15
 
4,645 
 0.08 %  
387 
 43.99 %  
3.57  
1,466 
 31.55 %
0.15  < 0.25
 
771 
 0.24 %  
191 
 44.92 %  
3.59  
445 
 57.67 %
0.25  < 0.50
 
705 
 0.39 %  
1,356 
 35.20 %  
2.47  
516 
 73.20 %
0.50  < 0.75
 
582 
 0.65 %  
590 
 41.65 %  
3.13  
490 
 84.13 %
0.75  < 2.50
 
429 
 1.37 %  
3,879 
 26.04 %  
3.65  
471 
 109.69 %
2.50  < 10.00
 
115 
 5.38 %  
2,866 
 26.36 %  
3.46  
139 
 120.43 %
10.00  < 100.00
 
29 
 17.80 %  
373 
 31.06 %  
4.11  
63 
 219.81 %
100.00 (Default)
 
11 
 100 %  
590 
 19.40 %  
1.81  
0 
 0.21 %
Sub-total
 
7,288 
 0.55 %  
10,232 
 41.63 %  
3.44  
3,589 
 49 %
AIRB. Retail
0.00  < 0.15
 
— 
0  %  
— 
0  %  
—  
— 
0  %
0.15  < 0.25
 
— 
0  %  
— 
0  %  
—  
— 
0  %
0.25  < 0.50
 
— 
0  %  
— 
0  %  
—  
— 
0  %
0.50  < 0.75
 
— 
0  %  
— 
0  %  
—  
— 
0  %
0.75  < 2.50
 
0 
 1.59 %  
1 
 24.33 %  
5.00  
— 
 25.73 %
2.50  < 10.00
 
0 
 2.97 %  
3 
 38.88 %  
1.20  
0 
 46.91 %
10.00  < 100.00
 
46 
 11.59 %  
20,867 
 40.00 %  
1.61  
33 
 70.37 %
100.00 (Default)
 
1 
 100 %  
146 
 40.00 %  
1.61  
0 
 13.75 %
Sub-total
 
47.23 
 13.24 %  
21,017 
 40.00 %  
1.61  
33 
 69 %
COUNTERPARTY CREDIT RISK 2020 Pillar 3 Disclosures Report
   103

31 Dec. 2020
PD Scale
EAD
post CRM
Average PD
Number of 
obligors
Average 
LGD
Average 
maturity
RWA
RWA 
density
FIRB. Institutions
0.00  < 0.15
 
1,492 
 0.06 %  
77 
 45 %  
0.65  
214 
 14 %
0.15  < 0.25
 
50 
 0.19 %  
19 
 45 %  
0.91  
21 
 42 %
0.25  < 0.50
 
20 
 0.35 %  
26 
 45 %  
1.17  
11 
 56 %
0.50  < 0.75
 
4 
 0.66 %  
11 
 45 %  
1.96  
3 
 76 %
0.75  < 2.50
 
— 
0  %  
— 
0  %  
—  
— 
0  %
2.50  < 10.00
 
— 
0  %  
— 
0  %  
—  
— 
0  %
10.00  < 100.00
 
— 
0  %  
— 
0  %  
—  
— 
0  %
100.00 (Default)
 
— 
0  %  
— 
0  %  
—  
— 
0  %
Sub-total
 
1,567 
 0.07 %  
133 
 45 %  
0.67  
250 
 16 %
FIRB. Corporates
0.00  < 0.15
 
232 
 0.13 %  
22 
 45 %  
1.99  
80 
 35 %
0.15  < 0.25
 
38 
 0.24 %  
10 
 45 %  
2.20  
20 
 53 %
0.25  < 0.50
 
13 
 0.40 %  
9 
 45 %  
2.50  
9 
 73 %
0.50  < 0.75
 
34 
 0.65 %  
48 
 45 %  
2.47  
31 
 91 %
0.75  < 2.50
 
13.72 
 1.12 %  
5 
 45 %  
2.50  
15 
 112 %
2.50  < 10.00
 
9.37 
 4.61 %  
2 
 45 %  
2.50  
16 
 169 %
10.00  < 100.00
 
— 
0  %  
— 
0  %  
—  
— 
0  %
100.00 (Default)
 
— 
0  %  
— 
0  %  
—  
— 
0  %
Sub-total
 
340 
 0.37 %  
96 
 45 %  
2.12  
172 
 51 %
Total
 
17,634 
 0.34 %  
32,674 
 43.37 %  
2.46  
5,575 
 32 %
COUNTERPARTY CREDIT RISK 2020 Pillar 3 Disclosures Report
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2020 Pillar 3 Disclosures Report

The following table shows the effects of netting agreements 
and collateral for exposure to counterparty credit risk in 
addition to the type of collateral exchanged in derivatives 
transactions and securities financing transactions.
Table 49. Impact of netting and collateral held on exposure values (CCR5-A)*
Million euros
31 Dec. 2020
Gross positive fair 
value or net carrying 
amount (1)
Add-on
Netting benefits
Netted current 
credit exposure
Collateral held
Net credit 
exposure
Derivatives
 
75,456  
10,556  
48,325  
37,688  
16,232  
21,455 
SFTs
 
149,177  
2,198  
26,870  
124,505  
121,650  
2,856 
Cross-product netting
 
—  
—  
—  
—  
—  
— 
Total
 
224,633  
12,754  
75,194  
162,193  
137,882  
24,311 
*Does not include CCPs.
(1) Gross positive fair value before applying any mitigation technique. In case of securities financing operations, information is included on the value of the securities or 
cash delivered to the counterparty.
Table 50. IRB approach. Composition of collateral for exposures to counterparty credit risk (CCR5-B)
Million euros
31 Dec. 2020
Collateral used in derivative transactions
Collateral used in SFTs
Fair value of collateral received
Fair value of posted collateral
Fair value of 
collateral 
received
Fair value of 
posted collateral
Segregated
Unsegregated
Segregated
Unsegregated
Cash - domestic currency
 
112  
6,554  
0  
6,969  
31,469  
26,683 
Cash - other currencies
 
1  
5,605  
1  
5,003  
12,084  
12,742 
Domestic sovereign debt
 
360  
1,510  
469  
86  
47,669  
55,686 
Other sovereign debt
 
1,029  
79  
1,098  
800  
11,344  
12,270 
Government agency debt
 
0  
—  
103  
—  
24  
47 
Corporate bonds
 
191  
78  
39  
—  
11,060  
14,490 
Shares
 
65  
647  
—  
—  
7,068  
8,672 
Other collateral
 
—  
—  
—  
—  
932  
742 
Total
 
1,759  
14,473  
1,711  
12,859  
121,650  
131,332 
COUNTERPARTY CREDIT RISK 2020 Pillar 3 Disclosures Report
   105

Table 51. EU CCR6 – Credit derivatives exposures
Million euros
31 Dec. 2020
Credit derivatives hedges
Other credit derivatives
Protection
bought
Protection
sold
Notionals
Single-name credit default swaps
 
4,257  
684 
Index credit default swaps
 
7,099  
2,257 
Total return swaps
 
234 
Credit options
Other credit derivatives
Total notionals
 
11,356  
3,174 
Fair values
 
(197)  
127 
Positive fair value (asset)
 
13  
132 
Negative fair value (liability)
 
(210)  
(6) 
*Bought credit derivatives do include loan coverage
For more information, see the Risk management and control 
chapter (section 3.6) of the 2020 annual report
Access 2020 Annual Report available on 
the Santander Group website
COUNTERPARTY CREDIT RISK 2019 Pillar 3 Disclosures Report
106
2020 Pillar 3 Disclosures Report

5
Credit risk - 
Securitisations
 
5.1.  Theoretical considerations on securitisation
109
5.2.  Securitisation accounting policies
111
5.3.  Management of the securitisation activity at 
Santander Group
111
5.3.1.  Santander Group securitisation objectives and 
management
111
5.3.2.  Santander Group securitisation functions
112
5.3.3.  Risk inherent to the securitisation activity at 
Santander Group
115
5.3.4.  Santander Group securitisation activity
115
5.4.  Capital requirements - Securitisations
118

5. Credit risk - 
Securitisations
Main figures
Million euros
EAD
RWA
2020
2019
2020
2019
Securitisation exposures in 
banking book
 39,316  43,448 
 8,159  6,629 
EAD variation
Million euros
                                          
(9.5)%
43,448
39,316
2019
2020
RWA variation
Million euros
                                          
23.1%
6,629
8,159
2019
2020
5.1. Theoretical considerations 
on securitisation
At Santander Group, securitisation is treated as stipulated in 
chapter 5 of the CRR. The assessment of the characteristics to 
determine whether or not securitisation exists, and 
consequently, the transaction has to be processed under the 
conditions described in this section, is based on the legal 
format and economic basis of the transaction.
Pursuant to the CRR, the following concepts shall be 
interpreted using these regulatory definitions:
Securitisation: a financial transaction or scheme whereby the 
credit risk associated with an exposure or pool of exposures is 
divided into tranches, with both of the following 
characteristics
a. Payments for the transaction or scheme are dependent 
upon the performance of the exposure or pool of exposures.
b. The subordination of the tranches determines the 
distribution of losses during the ongoing life of the 
transaction or scheme.
CREDIT RISK - SECURITISATIONS 2020 Pillar 3 Disclosures Report
   109

Securitisation position: exposures arising from 
securitisations. For these purposes, the providers of credit risk 
hedges for specific securitisation positions are considered to 
hold positions in the securitisation.
Tranche:  a contractually established segment of the credit 
risk associated with an exposure or pool of exposures, where 
a position in the segment entails a risk of credit loss greater or 
less than a position of the same amount in each of the other 
segments, without taking account of credit protection 
provided by third parties directly to the holders of positions in 
the segment or any of the other segments. In this respect, the 
whole securitisation position either forms part of a tranche or 
is a tranche in itself. The following terms can also be used.
• First loss tranche: this tranche is given a weighting of 
1250%.
• Mezzanine tranche: this is the tranche, other than a first 
loss tranche, that ranks below the most senior position in 
the securitisation and below any position in the 
securitisation assigned a credit rating of 1 in the case of 
securitisations under the standardised approach, or a rating 
of 1 or 2 in the case of securitisations under the IRB 
approach.
• Senior tranche: all tranches other than the first loss or 
mezzanine tranches. Within the senior tranche, the super 
senior tranche is the top tranche in the priority of payments, 
without taking into account for these purposes of any 
amounts owed under interest rate or currency derivatives, 
brokerage charges or similar payments.
Traditional securitisations: a securitisation involving the 
economic transfer of the exposures being securitised to a 
securitisation special purpose entity (SSPE) that issues 
securities. This may be accomplished by the transfer of 
ownership of the securitised exposures from the originator 
institution to an SSPE or through sub-participation by an SSPE, 
which shall include, for this purpose, mortgage participation 
certificates, mortgage transfer certificates and similar 
securities. The securities issued by the vehicle do not 
represent payment obligations of the originator institution.
Synthetic securitisation: a securitisation where the transfer of 
risk is achieved by the use of credit derivatives or guarantees, 
and the exposures being securitised remain exposures of the 
originator institution.
Resecuritisation: securitisation where the risk associated with 
an underlying pool of exposures is divided into tranches and 
at least one of the underlying exposures is a securitisation 
position.
Asset-backed commercial paper (ABCP) programme: a 
securitisation programme in which the securities issued 
predominantly take the form of commercial paper with an 
original maturity of one year or less.
Investment entity: any institution or subject, other than the 
originator or sponsor institution, holding a securitisation 
position.
Originator institution: is an institution that:
a. Itself or through related entities was, directly or indirectly, 
involved in the original agreement that created the 
obligations or potential obligations of the debtor or potential 
debtor giving rise to the exposure being securitised; or
b. Purchases a third party’s exposures for its own account and 
then securitises them.
Sponsor institution: an institution other than the originator 
that establishes and manages an asset-backed commercial 
paper programme, or other securitisation scheme, that 
purchases exposures from third-party entities and to which 
liquidity or credit facilities or other credit enhancements are 
generally granted.
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5.2. Securitisation accounting 
policies
The rule for derecognising securitised assets is that set by 
IFRS 9 financial instruments for the derecognition of financial 
assets (section 3.2.). The accounting treatment of transfers of 
financial assets depends on the form and extent to which the 
cash flows, risks and rewards are transferred to third parties, 
along with the control of the assets transferred:
1.
Where substantially all the risks and rewards are 
transferred to third parties, e.g. in asset securitisations 
in which the transferor neither retains subordinated 
debt nor grants any credit enhancement to the new 
holders, the transferred financial assets are 
derecognised. Any right or obligation retained or created 
in the transfer is recognised. The difference between the 
carrying amount recorded prior to the transfer and the 
fair value of the retained rights or obligations is 
recognised in income for the year.
2.
Where substantially all the risks and rewards associated 
with the transferred financial asset are retained (as in 
securitisations in which subordinated debt or some 
other type of credit enhancements are retained that 
absorb substantially all of the expected credit losses for 
the transferred asset or the probable variation of its 
future net cash flows), the transferred financial asset is 
not derecognised and continues to be measured using 
the same criteria as before the transfer. The following 
are also recognised for accounting purposes:
a.
An associated financial liability, which is recognised 
for an amount equal to the consideration received 
and is subsequently measured at amortised cost, 
unless it meets the requirements for classification at 
fair value through profit or loss.
b.
The income from the financial asset that has been 
transferred but not derecognised and any expense 
incurred on the new financial liability are presented 
on the income statement without netting. 
3.
The following distinction is made when substantially all 
the risks and rewards associated with the transferred 
financial asset are neither transferred nor retained, e.g. 
in securitisations in which the transferor takes on 
subordinated debt or some other type of credit 
enhancement for a portion of the transferred asset and 
thus significantly, but not substantially, reduces its 
exposure to variations in the present value of future net 
cash flows:
a.
Where the transferor does not retain control of the 
transferred financial asset: the transferred financial 
asset is derecognised and any right or obligation 
retained or created in the transfer is recognised.
b.
Where the transferor retains control of the 
transferred financial asset: it continues to recognise 
the transferred financial asset on its balance sheet 
for an amount equal to its exposure to possible 
changes in value and recognises a financial liability 
associated with the transferred financial asset. The 
net amount of the transferred asset and the 
associated liability is:
•
The amortised cost of the rights and obligations 
retained, if the transferred asset is measured at 
amortised cost, or 
•
The fair value of the rights and obligations retained, 
if the transferred asset is measured at fair value.
Accordingly, financial assets are only derecognised when any 
of the following circumstances occur:
• The rights to the future cash flows they generate have been 
extinguished.
•  The risks and benefits have been substantially transferred 
to third parties.
• If not all risks and benefits are retained or transferred, when 
control has been transferred.
There have been no changes with respect to the previous year 
in the methods, assumptions and key data used to assess the 
securitised exposures.
There is no specific accounting treatment for synthetic 
securitisations or assets awaiting securitisation.
5.3. Management of the 
securitisation activity at 
Santander Group
5.3.1. Santander Group securitisation objectives and 
management
Santander Group pursues various objectives through its 
securitisation activity:
• Management and diversification of credit risk: the Group 
aims to reduce credit risk concentrations that arise naturally 
from its commercial activity through securitisation 
transactions and the subsequent sale of the bonds in the 
market. The effective transfer of risks achieved through 
these transactions enables the Group to optimise its credit 
risk exposure and contributes to value creation by reducing 
the Bank’s need to retain own funds.
• Obtaining liquidity: securitisation enables Santander Group 
to mobilise its balance sheet by transforming illiquid assets 
into liquid assets and obtain wholesale funding by selling 
the transformed assets or using them as collateral. Retained 
securitisation positions can also be used as collateral for 
ECB and Bank of England funding.
• Diversifying funding sources: the liquidity obtained from 
securitisation allows Santander Group to diversify its 
funding sources, in terms of maturity and product type.
• Optimisation of capital consumption: in 2020, 15 new 
securitisations were originated, all involving significant risk 
transfer.
The Financial Management division draws up the issuances 
and securitisations plan for each Santander Group subsidiary/
global business annually, on the basis of the liquidity plan and 
considering certain prudential limits on raising short-term 
market funding.
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5.3.2. Santander Group securitisation functions
Santander Group’s role in the securitisation process is mainly 
that of originator of the underlying assets being securitised. 
Nevertheless, in addition to originating the underlying 
payments, the Group also plays a role in servicing the loans 
and granting subordinated loans. It also acts as a 
counterparty, when needed, in the interest rate swap 
agreement for the SSPE that acquires the loans.
Santander Group also acts as an investor, acquiring positions 
in SSPEs originated by non-Group entities and/or retaining a 
portion of the positions originated by the Bank itself.
Santander Group is the sponsor of a securitisation whose 
underlying consists of loans granted by various financial 
institutions to SSPEs of mortgage-backed bonds to cover the 
reserve fund.
Santander Group also structures and places its own 
securitisations, as it does for third parties, and leads and 
promotes new structures in various jurisdictions for both 
funding and risk transfer purposes. This activity is situated in 
the context of a revival of securitisation as a tool for 
channelling credit to the real economy, with a special focus on 
SMEs.
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The following table gives a breakdown of the securitisation 
positions purchased or retained by securitised asset class and 
the Bank’s role in the securitisation at 31 December 2020:
Table 52. Securitisation positions purchased and retained with risk transfer by exposure type in the banking book
Million euros
2020
2019
Exposure
RWA
EAD
RWA
Originator
Investor
Sponsor
Originator
Investor
Sponsor
Originator
Investor
Sponsor
Originator
Investor
Sponsor
Traditional 
securitisations
 
1,392  11,071 
 
454  
2,154 
 
3,933  
8,252  
0  
578  
1,351  
0 
Residential 
mortgages
 
6  
1,670 
 
1  
371 
 
19  
1,891  
—  
3  
201  
— 
Commercial 
mortgages
 
—  
— 
 
—  
— 
 
—  
—  
—  
—  
—  
— 
Credit cards
 
—  
105 
 
—  
39 
 
—  
70  
—  
—  
9  
— 
Leasing
 
—  
297 
 
—  
145 
 
—  
140  
—  
—  
76  
— 
Loans to 
corporates or to 
SMEs treated as 
corporates
 
—  
2 
 
—  
0 
 
—  
1,330  
—  
—  
324  
— 
Consumer loans
 
1,386  
4,032 
 
453  
687 
 
3,914  
1,930  
—  
575  
226  
— 
Receivables
 
—  
0 
 
—  
0 
 
—  
898  
0  
—  
131  
0 
Securitisation 
positions
 
—  
— 
 
—  
— 
 
—  
1,010  
—  
—  
173  
— 
Others
 
—  
4,966 
 
—  
913 
 
—  
983  
—  
—  
210  
— 
Resecuritisations
 
—  
—  
0  
—  
—  
0 
Securitisation 
positions
 
—  
—  
0  
—  
—  
0 
Synthetic 
securitisations
 26,647  
205 
 
5,300  
251 
 31,262  
—  
—  
4,700  
—  
— 
Loans to 
corporates or to 
SMEs treated as 
corporates
 
7,606  
102 
 
954  
143 
 17,952  
—  
—  
2,455  
—  
— 
Consumer loans
 
4,190  
— 
 
651  
— 
 
6,023  
—  
—  
993  
—  
— 
Receivables
 
—  
— 
 
—  
— 
 
7,287  
—  
—  
1,252  
—  
— 
Others
 14,852  
102 
 
3,695  
107 
 
—  
—  
—  
—  
—  
— 
Total
 28,040  11,276 
 
5,754  
2,405 
 35,195  
8,252  
0  
5,278  
1,351  
0 
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The following diagram depicts the geographical distribution 
of Santander Group’s securitisation activity as of 31 December 
2020.
Distribution of the group’s securitisation function
82%
18%
n Originator
n Investor
Originator activity
31%
7%
7%
8%
4%
27%
16%
n Spain
n Germany
n Portugal
n UK
n Italy
n USA
n Others
Note: The information on the securitisation positions of the investment and 
trading portfolio of Santander Group is included. 
Investor activity
19%
26%
22%
9%
4%
11%
9%
n USA
n UK
n France
n Italy
n Germany
n Spain
n Others
As indicated in the graph, originator activity accounts 82% of 
Santander Group securitisation activity, with investment 
activity accounting for 18%.
66% of the volume of securitisations originated by Santander 
Group is concentrated Spain, USA, and the United Kingdom.
On the investment side, 68% of acquisitions of investment 
positions are concentrated in the United Kingdom (26%), 
France (22%) and United States (19%).
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5.3.3. Risk inherent to the securitisation activity at 
Santander Group
Securitisation offers advantages in terms of lower funding 
costs and better risk management. However, it exposes 
investors to certain inherent risks. Santander Group is not 
exposed to any additional risk by acting as the originator or 
sole investor in a securitisation. In fact, doing so reduces 
liquidity risk by transforming illiquid assets (the loans 
originated) into liquid assets (securitisation bonds).
Acting as the originator and as one of the investors in the 
issue, subjects Santander Group to the following risks:
• Credit risk: the risk that borrowers will fail to meet their 
contractual obligations in due time and proper form, with 
the consequent impairment of the underlying assets 
backing the securitisation positions. Credit risk is assessed 
by external credit rating agencies, which assign ratings to 
the securitisation positions. At Santander Group, the 
maximum exposure in the banking book is limited by rating 
(AAA, AA, A, BBB, BB) and by type of underlying. In addition, 
the Group continuously monitors published data on default 
of the underlying, the credit quality of the originator and 
mandatory minimum ratios and ratings in the structure, as 
well as data on granularity, geographical distribution and 
type of underlying.
• Prepayment risk: the risk of early repayment of some or all 
of the assets underlying the securitisation, so that the 
securitisation positions mature before the contractual 
maturity date of the underlying assets. Calculations of the 
average life, return and duration of securitisation positions 
is subject, among other things, to assumptions about the 
rate at which the underlying assets will be prepaid, which 
may vary. This risk is practically non-existent at Santander 
Group as the contractual maturity of the securities issued is 
usually longer than that of any underlying 
• Basis risk: this risk arises when there is a mismatch 
between the interest rates or maturities of the securitised 
assets and those of the securitisation positions. At 
Santander Group this risk is usually hedged with swaps.
• Exchange rate risk: this exists in securitisations where the 
securitised assets and the securitisation positions are 
denominated in different currencies. At Santander Group, 
the risk arising from the currency mismatch between the 
underlying and the issue is usually hedged in the structure 
through a swap (excluding synthetic securitisations). The 
P&L risk assumed in non-euro bonds is managed by the 
Active Credit Portfolio Management (ACPM) area.
• Liquidity risk: this risk is diminished through the 
securitisation process, whereby naturally illiquid assets are 
transformed into debt securities that can be traded on 
organised financial markets. In some securitisations, 
however, such as those which issue commercial paper, 
liquidity risk is still significant and is manifested in the need 
to cover potential timing mismatches between interest 
payments on the underlying assets and payments of 
interest on the securities. At Santander Group this risk 
tends to be very small and is mitigated by liquidity facilities 
included in the structure (excluding synthetic 
securitisations). The liquidity risk associated with investing 
in bond positions is managed by establishing maximum 
holding periods.
• Counterparty risk: there are no portfolio sales to Special 
Purpose Vehicles (SPV) in synthetic securitisations. The 
Bank buys financial guarantees from an SPV (which then 
issues a Credit Link Note (CLN)) or the end investor to 
transfer risk. The financial guarantees received can be 
funded or unfunded. In the latter case, the Bank has to 
reclaim the losses from the investor, which generates 
counterparty risk.
5.3.4. Santander Group securitisation activity
Santander Group originated eight securitisations in 2020, 
aiming to achieve significant risk transfer.
Santander Group also originates and holds positions in 
traditional securitisation funds whose underlying portfolios 
mainly comprise mortgages, and consumer and corporate 
loans.
Santander Group is also the originator of 24 synthetic 
securitisation funds, three of which were originated in 2020. 
The underlying assets of those originated this year are loans 
to SMEs (in one case), project finance loans (in one case)  and 
consumer loans (in one case).
Santander Group is awarded a rating by one or more of the 
following external rating agencies for each of these 
traditional structures, regardless of the underlying product: 
Standard & Poors', Moody’s, Fitch, DBRS, Arc, Scope and 
KROLL. The Group obtains ratings from at least two of these 
agencies when a traditional securitisation is placed on the 
market.
For two of the synthetic securitisations, two external 
ratings have been requested.
With regard to investment activity, Santander Group holds 
positions in securitisation funds originated by entities outside 
Santander Group whose underlying assets mainly comprise 
receivables, credit cards, and corporate, SME and mortgage 
loans. As Santander Group limits its maximum exposure by 
rating (AAA, AA, A, BBB, BB), it does not usually employ 
hedging techniques to mitigate the risk.
Monitoring process for changes in associated risk:
• Securitisation positions originated: regular monitoring is 
the responsibility of the securitisation fund managers 
(trustees/management companies), who prepare regular 
reports updating the rating performance of the underlying 
portfolios for the bonds.
• Reverse securitisation positions: published NPL metrics 
(90+, default, recoveries) and prepayments are monitored 
regularly using specialised software, which also checks 
whether the established rating-based limits are being met.
The processes mentioned above serve to monitor changes in 
credit and market risks of both securitisation and re-
securitisation exposures.
The performance of the underlying assets particularly affects 
the duration of the tranches. It is unlikely that this will affect 
the principal bearing in mind the high levels of subordination 
and continuous monitoring.
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The following tables show the distribution, by type of 
underlying asset, of the securitisation positions issued and 
repurchased by Santander Group as an originator, investor 
and sponsor at 31 December 2020, in both the banking book 
and trading portfolio.
The following table shows the exposure of all securitisations 
in the banking book, distinguishing between wholesale and 
retail underlyings:
Table 53. Securitisation exposures in the banking book (SEC1)*
Million euros
31 Dec. 2020
Bank acting as originator
Bank acting as sponsor
Bank acting as investor
Traditional
Synthetic
Subtotal
Traditional
Synthetic
Subtotal
Traditional
Synthetic
Subtotal
Retail (total)
 
23,259  5,263  28,521 
 
—  
—  
— 
 
5,841  
—  5,841 
Residential mortgages
 
7,885  
—  
— 
 
—  
—  
— 
 
1,670  
—  1,670 
Credit card
 
—  
—  
— 
 
—  
—  
— 
 
105  
—  
105 
Other retail exposures
 
15,373  5,263  28,521 
 
—  
—  
— 
 
4,066  
—  4,066 
Resecuritisation
 
—  
—  
— 
 
—  
—  
— 
Wholesales (total)
 
337  24,265  24,601 
 
—  
—  
— 
 
5,435  
—  5,435 
Corporate loans
 
337  9,788  10,125 
 
—  
—  
— 
 
2,538  
—  2,538 
Commercial mortgage
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Finance leases and receivables
 
—  
921  
921 
 
—  
—  
— 
 
1,969  
—  1,969 
Other wholesale exposures
 
—  13,555  13,555 
 
—  
—  
— 
 
928  
—  
928 
Mortgage covered bonds
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Others
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Resecuritisation
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Total
 
23,595  29,527  53,123 
 
—  
—  
— 
 
11,276  
—  11,276 
*The securitisation portfolio has been considered as a whole (positions bought 
and retained)
Table 54. Securitisation exposures in the trading book (SEC2)
Million euros
31 Dec. 2020
Bank acting as originator
Bank acting as sponsor
Bank acting as investor
Traditional
Synthetic
Subtotal
Traditional
Synthetic
Subtotal
Traditional
Synthetic
Subtotal
Retail (total)
 
3  
—  
3 
 
—  
—  
— 
 
68  
—  
68 
Residential mortgages
 
—  
—  
— 
 
—  
—  
— 
 
52  
—  
52 
Credit card
 
—  
—  
— 
 
—  
—  
— 
 
— 
Other retail exposures
 
3  
—  
3 
 
—  
—  
— 
 
17  
—  
17 
Resecuritisation
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Wholesales (total)
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Corporate loans
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Commercial mortgage
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Finance leases and receivables
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Other wholesale exposures
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Resecuritisation
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Correlation portfolios
 
—  
—  
— 
 
—  
—  
— 
 
—  
—  
— 
Total
 
3  
—  
3 
 
—  
—  
— 
 
68  
—  
68 
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Finally, in its role as originator and investment entity for 
securitisations, Santander Group complies with the 
requirements of Part Five of the CRR relating to the retention 
of economic interest and requirements established in 
procedure and control policies for all securitisation funds 
issued since 1 January 2011. We have to distinguish between 
the requirements for originators and for investment positions:
Securitisations originated:
• Santander Group always retains a minimum of 5% of the 
net economic interest.
• Santander Group makes available to investors all the 
information needed to ensure the risks of the investment 
are fully known before purchase and to enable regular 
monitoring of the performance of the investment. This 
information includes details of the risk criteria applied to 
the securitised exposures, which in all cases are the same 
as for the non-securitised exposures in the originator’s 
balance sheet.
Investment positions in securitisations:
• Santander Group performs due diligence to ensure that the 
investment risks are understood before purchase and to be 
able to monitor the performance of the investment on a 
regular basis.
• Santander Group verifies that the originators of the 
securitisations in which it invests retain a 5% net economic 
interest.
In terms of regulatory compliance, we must distinguish 
between:
• Securitisations originated between 1 January 2011 and 31 
December 2019, and investment positions in securities 
issued before 1 January 2019, Santander Group complies 
with the requirements in Regulation (EU) No 575/2013 in 
the version applicable on 31 December 2018.
• In securitisations and investment positions in 
securitisations originated from 1 January 2019, Santander 
Group complies with the requirements of Regulation 
2017/2402 of the European Parliament and of the Council.
Therefore, as Santander Group complies with these 
requirements, no capital surcharge is applied.
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5.4. Capital requirements - 
Securitisations
Santander Group calculates regulatory capital under the 
securitisation approach for positions held in originated 
securitisations only if the regulatory conditions established in 
the CRR for significant risk transfer are met. Otherwise, 
capital is calculated for the securitised exposures as if they 
had never been securitised. Capital is also calculated for 
investment positions in securitisation funds originated by 
third parties.
Regulation (EU) 2017/2401 on securitisations entered into 
force on 1 January 2019.
This new framework modifies the calculation methods for 
capital requirements. Firstly, with the aim of ruling out any 
form of automatic recourse to external ratings, the entity 
must use its own calculation of regulatory capital 
requirements so long as it is authorised to apply the internal 
ratings-based approach for securitisations (SEC-IRBA). Entities 
that cannot use the SEC-IRBA must apply the standardised 
approach (SEC-SA) to securitisations. The SEC-SA must be 
based on a formula which takes as its input data the capital 
requirements calculated under the standardised approach for 
credit risk. When neither of these two approaches are 
available, the entities must adopt the external ratings-based 
approach for securitisations (SEC-ERBA). In accordance with 
SEC-ERBA, capital requirements must be assigned to 
securitisation tranches on the basis of their external rating.
Capital requirements for securitisation positions are 
calculated by applying the appropriate risk weight to the 
exposure value of each position, depending on the approach 
used by the entity to calculate the risk-weighted exposure 
amounts of the securitised portfolio.
For new securitisations generated in 2020, capital 
requirements are calculated using the new approaches under 
the new Regulation (EU) 2017/2401 on securitisations.
The following table shows positions in securitisations with 
risk transfer and in investment and sponsoring positions on 
the banking book, based on the approach used to calculate 
regulatory capital:
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Table 55. Breakdown of repurchased positions in SSPEs with risk transfer, distributed by function and approach used
Million euros
31 Dec. 2020
31 Dec. 2019
On-balance
sheet 
amount
 exposures
Off-
balance
sheet 
amount
 exposures
EAD
EAD after
capital
reductions
RWA
On-balance
sheet 
amount 
 exposures 
Off-
balance
sheet 
amount
 exposures
EAD
EAD after
capital
reductions
RWA
Originator – 
standardised approach
 
691  
—  
669  
669  
171 
Originator – SEC 
standardised approach
 
3,496  
—  2,699  
2,699  
393  
3,149  
—  3,142  
3,139  
471 
Originator – SEC ERB  
approach
 
1,516  
—  1,063  
1,038  
630  
1,248  
—  1,218  
1,183  
719 
Originator – RB 
approach
 
—  
—  
—  
—  
—  
7,499  
1  7,501  
7,498  
956 
Originator – SF 
approach
 
—  
—  
—  
—  
—  
9,307  
767  10,074  
10,065  
932 
Originator – IRB 
approach
 
28,921  
43  24,248  
24,182  
4,731  
12,588  
—  12,588  
12,520  
2,030 
Originator – 1250%
 
5,804  
—  
30  
—  
—  
3  
—  
3  
2  
— 
Total originator
 
39,738  
43  28,040  
27,919  
5,754  
34,485  
768  35,195  
35,076  
5,278 
Investor – 
standardised approach
 
233  
—  
233  
233  
176 
Investor – SEC 
standardised approach
 
8,820 
 8,820  
8,814  
1,428  
3,219  
—  3,219  
3,219  
543 
Investor – SEC ERB  
approach
 
2,455 
 2,455  
2,455  
977  
323  
—  
323  
323  
147 
Investor – RB approach  
— 
 
— 
 
4,477  
—  4,477  
4,477  
486 
Investor – SF approach
 
— 
 
— 
 
—  
—  
—  
—  
— 
Investor – IRB 
approach
 
— 
 
— 
 
—  
—  
—  
—  
— 
Investor – 1250%
 
— 
 
— 
 
—  
—  
—  
—  
— 
Total investor
 
11,276  
—  11,276  
11,269  
2,405  
8,253  
—  8,252  
8,252  
1,351 
Sponsor – 
standardised approach
 
—  
—  
—  
—  
— 
Sponsor – SEC 
standardised approach
 
—  
—  
—  
—  
— 
Sponsor – SEC ERB  
approach
 
—  
—  
—  
—  
— 
Sponsor – RB approach
 
—  
0  
0  
0  
— 
Sponsor – SF approach
 
—  
—  
—  
—  
— 
Sponsor – IRB 
approach
 
—  
—  
—  
—  
— 
Sponsor – 1250%
 
—  
—  
—  
—  
— 
Total sponsor
 
—  
0  
0  
0  
0 
Total
 
51,013  
43  39,316  
39,188  
8,159  
42,738  
768  43,448  
43,328  
6,629 
Of which: traditional 
securitisations
 
19,510  
43  12,463  
12,438  
2,608  
12,210  
1  12,185  
12,172  
1,929 
Of which: synthetic 
securitisations
 
31,503 
 26,852  
26,751  
5,551  
30,528  
767  31,262  
31,156  
4,700 
On and off-balance sheet totals before provisions and after outflows to other regulatory reports.
EAD IRB (RBA & SFA): exposures net of collateral, before provisions and deductions and after outflows to other regulatory reports.
EAD SA: exposures net of collateral, before deductions and after provisions and outflows to other regulatory reports.
RWA IRB (RBA & SFA): after provisions, deductions and outflows to other regulatory reports and before application of the limit.
RWA SA: after provisions, deductions and outflows to other regulatory reports and before application of the limit.
CREDIT RISK - SECURITISATIONS 2020 Pillar 3 Disclosures Report
   119

It should be noted that for all securitisations which qualify for 
a weight of 1250%, the entity deducts this exposure from 
equity.
As shown in Table 55, exposure decreased by  9,51%, due to  
the drop in exposures in securitisations originated by 
Santander Group. This year, 15 new securitisations with 
significant risk transfer were originated, with the main goal of 
optimising capital consumption.
Securitisation positions in the trading portfolio are eliminated 
from the regulatory capital calculation based on an internal 
market risk model and are included in the calculation of 
capital for specific risk, in accordance with article 335 of the 
CRR. The correlation trading portfolio is also included among 
these positions. This portfolio consists of securitisation 
positions and nth-to-default derivatives that meet all the 
criteria in article 338.1 of the CRR. Therefore, none of these 
positions are considered in the VaR spread and IRC 
calculation, although they are included in the interest rate 
VaR calculation (general risk). For these positions, capital is 
calculated as if they were securitisation positions in the 
banking book, so that capital requirements are calculated 
taking into account the new approaches considered in the 
new Regulation (EU) 2017/2401 on securitisations.
Finally, Regulation (EU) 2017/2402 on securitisations came 
into force from 1 January 2019. This regulation changes the 
prudential requirements for credit institutions and investment 
firms, establishing new treatment for securitisation positions. 
One of the most significant changes is that positions in 
preferential securitisation tranches may not consume more 
capital than the loan portfolio. It also establishes more 
favourable treatment for preferential tranches of STS (simple, 
transparent and standardised) securitisation tranches or those 
which, with certain conditions, foster funding for SMEs.
A breakdown of all securitisations in the banking book is 
provided below, together with the corresponding capital 
consumption arranged by RW (risk weighting) interval and the 
calculation method employed when Santander Group acts as 
originator or sponsor
CREDIT RISK - SECURITISATIONS 2020 Pillar 3 Disclosures Report
120
2020 Pillar 3 Disclosures Report

Table 56. Securitisation exposures in the banking book and associated regulatory capital requirements (Bank acting as originator 
or sponsor) (SEC3)
Million euros
31 Dec. 2020
Exposure values (by risk weight bands)
Exposure values (by regulatory approach)
<= 20%
> 20% to 50%
> 50% to 100%
> 100% to 1250%
1250%
IRB RBA
IRB SFA
SA
SEC IRBA
SEC SA
SEC ERBA
1250%
Total exposure
 17,938  9,625  
53  
302  121 
 
—  
—  
—  24,182  2,699  1,038  121 
Traditional securitisation
 
56  1,264  
53  
—  
19 
 
—  
—  
—  1,064  
—  
309  19 
   Of which, securitisation
 
56  1,264  
53  
—  
19 
 
—  
—  
—  1,064  
—  
309  19 
   Of which, retail underlying
 
56  1,264  
53  
—  
19 
 
—  
—  
—  1,064  
—  
309  19 
   Of which, wholesale 
underlying
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  — 
   Of which, resecuritisation
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  — 
   Of which, preference
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  — 
   Of which, non-preference
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  — 
Synthetic securitisation
 17,882  8,362  
—  
302  101 
 
—  
—  
—  23,117  2,699  
729  101 
Of which, securitisation
 17,882  8,362  
—  
302  101 
 
—  
—  
—  23,117  2,699  
729  101 
Of which, retail underlying
 
5,189  
—  
—  
23  
50 
 
—  
—  
—  3,265  1,496  
450  50 
Of which, wholesale underlying
 12,693  8,362  
—  
279  
51 
 
—  
—  
—  19,852  1,203  
279  51 
Of which, resecuritisation
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  — 
Of which, preference
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  — 
Of which, non-preference
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  — 
Million euros
31 Dec. 2020
RWA (by regulatory approach)
Capital change after cap
IRB RBA
IRB SFA
SA
SEC IRBA
SEC SA
SEC ERBA
1250%
IRB RBA
IRB SFA
SA
SEC IRBA
SEC SA
SEC ERBA
1250%
Total exposure
 
—  
—  
—  4,731  411  
639  — 
 
—  
—  
—  378  
31  
50  — 
Traditional securitisation
 
—  
—  
—  336  
—  
118  — 
 
—  
—  
—  
27  
—  
9  — 
   Of which, securitisation
 
—  
—  
—  336  
—  
118  — 
 
—  
—  
—  
27  
—  
9  — 
   Of which, retail 
underlying
 
—  
—  
—  336  
—  
118  — 
 
—  
—  
—  
27  
—  
9  — 
   Of which, wholesale 
underlying
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
   Of which, resecuritisation
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
   Of which, preference
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
   Of which, non-
preference
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
Synthetic securitisation
 
—  
—  
—  4,395  411  
520  — 
 
—  
—  
—  352  
31  
41  — 
Of which, securitisation
 
—  
—  
—  4,395  411  
520  — 
 
—  
—  
—  352  
31  
41  — 
Of which, retail underlying  
—  
—  
—  505  224  
109  — 
 
—  
—  
—  
40  
16  
8  — 
Of which, wholesale 
underlying
 
—  
—  
—  3,890  187  
412  — 
 
—  
—  
—  311  
15  
33  — 
Of which, resecuritisation
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
Of which, preference
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
Of which, non-preference
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
RWA does not include tranches that have a risk weight of 1250% due to they are deducted from Common Equity Tier 1.
CREDIT RISK - SECURITISATIONS 2020 Pillar 3 Disclosures Report
   121

The following table shows the aggregate value of securitisation positions purchased and retained in the trading portfolio.
Table 57. Aggregate amount of securitisation positions purchased and retained. Trading book
Million euros
31 Dec. 2020
Investor positions
Originator positions
Sponsor positions
ABS PORTFOLIO
Mark to 
market
RWA
Mark to 
market
RWA
Mark to 
market
RWA
SEC - SA approach
 
51  
87  
—  
—  
—  
— 
10-12%
 
17  
22  
—  
—  
—  
— 
12-20%
 
34  
65  
—  
—  
—  
— 
SEC - ERBA approach
 
17  
25  
2.6  
—  
—  
— 
10-12%
 
14  
17  
1.6  
—  
—  
— 
12-20%
 
3  
6  
1.0  
—  
—  
— 
20-40%
 
0  
1  
—  
—  
—  
— 
40-100%
 
0  
1  
—  
—  
—  
— 
Total ABS Portfolio
 
68  
112  
3  
—  
—  
— 
CORRELATION PORTFOLIO
SEC - ERBA approach
 
—  
—  
—  
—  
—  
— 
40-75 %
 
—  
—  
—  
—  
—  
— 
100%
 
—  
—  
—  
—  
—  
— 
250%
 
—  
—  
—  
—  
—  
— 
Supervisory formula method
 
—  
—  
—  
—  
—  
— 
FS
 
—  
—  
—  
—  
—  
— 
Total correlation portfolio
 
—  
—  
—  
—  
—  
— 
Total
 
68  
112  
3  
—  
—  
— 
Note: The table does not include the RWA of short position correlation, since it does not consume capital.
CREDIT RISK - SECURITISATIONS 2020 Pillar 3 Disclosures Report
122
2020 Pillar 3 Disclosures Report

Table 58. Securitisation exposures in the banking book and associated regulatory capital requirements (bank acts as an investor) 
(SEC4)
Million euros
31 Dec. 2020
Exposure values (by risk weight bands)
Exposure values (by regulatory approach)
<= 20%
> 20% to 50%
> 50% to 100%
> 100% to 1250%
1250%
IRB RBA
IRB SFA
SA
SEC IRBA
SEC SA
SEC ERBA
1250%
Total exposure
 9,261  1,412  
267  
330  
7 
 
—  
—  
—  
—  8,814  2,455  
7 
Traditional securitisation
 9,261  1,412  
267  
330  
7 
 
—  
—  
—  
—  8,814  2,455  
7 
   Of which, securitisation
 9,261  1,412  
267  
330  
7 
 
—  
—  
—  
—  8,814  2,455  
7 
   Of which, retail underlying
 5,561  
16  
148  
109  
7 
 
—  
—  
—  
—  4,518  1,316  
7 
   Of which, wholesale 
underlying
 3,700  1,395  
119  
221  
0 
 
—  
—  
—  
—  4,296  1,139  
— 
   Of which, resecuritisation
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  
— 
   Of which, preference
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  
— 
   Of which, non-preference
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  
— 
Synthetic securitisation
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  
— 
Of which, securitisation
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  
— 
Of which, retail underlying
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  
— 
Of which, wholesale underlying
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  
— 
Of which, resecuritisation
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  
— 
Of which, preference
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  
— 
Of which, non-preference
 
—  
—  
—  
—  
— 
 
—  
—  
—  
—  
—  
—  
— 
Million euros
31 Dec. 2020
RWA (by regulatory approach)
Capital change after cap
IRB RBA
IRB SFA
SA
SEC IRBA
SEC SA
SEC ERBA
1250%
IRB RBA
IRB SFA
SA
SEC IRBA
SEC SA
SEC ERBA
1250%
Total exposure
 
—  
—  
—  
—  1,428  
977  — 
 
—  
—  
—  
—  
114  
78  — 
Traditional securitisation
 
—  
—  
—  
—  1,428  
977  — 
 
—  
—  
—  
—  
114  
78  — 
   Of which, securitisation
 
—  
—  
—  
—  1,428  
977  — 
 
—  
—  
—  
—  
114  
78  — 
   Of which, retail 
underlying
 
—  
—  
—  
—  
666  
454  — 
 
—  
—  
—  
—  
53  
36  — 
   Of which, wholesale 
underlying
 
—  
—  
—  
—  
762  
523  — 
 
—  
—  
—  
—  
61  
42  — 
   Of which, 
resecuritisation
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
   Of which, preference
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
   Of which, non-
preference
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
Synthetic securitisation
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
Of which, securitisation
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
Of which, retail 
underlying
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
Of which, wholesale 
underlying
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
Of which, resecuritisation
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
Of which, preference
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
Of which, non-
preference
 
—  
—  
—  
—  
—  
—  — 
 
—  
—  
—  
—  
—  
—  — 
CREDIT RISK - SECURITISATIONS 2020 Pillar 3 Disclosures Report
   123

Santander Group, as an originator institution, retains positions 
in the funds with risk transfers issued by Group entities. 
Santander Group also acquires positions in SSPEs originated 
by non-Group entities and is the sponsor of a securitisation 
fund.
The increase of originator positions is motivated by the 
origination of 15 new securitisations in 2020.
The following table shows the current situation of the 
underlying portfolio for originated securitisations with risk 
transfer and the changes compared to 2019.
Table 59. Securitisation structures with risk transfer
Million euros
2020
2019
Traditional SPVs
Outstanding 
balance
Of which, in default
Value adjustments 
in the period
RWA
Outstanding 
balance
Of which, in default
Value adjustments 
in the period
RWA
Residential mortgages
 
411  
83 
0  
1 
 
794  
—  
—  
3 
Commercial mortgages
 
—  
—  
—  
— 
 
—  
—  
—  
— 
Loans to corporates or to SMEs 
treated as corporates
 
—  
—  
—  
— 
 
—  
—  
—  
— 
Consumer loans
 
7,577  
131  
66  
453 
 
6,873  
4  
(159)  
575 
Others
 
—  
—  
—  
— 
 
—  
—  
—  
— 
Resecuritisations
Securitisation positions
 
11  
—  
— 
0
Total traditional SPVs
 
7,988  
214  
66  
454 
 
7,679  
4  
(159)  
578 
Synthetic securitisation SPVs
Loans to corporates or to SMEs 
treated as corporates
 
8,539  
71  
39  
954 
 
20,098  
12  
(72)  
2,455 
Consumer loans
 
5,159  
45  
56  
651 
 
7,227  
11  
(16)  
993 
Others
 
16,042  
176  
15  
3,695 
 
7,889  
261  
(12)  
1,252 
Total synthetic securitisation 
SPVs
 
29,740  
291  
110  
5,300 
 
35,214  
284  
(101)  
4,700 
Total
 
37,728  
505  
176  
5,754 
 
42,893  
288  
(260)  
5,278 
Note: The value adjustments in the period include the value adjustments by asset and provision (generic and specific) deterioration.
As shown in Table 59, the outstanding balance of securitised 
exposures fell during 2020, mainly due to the reduction in the 
number of securitised loans to companies, SMEs and 
consumers.
In securitisation funds without risk transfer, Santander Group 
retains the majority of it positions in the originated 
securitisation funds, as they do not meet the regulatory 
conditions for significant risk transfer. For these funds, capital 
is calculated for the securitised exposures as if the exposures 
had not been securitised.
The underlying assets securitised in the SPVs originated by 
Santander Group continue to mainly consist of residential 
mortgages and consumer loans.
CREDIT RISK - SECURITISATIONS 2020 Pillar 3 Disclosures Report
124
2020 Pillar 3 Disclosures Report

6
Market risk

6.1.  Activities subject to market risk
127
6.2.  Capital requirements for market risk
128
6.2.1. Internal initiatives on methods for calculating 
market risk
131
6.3.  Trading activity
132
6.3.1.  Value at Risk
132
6.3.2.  Stressed VaR
135
6.3.3.  Incremental risk charge
135
6.3.4.  Stress testing
135
6.3.5.  Backtesting (MR4)
137
6.3.6.  Internal validation of the models
139
6.4.  Structural balance sheet risks
139
6.4.1.  Main interest rate risk in the banking book 
(IRRBB) metrics
139

6. Market risk
Main figures
Million euros
RWA
RWA
2020
2019
Market risk
 
18,008 
 
21,807 
Of which, standardised approach
 
5,071 
 
7,596 
Of which, IMA
 
12,936 
 
14,211 
RWA by calculation approach
RWA by geography
%
%
SA
approach:
28%
IMA
approach:
72%
68%
8%
8%
14%
2%
n Spain
n Brasil
n
Rest of South 
America
n North America
n Others
6.1. Activities subject to market risk
The measurement, control and monitoring perimeter of the 
Market Risk area includes all transactions where risk arises 
due to changes in market factors. This risk arises from 
changes in risk factors (interest rate, exchange rate, equities, 
credit spreads, commodity prices and the volatility of each of 
these) and from the liquidity risk of the products and markets 
in which Santander Group operates.
The activities are segmented according to the purpose of the 
risk, as follows:
a. Trading: this includes financial services for customers, 
trading and the taking of positions, mainly in fixed 
income, equities and currency products.
b. Structural risks: these are composed of the market risks 
inherent to the balance sheet, excluding the trading 
portfolio. Namely:
• Structural interest rate risk: this risk arises from timing 
mismatches in maturities and repricing of all balance 
sheet assets and liabilities.
• Structural foreign exchange risk (hedging of results): 
foreign currency risk arising from the currency in which 
investments in consolidated and non-consolidated 
companies are made (structural exchange rate). This 
category also includes the positions taken to hedge the 
foreign currency risk on future results generated in 
currencies other than the euro (hedging of results).
• Structural equity risk: this includes equity investments in 
non-consolidated financial and non-financial companies, 
and available-for-sale portfolios of equity positions
MARKET RISK 2020 Pillar 3 Disclosures Report
   127

6.2. Capital requirements for 
market risk
This section provides more detailed information on changes in 
capital requirements for market risk through both internal 
and standardised models. Santander Group’s consumption of 
regulatory capital for market risk at the end of December 
2020 breaks down as follows:
Table 60. Regulatory capital requirements for market risk
Million euros
31 Dec. 2020
31 Dec. 2019
Position risk - Trading book* - 
Standardised approach
 
174  
348 
Commodity Risk - Standardised 
approach
 
28  
22 
Specific risk in the correlation 
trading risk portfolio
 
—  
— 
Currency risk - standardised 
approach
 
202  
238 
Position and currency risk - 
Tradingbook - Internal models
 
1,035  
1,137 
Spain
 
617  
632 
Santander London Branch
 
110  
127 
Chile
 
108  
219 
Mexico
 
199  
159 
Total
 
1,439  
1,745 
*Includes structural equity considered as business.
At year-end 2020, Santander Group had authorisation for the 
use of the internal market risk model for the calculation of 
regulatory capital in the trading portfolios of the Spain, Chile 
and Mexico units and the London Branch, by extension of 
Spain's internal model.
Santander Group aims to gradually extend this approval to 
the rest of the units with significant market positions.
The other geographic units calculate capital consumption by 
market risk through the standardised approach.
Consolidated regulatory capital under the internal market risk 
model for Santander Group is computed as the sum of the 
regulatory capital of the units that have the necessary 
approval from the European Central Bank. This is a 
conservative criterion when consolidating Santander Group’s 
capital, as it takes no account of the capital savings arising 
from the geographic diversification effect.
The regulatory capital of the trading activity for the perimeter 
concerned is calculated with advanced approaches, using VaR, 
Stressed VaR (SVaR) and IRC (incremental risk charge) as the 
core metrics, in line with the new bank capital requirements 
under the Basel accords, specifically, the CRR. -
The capital resulting from the VaR and SVaR metrics is 
adjusted using a Kr coefficient, derived from the number of 
backtesting overshootings for each unit in its local internal 
model.
This year, we continued to add new not-in-model risks to the 
calculation of capital by market risk, for those risk factors not 
included in the current regulatory capital metrics (VaR, SVaR, 
etc.).
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A breakdown of capital requirements in the units that use the 
internal model is shown below, by geography and 
component, at year-end:
Table 61. Capital requirements for market risk. Internal model
Million euros
31 Dec. 2020
CR (VaR)
CR (SVaR)
IRC
Risk Not in VaR
Add-On
Total
Spain
 
106  
291  
221  
—  
—  
617 
Santander London Branch
 
33  
74  
4  
—  
—  
110 
Chile
 
34  
55  
4  
16  
—  
108 
Mexico
 
71  
122  
6  
—  
—  
199 
Total
 
244  
541  
234  
16  
—  
1,035 
Below is a breakdown of capital requirements and RWAs 
for market risk with internal model approval from 2019 to 
2020:
Table 62. Market risk under IMA approach (MR2-A)
Million euros
31 Dec. 2020
RWA
Capital 
requirements
VaR (higher of values a and b)
 
3,047  
244 
a. Previous day’s VaR (Article 365(1) of the CRR (VaRt-1))
 
629  
50 
b. Average of the daily VaR (Article 365(1)) of the CRR on each of the preceding 60 business days (VaRavg) 
x multiplication factor (mc) in accordance with Article 366 of the CRR
 
3,047  
244 
SVaR (higher of values a and b)
 
6,767  
541 
a. Latest SVaR (Article 365(2) of the CRR (SVaRt-1))
 
1,301  
104 
b. Average of the SVaR (Article 365(2) of the CRR) during the preceding 60 business days (SVaRavg) x 
multiplication factor (ms) (Article 366 of the CRR)
 
6,767  
541 
IRC (higher of values a and b)
 
2,928  
234 
a. Most recent IRC value (incremental default and migration risks calculated in accordance with Article 
370 and Article 371 of the CRR)
 
1,288  
103 
b. Average of the IRC number over the preceding 12 weeks
 
2,928  
234 
Comprehensive risk measure (higher of values a, b and c)
 
—  
— 
a. Most recent risk number for the correlation trading portfolio (Article 377 of the CRR)
 
—  
— 
b. Average of the risk number for the correlation trading portfolio over the preceding 12 weeks
 
—  
— 
c. 8% of the own funds requirement in the standardised approach on the most recent risk number for the 
correlation trading portfolio (Article 338(4) of the CRR)
 
—  
— 
Other
 
194  
16 
Total
 
12,936  
1,035 
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Table 63. RWA flow statements of market risk exposures under IMA (MR2-B)
Million euros
31 Dec. 2020
VaR
SVaR
IRC
Comprehensive 
risk measure
Other
Total RWAs
Total capital 
requirements
RWAs sep-20
 
3,284  
7,070  
2,952  
—  
97  
13,403  
1,072 
Regulatory adjustment
 
2,434  
5,412  
1,830  
—  
—  
9,676  
774 
RWAs at the previous quarter-end (end of 
the day)
 
850  
1,659  
1,122  
—  
97  
3,727  
298 
Movement in risk levels
 
(237)  
(303)  
(24)  
—  
97  
(467)  
(37) 
Model updates/changes
Methodology and policy
Acquisitions and disposals
Foreign exchange movements
Other
RWAs at the end of the reporting period 
(end of the day)
 
629  
1,301  
1,288 
 
194  
3,413  
273 
Regulatory adjustment
 
2,418  
5,465  
1,639  
—  
—  
9,523  
(762) 
RWAs dec-20
 
3,047  
6,767  
2,928 
 
194  
12,936  
1,035 
Spain: Upward variations in the SVaR caused by increased exposure to sovereign credit positions and covered bonds. Increase in 
the IRC due to increased exposure of the bond portfolio.
Chile: The increase in the RNIM is caused by the positions of sovereign bonds over which the RNIM is calculated. Decrease in VaR 
following a decline in the exchange rate position and a reduction in its volatility (USD/CLP)
Mexico: Reduction in capital arising from the effects of XVA coverage.
SLB: No major differences.
Table 64. Market risk under standardised approach (MR1)
Million euros
31 Dec. 2020
RWA
Capital requirements
Outright products
Interest rate risk (general and specific)
 
1,635  
131 
Equity risk (general and specific)
 
366  
29 
Foreign exchange risk
 
2,521  
202 
Commodity risk
 
350  
28 
Options
Simplified approach
Delta-plus method
 
64  
5 
Scenario approach
Securitisation (specific risk)
 
112  
9 
Total
 
5,047  
404 
Changes in capital requirements and RWAs for market risk 
using approved standardised models from 2019 to 2020 are 
shown below:
Table 65. Capital requirements for market risk. 
Standardised approach
Million euros
31 Dec. 2020
Capital
RWAs
Starting figure (31 Dec. 2019)
 
608  
7,596 
Changes in business
 
(204)  
(2,549) 
Ending figure (31 Dec. 2020)
 
404  
5,047 
Prudent Valuation Adjustments (PVA)
There is also a breakdown in Appendix XVIII of the constituent 
elements of the Bank’s PVA for all assets measured at fair 
value (marked to market or marked to model) for which PVAs 
are required.
This information is published as per Template PV1 of the 
document Pillar 3 disclosure requirements - consolidated and 
enhanced framework, published by the BCBS in March 2017.
In 2020, capital consumption by market risk has been heavily 
impacted by the covid-19 pandemic, which has severely 
disrupted global financial markets, particularly in the first half 
of the year.
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Major global stock market indices slumped, volatility and 
intra-day fluctuations surged, and sovereign bond yields 
reached new lows. CDS spreads also increased, reflecting 
greater medium-term uncertainty and significant risks in 
economic activity in the world's most important economies.
There were episodes of low liquidity and diverging prices 
provided by the main providers of information and market 
prices.
Access files2020 Pillar3 Appendices 2020 Pillar3 
tables available on the Santander Group website
6.2.1. Internal initiatives on methods for calculating 
market risk
Santander is forging ahead with its new global Market Risk 
Advanced Platform (MRAP) initiative. This adapts, transforms 
and strengthens our current market risk calculation, in line 
with the new requirements of the regulatory framework for 
market risk published by Basel (FRTB), and adapts the internal 
risk models to the latest TRIM (Targeted Review of Internal 
Models) guidelines and to the supervisor’s expectations.
This programme adopts a multidisciplinary and multi-
geography approach. It involves all of our entities that 
perform activities exposed to market risk and all relevant 
stakeholders, including Market Risk, Technology, Front Office, 
and Regulatory Affairs and Compliance.
The MRAP programme introduces significant improvements in 
terms of functional and IT architecture and operating models, 
leading to a change in the culture established in the Group 
and the generation of synergies among all initiatives and 
resources.
In 2020, a great deal of work has been done to improve and 
adapt the IRC model. The new model is expected to be 
launched in 2021, once the ECB has approved the 
improvements and developments introduced for this purpose. 
2020 saw the introduction of the tools resulting from the 
Capital Tools project, to strengthen the calculation, validation 
and reporting processes of regulatory capital for market risk. 
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6.3. Trading activity
Trading activity at Santander Group is monitored by the local 
market risk units, under the principle of independence of 
market units, monitoring market risk positions on a daily basis 
and analysing the value of a set of metrics identified and 
approved by the Group to control existing market risk.
These functions carry out regular monitoring to assess and 
evaluate trends in the market risk metrics and any significant 
changes, and to ensure compliance with the approved limits 
for these metrics.
Based on the value of these metrics, regular reports are 
prepared and distributed on the basis of this analysis. These 
reports ensure the appropriate monitoring of market risk 
activities within the Group, as well as communication to 
senior management and other internal and external 
stakeholders.
The corporate Market Risk functions also monitor positions 
daily, both locally at the level of the individual unit and 
globally, through exhaustive checking of changes in the 
portfolios to detect any incidents and correct them 
immediately. 
The local Market Risk functions are also responsible for the 
daily calculation and analysis of the results of the trading 
portfolios. Preparing and analysing a daily income statement 
is an excellent risk indicator, helping us identify the impact of 
changes in financial variables on the portfolios.
The main market risk metrics are as follows:
• VaR and Stressed VaR
• Equivalent and/or nominal positions 
3
• Sensitivities 
4 of the  market risk factors to underlying 
factors (delta, vega, gamma and theta).
• Delivery risk for short positions in securities (fixed 
income and equities).
• The volume of effective and relative losses resulting 
from the monitoring of results during a period:
◦
Loss trigger
◦
Stop loss
• Credit metrics:
◦
Total exposure and exposure by sector/geography/
rating
◦
Jump to default by issuer
◦
Sensitivity to credit risk
• The volume of origination transactions
• P&L of each desk and/or portfolio
These metrics are used to establish limits and sub-limits, in 
order to provide a sufficiently granular limit structure to 
enable effective control of the various types of market risk 
factors to which the Group's portfolios are exposed in its 
trading activities.
The establishment of market risk limits for trading is a 
dynamic process that responds to the level of risk appetite 
established by the Group. This process is part of an annual 
limits plan defined by the Group’s senior management, 
involving all of the Group’s subsidiaries
Three categories of limits are established based on their 
scope of approval and control: 
• Global approval and control limits, 
• Global approval limits with local control, and 
• Local approval and control limits
The limits are requested by the head of the business in each 
country/subsidiary, considering the particular nature of the 
business in order to achieve the budget targets, seeking 
consistency between the limits and the risk/return ratio. 
These are approved by the corresponding risk bodies, as 
defined in their governance process.
Business units must comply with the approved limits at all 
times. If a limit is exceeded, local business executives have to 
explain, in writing and on the same day, the reasons for the 
excess and the action plan to correct the situation. This may, 
in general, consist of reducing the position until it is once 
again within the defined limits or setting out a strategy that 
justifies an increase in the limits.
The basic metric used to control market risk for trading 
activity in Santander Group is value at risk (VaR). VaR 
measures the maximum expected loss for a given confidence 
level and time horizon. The other risk metrics described above 
are also used in addition to this VaR metric to monitor all the 
market risks arising from Santander Group's trading activities. 
Scenario analysis is also performed as a risk management 
tool, to control the potential impact of extreme or unexpected 
movements in market risk factors on trading portfolios. These 
scenarios can replicate past events (historical scenarios), 
identify plausible alternatives that do not correspond to past 
events (hypothetical scenarios) or look for market 
movements that cause a particular impact on results (reverse 
scenarios).
6.3.1. Value at Risk 
Santander Group’s VaR calculation methodology consists of 
historical simulation at a 99% confidence level, with a one-
day horizon for internal risk management and a ten-day 
horizon when calculating own funds for market risk.
Statistical adjustments are applied in VaR to enable swift and 
efficient incorporation of the most recent events affecting the 
levels of risk assumed. Currently, all units use historical 
simulation with full revaluation, except for Market Risk Spain, 
which, while using this methodology for some portfolios, 
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3 At Santander, positions are used to quantify the net volume of the market values of portfolio transactions, grouped by main risk factor, considering the delta value of 
any futures or options. All risk positions can be expressed in the base currency of the local unit and the currency used for standardising information. The changes 
recorded in the positions are monitored on a daily basis to detect any incidents so they can be corrected immediately.
4 Measurements of market risk sensitivity estimate the variation (sensitivity) of the market value of an instrument or portfolio to any changes in a risk factor. The 
sensitivity of the value of an instrument to changes in market factors can be obtained using analytical approximations through partial derivatives or through a 
complete revaluation of the portfolio.

applies historical simulation using Taylor series 
approximation for the bulk of its portfolios.
The Group uses a two-year window, or 520 daily readings, 
backwards in time from the VaR calculation reference date. 
Two figures are calculated every day: one applying an 
exponential decay factor that accords less weight to the 
observations furthest away in time and another with the 
same weight for all observations. The VaR reported is the 
higher of these two figures. Simultaneously, Value at 
Earnings (VaE) is calculated, which measures the maximum 
potential gain at a certain level of confidence and time 
horizon, applying the same methodology as for VaR.
VaR by historical simulation has many advantages as a risk 
metric: it sums up the market risk of the portfolio in a single 
number and is based on observed market movements without 
the need for assumptions about functional forms or 
correlations between market factors.
In relation to VaR, the Expected Shortfall (ES) is also 
calculated by estimating the expected value of the potential 
loss when this is greater than the level set by VaR.
Unlike VaR, ES has the advantage of being better at capturing 
the risk of large losses with low probability (tail risk) and of 
being a sub-additive metric. The Basel Committee considers 
that a 97.5% confidence interval delivers a similar level of risk 
to VaR at a 99% confidence interval. ES is calculated by 
applying uniform weightings to all observations
At the end of December 2020, Santander Group had 
authorisation from the European Central Bank to use the 
internal market risk model for calculating regulatory capital in 
the trading portfolios of the Spain, Santander London Branch, 
Chile and Mexico units.
The total regulatory capital figure using the internal model is 
calculated as the linear sum of the individual regulatory 
capital figures of the units that have received approval for the 
internal model, i.e. without considering diversification. 
Santander Group entities that do not have approval to 
calculate regulatory capital using internal models calculate 
capital using the standardised approach. This calculation 
methodology is also used by entities that have approved 
internal models for only some of their portfolios. The 
standardised approach is applied to portfolios for which the 
internal model is not approved.
During the year, the Group maintained its strategy of 
concentrating its trading activity on customer business, 
minimising net exposure to directional risk as much as 
possible and maintaining geographic and risk factor 
diversification.
Risk levels in the trading portfolio remained low, despite the 
covid-19 crisis, the low interest rate environment, trade 
disputes between China and the USA, and to a lesser extent 
other countries, and the uncertainty caused by the Brexit 
negotiations during 2020. Risk management processes also 
proved to be sound, robust and effective, despite spikes in 
VaR observed at certain times during the year. 
This was reflected in the VaR of the trading portfolio, which, 
despite market volatility, especially with regard to interest 
and exchange rates, remained mostly below the trend of the 
last three years and closed December at EUR10.2 million. This 
means that the contribution of trading risks to capital has 
been substantially lower than in previous years.
Santander also continues to have very limited exposure to 
complex structured instruments or vehicles, reflecting a risk 
culture in which prudent risk management is one of the key 
features.
At the end of September 2020, the Group had the following 
exposures in this regard:
• Hedge funds: exposure was EUR 100 million, all of which 
was indirect, acting as a counterparty in derivative 
transactions. The risk with this type of counterparty is 
analysed on a case-by-case basis, establishing 
percentages of collateralization on the basis of the 
features and assets of each fund.
• Monolines: no exposure at the end of September 2020.
The Group’s policy for approving new transactions related to 
these products remains very prudent and conservative, and is 
subject to strict supervision by the Group’s senior 
management.
The bank's derivatives activity is mainly focused on the sale of 
investment products and on hedging risks for our customers. 
Risk management is focused on ensuring that net open risk is 
as low as possible.
These transactions include options on equities, fixed income 
and exchange rates. This activity mainly takes place in the 
Spain, Brazil, UK and Mexico units.
In comparison with other similar financial groups, Santander 
Group’s trading risk profile can be classified as low. Dynamic 
management of risk enables Santander Group to adopt 
changes in strategy to unlock opportunities in an uncertain 
environment.
For more information, see the Risk Management chapter 
(section 4) of the 2020 annual report.
Access 2020 Annual Report available 
on the Santander Group website
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At year-end 2020, VaR by geography was as follows:
Table 66. EU MR3 – IMA values for trading portfolios
Million euros
Spain
2020
2019
Variation
Var (10 days - 99%)
1
Maximum
 
114.0  
36.9 
 209% 
2
Average
 
29.2  
18.6 
 57% 
3
Minimum
 
15.3  
13.5 
 13% 
4
End of period
 
26.6  
26.8 
 (1%) 
Stressed VaR (10 days - 99%)
5
Maximum
 
109.7  
182.5 
 (40%) 
6
Average
 
73.6  
88.7 
 (17%) 
7
Minimum
 
52.9  
50.5 
 5% 
8
End of period
 
62.1  
61.3 
 1% 
Incremental Risk Charge (99.9%)
9
Maximum
 
159.3  
242.4 
 (34%) 
10
Average
 
105.9  
149.2 
 (29%) 
11
Minimum
 
57.9  
84.6 
 (32%) 
12
End of period
 
98.1  
85.5 
 15% 
Comprehensive risk capital charge (99.9%)
13
Maximum
 
—  
— 
 0% 
14
Average
 
—  
— 
 0% 
15
Minimum
 
—  
— 
 0% 
16
End of period
 
—  
— 
 0% 
Santander London Branch
2020
2019
Variation
Var (10 days - 99%)
1
Maximum
 
26.8  
9.7 
 175% 
2
Average
 
9.6  
5.8 
 65% 
3
Minimum
 
4.0  
3.9 
 1% 
4
End of period
 
7.4  
6.8 
 9% 
Stressed VaR (10 days - 99%)
5
Maximum
 
28.1  
35.2 
 (20%) 
6
Average
 
19.3  
20.0 
 (4%) 
7
Minimum
 
13.0  
13.2 
 (2%) 
8
End of period
 
18.3  
25.5 
 (28%) 
Incremental Risk Charge (99.9%)
9
Maximum
 
26.7  
103.3 
 (74%) 
10
Average
 
3.8  
18.2 
 (79%) 
11
Minimum
 
0.1  
0.1 
 0% 
12
End of period
 
1.6  
0.1 
 3057% 
Comprehensive risk capital charge (99.9%)
13
Maximum
 
—  
— 
 0% 
14
Average
 
—  
— 
 0% 
15
Minimum
 
—  
— 
 0% 
16
End of period
 
—  
— 
 0% 
Chile
2020
2019
Variation
Var (10 days - 99%)
1
Maximum
 
36.1  
45.4 
 (21%) 
2
Average
 
11.5  
8.7 
 32% 
3
Minimum
 
4.8  
3.7 
 29% 
4
End of period
 
6.7  
13.3 
 (49%) 
Stressed VaR (10 days - 99%)
5
Maximum
 
38.3  
36.1 
 6% 
6
Average
 
24.7  
26.6 
 (7%) 
7
Minimum
 
10.3  
18.9 
 (46%) 
8
End of period
 
11.1  
33.0 
 (67%) 
Incremental Risk Charge (99.9%)
9
Maximum
 
10.3  
17.8 
 (42%) 
10
Average
 
3.5  
11.2 
 (69%) 
11
Minimum
 
0.1  
0.2 
 (12%) 
12
End of period
 
1.4  
0.2 
 689% 
Comprehensive risk capital charge (99.9%)
13
Maximum
 
—  
— 
 0% 
14
Average
 
—  
— 
 0% 
15
Minimum
 
—  
— 
 0% 
16
End of period
 
—  
— 
 0% 
Mexico
2020
2019
Variation
Var (10 days - 99%)
1
Maximum
 
45.0  
16.2 
 177% 
2
Average
 
20.8  
9.8 
 113% 
3
Minimum
 
8.5  
3.7 
 130% 
4
End of period
 
9.6  
11.1 
 (14%) 
Stressed VaR (10 days - 99%)
5
Maximum
 
41.5  
40.7 
 2% 
6
Average
 
25.9  
22.6 
 15% 
7
Minimum
 
12.6  
12.3 
 3% 
8
End of period
 
12.6  
25.7 
 (51%) 
Incremental Risk Charge (99.9%)
9
Maximum
 
21.1  
11.8 
 79% 
10
Average
 
3.3  
4.8 
 (32%) 
11
Minimum
 
0.3  
1.0 
 (68%) 
12
End of period
 
1.9  
2.1 
 (11%) 
Comprehensive risk capital charge (99.9%)
13
Maximum
 
—  
— 
 0% 
14
Average
 
—  
— 
 0% 
15
Minimum
 
—  
— 
 0% 
16
End of period
 
—  
— 
 0% 
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6.3.2. Stressed VaR
In addition to standard VaR, Stressed VaR is calculated daily 
for the main portfolios. The methodology for calculating 
Stressed VaR is the same as that used to calculate VaR, apart 
from two differences:
• Historical window for observing factors: The stressed VaR 
calculation uses a window of 260 data readings, instead of 
the 520 used for computing the ordinary VaR measurement.
• Unlike the method used for the ordinary VaR calculation: 
stressed VaR is not obtained as the higher of the uniformly 
weighted percentile and the exponentially weighted 
percentile; instead, the uniformly weighted percentile is 
used directly. 
All other aspects of the methodology and inputs for 
calculating Stressed VaR are the same as for VaR. 
The Market Risk functions periodically define the window 
used to calculate SVaR (the observation period), using the 
most severe at any given time, depending on the positions in 
the portfolio. The scope considered comprises the Treasuries 
for which approval has been obtained for the use of the 
internal model at 31 December 2020: Spain, Chile, Mexico 
and the Santander London Branch.
The windows currently used to calculate stressed VaR are:
Stress window
Period
Spain
13/10/2008 - 10/10/2009
SLB
13/10/2008 - 10/10/2009
Chile
06/05/2008 - 19/05/2009
Mexico
18/09/2008 - 30/09/2009
The Market Risk functions review these stress windows every 
quarter. The SVaR figures are also checked daily, comparing 
them to the VaR figures. If this analysis reveals that the 
current window used to calculate daily VaR covers a period 
with greater volatility than the window used to calculate 
SVaR, the stress window is reviewed on an extraordinary 
basis.
6.3.3. Incremental risk charge
Following the recommendations of the Basel Committee on 
Banking Supervision and applicable regulations, an additional 
metric is calculated in relation to the credit risk inherent to the 
trading portfolios: the incremental risk charge (IRC).
The IRC is intended to measure both rating migration risk and 
any incremental default risk that is not captured by VaR, 
through changes in the corresponding credit spreads. The IRC 
metric is calculated for public and private fixed-income bonds, 
bond derivatives and credit derivatives in the trading portfolio.
The method used to calculate the IRC, which is essentially 
similar to that applied to the credit risk of non-trading 
portfolio exposures, is based on the Merton structural model, 
which says that a default event occurs when a company's 
assets fall below a certain level of its debts. This internally 
developed model comprises direct measurements of the 
distribution queues of losses caused by the credit events 
considered, i.e. default risk and migration of credit quality 
subject to a confidence interval of 99.9% and a capital horizon 
of one year for all positions.
The assumed liquidity horizon coincides with the one-year 
capital horizon, there being no other liquidity horizons of less 
than one year. The IRC calculation methodology uses a loss 
distribution generated through Monte Carlo simulation, using 
two transition matrices: one for corporate issues and one for 
sovereign issues. The transition matrices used in the IRC 
model are based on the historical transition probabilities 
published by the rating agencies. These probabilities are 
processed to remove the non-rated category and adjusted to 
include the internally estimated probability of default. This 
calibration process is run once a year to incorporate the latest 
information. The model does not assume the regular renewal 
of positions (roll-over), but rather a model of constant 
positions along the one-year capital and liquidity horizon, 
maintaining the same positions along this horizon 
independently of the maturity of each of them.
This is a corporate model that incorporates the portfolios 
from the various geographies in which the IRC has been 
approved for calculating independent IRC figures.
6.3.4. Analysis of scenarios and stress testing
The risk measures described above are based on assumptions 
that underpin day-to-day risk management and decision-
making, including normal market conditions, continuous 
pricing and adequate liquidity, although they do not fully 
predict extreme movements or unforeseen market 
turbulence.
Stress testing is an important risk management tool that 
identifies unexpected outcomes related to a wide range of 
risks, telling us how much capital would be needed to absorb 
losses if these unexpected events were to occur. 
Stress tests play a particularly important role in: estimating 
future risk; overcoming the inherent constraints of models 
and the use of historical data; the communication of internal 
and external risks; supporting liquidity and capital plans; 
reporting the establishment of risk tolerance levels; and 
designing risk mitigation and contingency plans for stressed 
conditions.
The Group's stress test programme includes the following 
scenarios:
• Historical scenarios: these study how the portfolio reacts 
under crisis conditions or significant market events that 
occurred in the past which affect portfolio positions, 
estimating maximum losses under the assumption that 
such events will recur.
• Subprime crisis: based on events that occurred in the period 
between September 2007 and December 2008, triggered by 
the subprime mortgage crisis in the USA. Considering two 
different time horizons (1 day and 10 days), it identifies the 
most severe changes in market variables for each risk factor
• covid-19 crisis: this reflects the dramatic changes in 
financial markets as a result of the covid-19 pandemic 
during the first two quarters of 2020. It is based on the 
application of historical market movements during the most 
severe 10-day period in terms of results, for most of the 
positions in the trading portfolios of the Group's units
• Hypothetical scenarios: built using movements for market 
variables that are not necessarily connected to historical 
events, with a forward-looking (ex-ante) view, as opposed 
to a backward-looking (ex-post) view of historical scenarios.
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• Abrupt crisis: a hypothetical scenario based on abrupt 
changes in market risk factors: rise in yield curves and credit 
spreads, appreciation of the USD, sharp fall in stock market 
indices and dividends, increased volatility in all risk factors, 
rises in commodity prices and default of the main positions 
in the portfolio.
• Worst case: this combines movements in risk factors and 
their respective historical volatilities, assuming a variation 
in the value of market factors of +/-3 and +/-6 standard 
deviations per day. Its output is the sum of the worst results 
by risk factor, regardless of their historical correlations.
• EBA adverse scenario: based on the adverse 
macroeconomic scenario to be applied to market risk 
factors, as proposed by the EBA for the "EU-wide stress test 
2020" exercise
• Forward-looking scenario: a plausible scenario defined by 
the Market Risk functions, based on the portfolio positions 
and their expert judgement regarding short-term changes in 
market variables that can have a negative impact on such 
positions. 
• Reverse stress test scenarios: analysis of scenarios that 
could undermine the institution's viability, identifying the 
potential vulnerabilities of the business, along with hidden 
risks and interactions between risk factors. They start from 
a known stress result (such as non-compliance with certain 
ratios relating to capital, liquidity or capital adequacy) and 
from there they identify the extreme scenarios in which 
movements in market variables could cause events that 
might compromise the viability of the business.
Other scenarios:
• IRC scenarios: designed to stress the default risk and rating 
migration risk of credit positions in the trading portfolio, 
with a view to identifying credit events that could impact 
regulatory capital and measure how reasonable the 
assumptions of the CRR model are.
• Use of proxies scenarios: defined to analyse what impact 
incorrect estimates of proxies could have on determining 
the time horizons used to calculate VaR. 
• Liquidity and concentration stress scenario: designed to 
estimate the potential impact of a reduction in market 
liquidity or an excessive concentration of portfolio positions 
that could affect their exit price. 
The Market Risk functions regularly calculate and analyse all 
these scenarios. A consolidated stress test report is prepared 
every month, based on the results of each of the scenarios 
and for all the Group's units with trading activities.  There are 
also alerts on the stress results which, when exceeded, 
trigger communication and joint analysis by Risk and Business 
functions. 
The table below shows the results as at 31 December 2020, 
broken down by risk factor (interest rate, equities, foreign 
currency, credit spread, commodities and their volatilities), in 
a scenario in which volatility equivalent to six standard 
deviations in a normal distribution is applied. The scenario is 
defined by taking the change that produces the highest 
potential loss in the global portfolio for each risk factor.
At the end of June 2020, this scenario implied, for the global 
portfolio, increases in interest rate curves in South American 
markets and decreases in North American markets, 
downturns in stock markets, depreciation of all currencies 
against the euro and increased credit spreads.
Table 67. Stress scenario: Maximum volatility (worst case)
Million euros
31 Dec. 2020
31 Dec. 2019
Interest 
rate
Equities
Foreign 
currency
Credit 
spread
Commod
ities
Total
Interest 
rate
Equities
Foreign 
currency
Credit 
spread
Commod
ities
Total
Total Trading
 
(40.6)  
(25.2)  
(7.3)  
(4.9)  
—  
(77.8)  
(33.2)  
(26.4)  
(11.9)  
(12.2)  
—  
(83.8) 
Europe
 
(21.0)  
(24.5)  
(3.0)  
(4.6)  
—  
(53.0)  
(2.6)  
(18.7)  
(7.5)  
(10.8)  
—  
(39.5) 
South America
 
(18.0)  
(0.5)  
(3.3)  
(0.3)  
—  
(22.0)  
(24.9)  
(7.7)  
(3.5)  
—  
—  
(36.1) 
USA
 
(1.6)  
(0.1)  
(1.0)  
—  
—  
(2.7)  
(4.4)  
—  
(0.6)  
—  
—  
(5.1) 
Global Activities
 
—  
—  
—  
—  
—  
— 
 
—  
—  
(0.1)  
(1.4)  
—  
(1.5) 
Asia
 
—  
—  
—  
—  
—  
— 
 
(1.2)  
—  
(0.3)  
—  
—  
(1.5) 
The stress test reveals that the economic loss suffered by 
Santander Group in its trading portfolios, at market prices, if 
the stress movements defined in the scenario materialised in 
the market, would be €77.8 million. This loss would be 
concentrated in Europe (in the following order: equities, 
interest rates and credit spread) and Latin America (in the 
following order: interest rates, exchange rates and equities)
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6.3.5. Backtesting (MR4)
The backtesting exercise consists of comparing the VaR 
forecasts, with a certain confidence level and time horizon, 
with the actual losses incurred over a time horizon equal to 
the VaR time horizon.
The general aim of backtesting is to verify the accuracy of the 
Value at Risk (VaR) calculation model. In other words, 
whether to accept or reject the model used to estimate the 
maximum loss on a portfolio with a given level of confidence, 
over a certain period of time.
The backtesting is analysed at the local level by the local 
Market Risk Control units. The Market Risk Consolidation unit 
is responsible for reporting the backtesting at the 
consolidated level.  The backtesting methodology is applied 
identically to all the sub-portfolios covered by the internal 
market risk model. The analysis of regulatory backtesting is 
conducted daily, at the portfolio and sub-portfolio levels.
Four types of backtesting are defined, depending on the kind 
of P&L used:
• Economic P&L (dirty P&L): refers to the daily P&L 
calculated on the basis of mark-to-market or mark-to-
model securities (depending on the instruments) of the 
books and records of the bank at the end of the day. It is 
calculated using Front Office systems (data on positions, 
pricing models, valuation methods, price parameters and 
end-of-day market data)
• "Actual P&L" (dirty P&L without mark-ups): refers to the 
daily P&L calculated by comparing the portfolio's closing 
value and its actual value at the end of the following day, 
including losses and gains derived from intraday activities, 
excluding fees, commission and net interest income. 
Santander, as considered acceptable in paragraph 63 of the 
TRIM guidance (“ECB Guide to Internal Models”, Oct 2019), 
has established that net interest income is equal to zero in 
the trading portfolio. The "actual P&L" includes all time 
effects (theta). This P&L is used for the regulatory 
backtesting in accordance with article 366 (3) of the CRR, to 
compute the number of regulatory overshootings. The 
additional aspects included in the TRIM guidance are also 
considered.
• Hypothetical P&L (clean P&L due to subtractions): this 
refers to the daily P&L calculated by comparing the 
portfolio's closing value and its actual value at the end of 
the following day, assuming unchanged positions. In this 
case, time effects are not considered, to be consistent with 
the VaR. Similarly, the additional aspects included in the 
TRIM guidance are also considered. Specifically, any 
valuation adjustment made in the "actual P&L" that is not 
included in the VaR is also not included in the "hypothetical 
P&L". Hypothetical P&L is obtained from the Front Office 
platforms by the Market Risk function, without considering 
intra-day results or changes in portfolio positions. This P&L, 
like the "actual P&L" is used for regulatory backtesting in 
accordance with article 366 (3) of the CRR, in order to 
calculate the number of regulatory overshootings.
• Risk-theoretical P&L (clean P&L due to change of factors): 
this hypothetical P&L is similar to the previous measure but 
is calculated using the Market Risk calculation engine 
(AIRE), without considering intra-day results, changes in 
portfolio positions or time effects (theta). This P&L is 
exclusively used to verify the quality of the internal VaR 
model.
Of these four backtesting methods, only the backtesting on 
the "actual P&L" (dirty P&L without mark-ups) and the 
hypothetical P&L (clean P&L due to subtractions) are used to 
measure and report the accuracy of the model, for regulatory 
purposes. 
Santander Group performed the required benchmark tests 
and analyses regularly throughout 2020 to calibrate and 
control the effectiveness of its internal market risk 
measurement and management systems, concluding that the 
model was reliable.
Number of overshootings
Overshooting occurs whenever the losses or gains observed in 
a day exceed the VaR estimate. The number (or percentage) of 
overshootings recorded is one of the most intuitive indicators 
of a model’s accuracy.
When the P&L exceeds the previous day’s VaR it is considered 
to be overshooting. The number (or percentage) of 
overshootings recorded is one of the most intuitive indicators 
of the model’s accuracy. A regulatory coefficient "K" is 
calculated on the basis of the number of overshootings in the 
regulatory backtesting. This affects the calculation of 
regulatory capital in accordance with the following table:
Backtesting overshootings
KR value
0
0.00
1
0.00
2
0.00
3
0.00
4
0.00
5
0.40
6
0.50
7
0.65
8
0.75
9
0.85
10
1.00
The confidence level for the VaR calculation is a measure of 
the number of overshootings expected to occur in a given 
time window. For example, if the daily VaR is calculated with 
a confidence level of 99%, the percentiles of interest are the 
1st and the 99th percentiles of the P&L distribution, so we 
should expect 2% of overshootings during the days studied 
(1% due to excess profits and 1% due to excess losses).
If there are significantly more, or fewer, overshootings, this 
might be a sign of problems in the VaR model employed. The 
observed P&L and estimated VaR data can be used to 
construct a hypothesis test to check the validity of the VaR/
P&L relationship.
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Time between overshootings
The confidence level for the VaR calculation is also an 
indicative measure of the number of days that can be 
expected to elapse between two successive overshootings. 
For instance, if the daily VaR is calculated at 99% confidence 
(1st and 99th percentiles), we may expect an average time of 
approximately 50 days between overshootings.
Similarly to the frequency of overshootings, hypothesis 
testing can be done based on the time between 
overshootings, as a means of validating the VaR model.
Distance between overshootings
Whereas VaR predicts the risk that is assumed with a certain 
probability, average overshooting (expected shortfall) is a 
predictor, for that probability, of the average loss once VaR is 
exceeded. This study should be included when analysing the 
backtesting report, to obtain the size of the potential losses 
that exceed the VaR level.
Daily VaR/P&L relationship
To validate the VaR model, it is not enough to analyse the 
number and type of overshootings that occur in a time 
window. Other indicators must be observed to ensure the 
model’s consistency. One such indicator is the daily VaR/P&L 
relationship. This relationship is defined as:
• The P&L figure, as a percentage of VaR, on all the days on 
which there are no overshootings (losses or gains).
• Calculation of its arithmetic mean.
The percentage should be close to a value determined by the 
VaR confidence level, because the higher the chosen 
confidence level, the higher the VaR estimate (and the smaller 
the P&L results as a percentage of that estimate).
If the percentage observed is much higher than expected, the 
risk is being underestimated and the model should be 
reviewed. Conversely, if the percentage is significantly 
smaller, then the risk is being overestimated and the VaR 
model should be adjusted. The latter outcome may, however, 
be desirable if the aim is to maintain conservative risk 
estimates.
The following diagram shows the annual backtesting (MR4) 
at the end of December 2020 for each unit with internal 
model approval (see Appendix XIX)
Access file 2020 Pillar 3 Appendices 
available on the Santander Group 
website
The following table includes backtesting overshootings for 
units with approved internal models that account for over 3% 
of total RWAs for market risk. The number of overshootings at 
31 December 2020 for the main units with internal model 
approval are shown below.
Table 68. Exceptions at units with internal model
31 Dec. 2020
Exceptions
Model Status
Spain
 
— 
Valid
SLB
 
2 
Valid
Chile
 
2 
Valid
Mexico
 
1 
Valid
Overshootings in Spain relate mainly to movements in the 
interest rates curve, credit spreads and exchange rates. In the 
last few months of the year, there was also a depreciation of 
the Brazilian real, which created major volatility in the Madrid 
offshore portfolios in Brazil, particularly for fixed income 
positions.
Overshootings in Mexico relate to abrupt movements in the 
MXN/USD exchange rate, with movements in the dollar 
interest rate curve also affecting the overshooting on 20 
November.
Overshootings in Chile are mainly the result of movements in 
the USD/CLP exchange rate and in the dollar interest rate 
curve.
Valuation adjustments
The fair value of a financial instrument is calculated using 
quoted market prices or appropriate valuation models, duly 
validated and approved. This may cause a degree of 
uncertainty in the valuation of less liquid financial 
instruments, which are not traded on a regular basis or which 
use valuation models. These uncertainty factors are 
incorporated into the fair value of positions through valuation 
adjustments. 
Valuation adjustments are designed to ensure the fair 
valuation of positions, by including variables in the market 
value that are not considered in the valuation models or for 
which there is sufficient uncertainty to significantly affect the 
valuation. 
The valuation adjustment categories used at Santander Group 
include:
• Market liquidity valuation adjustments (close out cost): 
adjustments arising from the use of average prices when 
valuing portfolio positions, where accounting rules require 
valuation based on the exit price.
• Valuation adjustments are included due to the existence of 
spreads between buy and sell prices.
These adjustments are calculated taking into account the 
spread between market buy and sell prices and are estimated 
independently for each risk factor, distinguishing between: 
interest rate curves, prices, dividends, volatilities and 
correlation.
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• Valuation adjustments due to uncertainty in market prices 
(market price uncertainty): these are warranted because of 
considerable uncertainty in the market data used for the 
calculation of fair value, distinguishing between: 
◦
Observable market data 
◦
Unobservable market data
• Valuation adjustments due to model risk: these are 
warranted when there is a high degree of uncertainty in the 
valuation models or in the parameters used by these 
models. This uncertainty may be caused by: adding certain 
assumptions that may be erroneous, models whose results 
cannot be calibrated because there are no alternatives or 
because of dependence on parameters that are subject to 
possible estimation errors.
• Other valuation adjustments: adjustments for limitations in 
valuation systems, for exotic items not captured in the 
payoffs configured in the systems, uncertainty in the 
financing/investment costs used in estimating the exit price, 
profit reserves for specific or one-off transactions (generally 
associated with the first-day profit or loss of instruments 
classified as Level 3 in the fair value hierarchy) and credit 
risk adjustments (CVA/DVA). 
6.3.6. Internal validation of the models
Market, counterparty and other non-financial risk models
In 2020, in accordance with the model risk policies, the 
Internal Validation team performed independent review 
exercises for the main models used in the Group's 
geographies. The areas covered are counterparty risk 
(maximum and expected exposures, CVA/DVA), issuer risk 
(incremental risk charge), valuation (interest rates, FX, equity, 
credit and commodities), valuation adjustments (AVA, FVA), 
market risk (VaR/SVaR), structural interest rate and liquidity 
risk (prepayments, accounts with no specified maturity, 
mortgages, calculation of EVE/NIM) and other non-financial 
risks (operational risk, macroeconomic scenarios).
During these exercises, recommendations were issued aimed 
at improving the models and correcting their weaknesses. The 
resolution of the recommendations addressed was certified 
and an independent opinion was issued on the changes made 
to the models, in accordance with the policy on material 
changes.
The Group has also continued to monitor the VaR & SVaR 
models used to calculate regulatory capital for market risk on 
a quarterly basis, based on key indicators of the quality of the 
models, to proactively and independently monitor the 
functioning of these models.
6.4. Structural balance sheet risks
IRRBB (interest rate risk in the banking book) management in 
the Group aims to ensure the stability and recurrence of the 
net interest margin on commercial activity and economic 
value, maintaining risk levels always below those permitted 
by the risk appetite approved by the board of directors.
Structural risk is inherent to the banking business and arises 
from the existence of balance sheet items that behave 
differently in response to changes in interest rates. This risk 
includes both the potential losses from price changes for 
assets recognised at fair value, and economic losses arising 
from management of assets and liabilities carried at 
amortised cost in the banking book positions of Santander 
Group.
The principles governing the control of structural risk at 
Santander Group are as follows:
• Autonomy in management, whereby each entity 
autonomously manages its balance sheet structure and its 
capital.
• Control and supervision that means all control and 
oversight mechanisms must exist for the risks assumed.
• Robust systems and quality internal data.
• Use of standardised and metrics that can be aggregated.
• Use of methodologies and models which are standardised 
and documented.
• Establishment and adaptability of limits.
• Adjustment to the global regulatory environment.
For more information, see the Risk management and control 
chapter (section 4.1) of the 2020 annual report.
Access 2020 Annual Report available 
on the Santander Group website
6.4.1. Main interest rate risk in the banking book (IRRBB) 
metrics
The metrics used in the management and control of structural 
interest rate risk are calculated under various scenarios and 
provide a static and/or dynamic overview of balance sheet 
exposure and the net interest margin in response to adverse 
interest rate movements. The main metrics used in the 
measurement of structural interest rate risk are the following:
a) Repricing gap:
This is the basic concept for identifying the Group’s interest 
rate risk profile. It measures the difference between the 
volume of sensitive assets and liabilities, on and off the 
balance sheet, that re-price (i.e. that mature or are subject to 
rate revisions) at certain times (buckets). This provides an 
immediate approximation of the sensitivity of the entity’s 
balance sheet and its net interest margin and market value of 
equity to changes in interest rates.
b) Net interest margin and its sensitivity:
The net interest margin is calculated as the difference 
between interest income as a percentage of assets and the 
interest cost of the liabilities of the banking book for a 
determined time horizon (typically from one to three years, 
with one year being the standard period for measuring net 
interest margin risk in the Group and for regulatory purposes). 
Its sensitivity reflects the impact of changes in interest rates 
on net interest margin in the given time horizon. Net interest 
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   139

margin sensitivity is calculated as the difference between the 
net interest margin in a selected scenario and the net interest 
margin in the baseline scenario. Therefore, the net interest 
margin can have as many sensitivities as scenarios 
considered. This metric enables the identification of short-
term risk, and supplements economic value of equity (EVE) 
sensitivity.
c) Economic value and its sensitivity:
Economic value of equity (EVE) and its sensitivity: EVE 
measures the market value of equity and its sensitivity 
measures the impact of changes in interest rates on EVE. EVE 
is calculated as the sum of the assets less the present value of 
the liabilities in the banking book, excluding own equity and 
other instruments that do not generate interest. These 
present values are obtained by discounting the projected cash 
flows from assets and liabilities in the relevant discount 
curve(s). EVE sensitivity is calculated as the difference 
between the EVE in a selected scenario and the EVE in the 
baseline scenario. Therefore, EVE can have as many 
sensitivities as scenarios considered. This metric enables the 
identification of long-term risk, and so supplements net 
interest margin.
d) Value at risk (VaR) for the purpose of calculating economic 
capital:
Measurements of value at risk are used to assess the possible 
impact of changes in market variables on the economic value 
of equity (EVE). The risk factors to be considered for the 
calculation of VaR are interest rates and sovereign spreads. 
The latter of these are considered for those currencies where 
this risk is considered high and confined to the spread risk of 
the ALCO portfolio. 
VaR represents the maximum level of estimated losses on the 
economic value of own funds calculated over a two-year 
period and expected to be exceeded only in a percentage of 
cases (1% confidence level) over a one-month time horizon.
In addition, the possible impact of changes in market 
variables on Group earnings is also assessed when calculating 
economic capital (with both losses in the net interest margin 
and losses from price changes in assets recognised at fair 
value being considered):
1. The same standard is used to estimate net interest 
margin losses as is used for VaR, with the only difference 
being the time horizon for the transactions (one year).
2. To estimate losses from price changes of assets 
recognised at fair value, economic P&L is calculated 
under stress for fixed-income instruments managed by 
the ALCO (ALCO portfolios). The impact this market 
stress could have on the portfolio is then measured. A 
change in the value of this portfolio would reduce the 
Group’s equity and, therefore, have a negative effect on 
its capital ratio. The stress combines a statistical 
component, as it is calibrated according to past 
performances observed in the market, with a forward-
looking component, which uses stress scenarios 
generated by the Group based on macro-economic 
analysis.
For further details, see the Risk Management and Control 
chapter (section 4.5) on the 2020 Annual Report.
Access 2020 Annual Report available on 
the Santander Group website
System for controlling limits
The measurement, analysis and control of structural interest 
rate risk metrics guarantees that the level of structural 
balance sheet interest rate risk is aligned with the Group's 
policies, approved limits and risk appetite.
Limits are set for IRRBB (interest rate risk in the banking book) 
as part of the framework of the annual limits plan, responding 
to the Group’s risk appetite levels. The main limits are:
• Net interest margin sensitivity limit at one year
• Market value of equity sensitivity limit
The internal metrics used to monitor interest rate risk are 
based on the sensitivity of economic value and net interest 
margin to interest rate shocks (-100 bp, -75 bp, -50 bp, -25 
bp, +25 bp, +50 bp, +75 bp and +100 bp), to provide a 
harmonised overview of the risk in the Group entities.
• There are also metrics for monitoring the potential impact 
that the bond portfolio used by the ALCO to manage the 
balance sheet interest rate could have on own funds given 
its accounting classification (fair value with changes in 
equity).
If one of these limits or their sub-limits is exceeded, the heads 
of risk management must explain the reasons and facilitate a 
corrective action plan.
Methodologies
The calculation of structural interest rate risk metrics requires 
the use of three main elements:
• Yield curves for capitalisation and discounting
• Behavioural models that enable the cash flows of certain 
instruments to be determined 
• Assumptions about future changes in the entity's balance 
sheet and its various items.
Of these three elements, the behavioural element is the main 
one subject to modelling. The main models used in the 
management and control of balance sheet interest rate risk 
are described below, by product type:
a) Treatment of non-maturing liabilities
Accounts with no contractual maturity are subject to two 
types of optionality, the customer's option to withdraw their 
money without prior notice and/or the bank's option to review 
the interest paid. The corporate model for non-maturity 
deposits (NMDs) is divided into three sub-models:
• Volumes model: the volumes model is based on the fact 
that, with the passage of time, changes in non-maturing 
account balances depend more on customer behaviour and 
macroeconomic variables (such as the opportunity cost of 
not investing in other markets, the housing market or 
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140
2020 Pillar 3 Disclosures Report

interest rates) than on the bank's commercial departments. 
In this case, a statistical approach is considered, based on 
the selection of the lower limit of a confidence interval 
constructed by removing a certain amount of the standard 
deviations from the trend balance sheet. The balance sheet 
is split into stable and unstable balances. The model 
focuses on the stable balances, treating unstable balances 
with an immediate maturity.
• Run-off model: this sub-model assumes that these balances 
naturally decline, as the existing accounts are liquidated 
with the passage of time. The model creates a function that 
produces a fall in the balance down to a maximum maturity 
defined for the account.
• Beta model: this sub-model defines the relationship 
between benchmark interest rates in the market and the 
remuneration paid to customers.
This model requires a variety of inputs:
• Parameters inherent in the product.
• Customer and/or Bank behavioural parameters (in this case 
analysis of historic data is combined with expert judgement 
on the business).
• Market data.
• Historic data of the portfolio.
Internal policies establish the need to review the prices 
assigned to non-maturity deposits (NMDs) on an annual 
basis, or more frequently if required by market conditions. 
The most recent review of the parameters used in the 
valuation of NMD in Group units was 53 days ago on average.
b)Treatment of non-maturing assets
The model used on the asset side for products such as credit 
cards is based on the non-maturing accounts model, sharing 
some of the same methodology and assumptions.
c) Treatment of prepayment of certain assets
 The prepayment option is defined as the possibility offered to 
customers to repay their loans before the contractual 
maturity date, without this involving a significant additional 
cost for them. Prepayment mainly affects fixed-rate products, 
such as fixed-rate mortgages, in a market where the yield 
curves for these portfolios are at low levels and there is an 
incentive for customers to prepay when the market interest 
rate is below the product's reference interest rate. However, 
prepayment does not only depend on the level of interest 
rates. It also depends on other more complex factors resulting 
from macroeconomic and cultural situations in the market. 
This means that the normal techniques used to value options 
cannot be applied directly, and they must be combined with 
empirical statistical models that aim to capture customer 
behaviour. Some of the factors conditioning this behaviour 
are:
• Interest rates: the difference between the fixed rate of the 
product (e.g. a mortgage) and the market rate at which it 
could be refinanced, net of cancellation and opening costs.
• Seasoning: the trend whereby prepayment is low at the 
beginning of the instrument life-cycle (signature of the 
agreement) and then increases, stabilising with the passage 
of time.
• Seasonality: redemptions and early cancellations tend to 
take place at specific dates.
• Burnout: a decreasing trend in the speed of prepayment as 
the instrument’s maturity approaches. This includes:
a) Age, which defines low rates of prepayment.
b) Cash pooling which defines loans that have already survived 
various waves of interest rate reductions as being more 
stable. In other words, when a loan portfolio has been 
through one or more cycles of rate cuts and, thus, high 
levels of prepayment, the surviving loans have a 
significantly lower prepayment probability.
c) Other: such as geographic mobility, demographic, social and 
disposable income factors.
Major developments in the work carried out on models in 
2020 include:
• Internal validation of all the models used in the Group units, 
with around 80% of the models in use having been 
validated at year-end.
• Development of interest-rate conditional models
• Change in the method of calculating the input of the P&L 
vector for the VaR-EaR used in economic capital, adapting it 
to the new conditional parameters defined in the models
MARKET RISK 2020 Pillar 3 Disclosures Report
   141

The following tables show the bank’s changes in the 
Economic Value of Equity (EVE) and Net Interest Income (NII) 
for every interest rate prescribed scenario and for every 
currency.
Table 69. Quantitative information on IRRBB
Million euros
Total
VaR EVE
VaR NII
Period
Dec 20
Dec 19
Dec 20
Dec 19
Parallel up
 
1,243  
(273)  
1,716  
97 
Parallel down
 
(1,867)  
(4,728)  
(740)  
(961) 
Steepener
 
2,726  
2,551 
Flatterner
 
(4,731)  
(5,098) 
Short rate up
 
(2,894)  
(3,633) 
Short rate down
 
(463)  
(288) 
Maximum
 
(4,731)  
(5,098)  
(740)  
(961) 
Period
Dec 20
Dec 19
Tier 1 capital
78,126
78,964
Note: the scenarios assume the shocks established by Basel for each currency 
before applying management floors limiting their impact on currencies with 
negative or extremely low interest rates. Parallel shocks of +/-200 bp are 
used for NII
Note: The aggregation of EVE sensitivities used follows the criteria set out in 
the EBA/GL/2018/02 Guidelines on the management of interest rate risk 
arising from non-trading book activities. For each interest-rate scenario, the 
positive and negative changes occurring in each currency are added linearly, 
with a 50% weighting for positive change. The aggregate NII sensitivities 
used are obtained using internal methodology.
EUR
VaR EVE
VaR NII
Period
Dec 20
Dec 19
Dec 20
Dec 19
Parallel up
 
7,660  
8,423  
1,195  
1,316 
Parallel down
 
(1,477)  
(4,051)  
(439)  
(734) 
Steepener
 
2,696  
2,504 
Flatterner
 
(594)  
(754) 
Short rate up
 
1,466  
1,881 
Short rate down
 
(1,427)  
(2,480) 
Maximum
 
(1,477)  
(4,051)  
(439)  
(734) 
Cumulative interest rate cuts in 2020 led to the fall from the downward shock 
as far as the activation levels of the management floor being reduced and 
sensitivity also decreasing with it.
USD
VaR EVE
VaR NII
Period
Dec 20
Dec 19
Dec 20
Dec 19
Parallel up
 
(600)  
(1,136)  
192  
86 
Parallel down
 
(449)  
(1,105)  
85  
(28) 
Steepener
 
541  
484 
Flatterner
 
(987)  
(1,234) 
Short rate up
 
(746)  
(997) 
Short rate down
 
188  
890 
Maximum
 
(987)  
(1,234)  
192  
(28) 
Fall triggered by the decline in yields and the replacement of wholesale 
funding (FHLB, warehouses and securitisations) with retail funding
GBP
VaR EVE
VaR NII
Period
Dec 20
Dec 19
Dec 20
Dec 19
Parallel up
 
1,619  
(219)  
599  
360 
Parallel down
 
(860)  
(610)  
(425)  
(240) 
Steepener
 
1,547  
1,367 
Flatterner
 
(1,702)  
(1,562) 
Short rate up
 
(407)  
(1,134) 
Short rate down
 
(211)  
792 
Maximum
 
(1,702)  
(1,562)  
(425)  
(240) 
Increased sensitivity in falling-interest-rate scenarios as a result of the 
shortening of the yield curve following the BoE base rate cut of March-20, 
which increased “margin compression” between mortgages and savings 
accounts.
In rising-interest-rate scenarios, sensitivity moves from negative to positive 
especially with the impact in March-20 of the repricing to 0% of GBP 4 billion 
worth of current accounts due to the BoE's rate cut, with them becoming 
treated as non-sensitive (they become fixed) and so losing market value in 
scenarios where rates are increasing. Additionally, GBP 2.4 billion of deposits 
with no defined maturity were also included in April-20, which add greater 
market value in rate-rise scenarios
BRL
VaR EVE
VaR NII
Period
Dec 20
Dec 19
Dec 20
Dec 19
Parallel up
 
(1,096)  
(1,732)  
(132)  
(148) 
Parallel down
 
862  
1,881  
132  
148 
Steepener
 
752  
315 
Flatterner
 
(1,007)  
(628) 
Short rate up
 
(1,250)  
(1,225) 
Short rate down
 
1,192  
1,356 
Maximum
 
(1,250)  
(1,732)  
(132)  
(148) 
For further details, see the Risk Management chapter (section 
4) on the 2020 Annual Report.
Access 2020 Annual Report available on 
the Santander Group website
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2020 Pillar 3 Disclosures Report

7
Operational risk
 
7.1.  Definition and objectives
146
7.2.  Capital requirements for operational risk
146

7. Operational risk
Main figures
Million euros
RWA
RWA
2020
2019
Operational risk
 
55,865  
59,661 
Of which, standardised 
approach
 
45,707  
47,986 
Of which, alternative 
standardised approach
 
10,158  
11,675 
RWA by geography
%
 
  
19%
33%
19%
23%
6%
n Spain
n Rest of Europe
n USA
n South America
n North America
n Others
RWA variation
Million euros
          
(0.6)%
                
59,661
55,865
2019
2020
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7.1. Definition and objectives
Santander Group controls and manages operational risk by 
focusing on identifying, assessing, mitigating and reporting 
sources of operational risk, whether or not they have 
materialised, ensuring that risk management priorities are 
properly established. Santander Group expressly recognises 
that while a certain volume of operational losses can be 
expected, severe unexpected losses resulting from failures in 
business controls are unacceptable.
This year the focus was on managing risks that have arisen or 
increased due to the covid-19 pandemic, while maintaining 
the activities of the operational risk management model. 
Amid this disruption, the bank has adapted quickly and 
efficiently to the new operating environment, providing all 
necessary services to customers and protecting the health of 
its employees. 
In 2020, risk management and analysis in the operational risk 
management model is being improved in various ways: new 
risk appetite metrics were defined; an independent 
methodology was developed to assess and challenge 
countries' risk and control profiles to help with oversight; and 
improvements were made to contingency, business continuity 
and crisis management plans, also providing coverage for 
emerging risks. 
In the management area, specific measures were promoted 
for the management of operational risks during the pandemic 
(focusing on information security, IT, fraud and process risks), 
while continuing to monitor mitigation plans for other 
important areas (e.g. supplier control and transformation 
risk).
For more information, see the Risk management and control 
chapter (section 6) of the 2020 annual report
Access 2020 Annual Report available on 
the Santander Group website
7.2. Capital requirements for 
Operational Risk
Santander Group uses the standardised approach to calculate 
capital requirements for operational risk, as established in the 
the CRR. The resolution was taken by the board of directors on 
22 June 2007 and reported to the Bank of Spain’s general 
supervisory department by the second vice chairman and 
chief executive officer on 29 June 2007.
Under the standardised approach, capital requirements are 
calculated on the basis of relevant income, which is defined as 
the sum of the following components of the income 
statement:
• Interest and similar income
• Interest expense and similar charges
• Income from equity instruments
• Fee and commission income
• Fee and commission expense
• Trading gains (net)
• Exchange differences (net)
• Other operating income
The CRR also defines the following segmentation of business 
lines for this method:
a) Corporate finance
b)Trading and sales
c) Retail brokerage
d) Retail and commercial banking
e) Retail banking
f) Payment and settlement
g)Agency services
h)Asset management
Relevant income
Under the standardised approach, capital requirements are 
calculated as the simple average over the last three years of 
the aggregation, for each year, of the greater of zero or the 
sum of relevant income across each of the business lines, 
multiplied by the weight assigned to each business line.
The mathematical expression of these requirements is as 
follows:
Where:
RI1-8 = Relevant income of each business line, with the 
appropriate sign, in accordance with the CRR.
ß1-8 = Weight applicable to each business line, in accordance 
with the CRR.
The Financial Accounting and Control division is responsible 
for obtaining data on relevant income, allocating it to the 
various business lines and calculating the capital 
requirements.
Santander Group obtains the figure for relevant income from 
the consolidated management information by business line. 
This information is generated from accounting information.
Consolidated management information is published quarterly 
in aggregate form and is the basis on which the budgetary 
compliance of the businesses is measured. This is prepared by 
the Management Control area, which regulates the business 
lines of all the Group’s units based on corporate criteria, 
which all units must apply when drawing up their 
management information.
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2020 Pillar 3 Disclosures Report

1)Main segments: 
a) Europe: includes all the business activities in the region. 
Detailed financial information is provided on Spain, 
Portugal, Poland, Santander Consumer Finance (which 
incorporates all the business activities in the region, 
including the three countries already mentioned) and the 
UK.
b)North America: includes all business activities in Mexico 
and the US, which includes the holding company (SHUSA) 
and the businesses of Santander Bank, Santander Consumer 
USA, Banco Santander International’s specialised unit and 
the New York branch. Banco Santander Puerto Rico, which 
was included with the US, was sold in September 2020.
c) South America: includes all the financial activities 
performed by the Group through its banks and subsidiary 
banks in the region. Detailed information is provided on 
Brazil, Chile, Argentina, Uruguay, Peru and Colombia. 
d)Santander Global Platform: integrates our global digital 
services under one unit. This includes Global Payment 
Services (Global Trade Services, Global Merchant Services, 
Superdigital and Pago FX), our digital bank Openbank and 
Open Digital Services, and Digital Assets (Digital knowledge 
centres, InnoVentures and Digital Assets).
2)Secondary segments. the Group is structured into Retail 
and Commercial Banking, Santander Corporate & 
Investment Banking, Wealth Management & Insurance and 
Santander Global Platform at this secondary level of 
segment reporting.
a) Retail and commercial banking: this covers all customer 
banking businesses, including consumer finance, except 
those of corporate banking, which are managed through 
Santander Corporate & Investment Banking, and asset 
management and private banking, which are managed by 
Wealth Management and Insurance, and 50% of the income 
from the countries' digital services, which are included in 
Santander Global Platform. The results of the hedging 
positions in each country within the scope of their assets 
and liabilities committees are also included in this business.
b)Santander Corporate & Investment Banking (SCIB):this 
business includes revenue from global corporate banking, 
investment banking and markets worldwide, including 
trading desks managed globally (always after the 
appropriate distribution with Retail and Commercial 
Banking customers), as well as the equities business.
c) Wealth Management & Insurance: includes the asset 
management business (Santander Asset Management), the 
corporate Private Banking unit, International Private 
Banking in Miami and Switzerland (Santander Private 
Banking), and the insurance business (Santander Insurance). 
d)Santander Global Platform: integrates our global digital 
services in a single unit (see composition in the definition of 
the main segment) and 50% of the results generated by 
these services in the retail networks.
In addition to these units operating in both the main and 
secondary segments, the Group continues to maintain the 
corporate centre, which includes centralised management 
businesses relating to financial holdings, financial 
management of the structural exchange rate position, 
performed within the scope of the Group’s assets and 
liabilities committee, and management of liquidity and own 
funds through issuances.
As a supplement to the Management Control area’s 
aggregated information at the business unit level, Santander 
Group uses business area information broken down by 
segment, product, etc., to distribute relevant income among 
the business lines defined by the CRR.
Any difference between the total figure for relevant income 
and the Group’s published consolidated information is 
allocated to the business line with the highest capital 
consumption.
The following chart shows the distribution of capital by 
business line as of 31 December 2020.
Capital distribution by business line
63%
27%
5%
2%
2%
1%
n
Retail Banking
n
Commercial 
Banking
n
Sales and 
Negotiation
n
Payment and 
settlement
n
Asset 
management
n
Corporate 
Financing
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Changes in capital requirements and RWAs for operational 
risk from 2019 to 2020 are shown below:
Table 70. Changes in capital requirements for operation risk
Million euros
31 Dec. 2020
Capital
RWAs
Starting figure (31/12/2019)  
4,773  
59,661 
Perimeter
 
(11)  
(137) 
Exchange rate effect
 
(424)  
(5,306) 
Change in business
 
131  
1,647 
Ending figure (31/12/2020)
 
4,469  
55,865 
The standardised approach imposes higher capital 
requirements for financial institutions operating in 
jurisdictions with high net interest income, which are often 
associated with a high-risk premium but not necessarily 
greater operational risk. To avoid this undesired effect, EU 
legislation (Regulation 575/2013/EU) provides for the use 
of the alternative standardised approach by businesses that 
meet certain conditions, subject to the supervisor's 
approval. This approach uses a standardised indicator 
calculated by multiplying certain balances by 3.5%, thereby 
providing an average which is more in line with the unit’s 
operational risk.
On 3 February 2016, the European Central Bank issued 
authorisation for the alternative standardised approach to 
be used to calculate consolidated capital requirements for 
operational risk at Banco Santander Brasil, S.A.
The European Central Bank also issued authorisation for the 
alternative standardised approach to be used to calculate 
consolidated capital requirements for operational risk at 
Banco Santander México S.A., on 12 July 2017.
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2020 Pillar 3 Disclosures Report

8
Other risks
8.1.   Liquidity and funding risk 
151
8.1.1.   Liquidity Coverage Ratio (LCR)
151
8.1.2.   Asset Encumbrance
152
8.2.   Compliance and conduct risk
155
8.3.   Capital risk 
156

8. Other risks
More information on other risks not contemplated in this 
document can be found in the Risk Management and Control 
chapter2  of the 2020 Annual Report.
Access 2020 Annual Report available on 
the Santander Group website
8.1. Liquidity and funding 
Liquidity risk entails the potential losses that may be incurred 
by an entity as a result of its inability to secure funding on the 
market and/or the higher borrowing costs of new sources of 
finance.
The aim of liquidity risk management is to guarantee that 
funds are available at the right time and cost to enable the 
entity to meet its obligations and carry out its operations.
Risk profile:
• Management of liquidity and funding is an essential 
component of business strategy.
• The liquidity and funding model is decentralised and based 
on autonomous subsidiaries responsible for covering their 
own liquidity needs.
• Needs arising from business activity in the medium/long 
term must be funded by medium-term and long-term 
instruments.
• A large proportion of customer deposits, from an essentially 
retail banking balance sheet.
• Diversification of sources of wholesale funding in terms of 
instruments/investors, markets/currencies and maturities.
• Limited recourse to short-term wholesale funding.
• Availability of sufficient liquidity reserves, including a 
discount capacity with central banks to be used in adverse 
situations.
For more information on other risks not covered in this 
document, see the chapter on Risk management and control 
in the 2020 annual report.
Access 2020 Annual Report available on 
the Santander Group website
For further details, see the Risk Management chapter (section 
4) on the 2020 Annual Report.
Access 2020 Annual Report available on 
the Santander Group website
8.1.1. Liquidity Coverage Ratio (LCR)
Description of the degree of centralisation of liquidity 
management and interaction among the Group’s units:
The Group has adopted a decentralised financing model 
through a structure of autonomous subsidiaries that are self-
sufficient when it comes to liquidity. Each subsidiary is 
responsible for covering the liquidity needs arising from its 
current and future business, either through deposits secured 
from its customers in its area of influence or through recourse 
to the wholesale markets in which it operates, within a 
management and supervision framework coordinated at 
Group level. Therefore, each subsidiary manages and 
monitors its own LCR ratio, ensuring that it remains at all 
times within the limits established for that subsidiary. These 
individual limits are more stringent than the regulatory 
requirements and are reflected in the risk appetite of each 
subsidiary.
This financing model has proven itself to be highly effective 
during times of high market stress, since it effectively 
prevents problems at one division from impacting the 
borrowing capacity of other areas and, therefore, of the Group 
as a whole, which can happen with centralised financing 
models.
The breakdown of the LCR ratio shown here is essentially the 
sum of the individual ratios at each Group unit, stripping out 
any one-off intra-group transactions.
For more information, see the LCR table in Appendix XX.
Access 2020 Pillar 3 available on the 
Santander Group website
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Concentration of funding and liquidity sources
The Group seeks to diversify its sources of wholesale 
financing, in terms of instruments, investors, markets, 
currencies and maturities, to ensure sound liquidity 
management. The Group’s model relies on its presence in 
major markets, affording it a large degree of diversification. 
Since most Group units are commercially-oriented, they 
obtain a large part of their funding from deposits secured 
from retail customers, which are inherently more stable than 
wholesale funding sources.
In view of these considerations, there is no significant risk of 
concentration of funding. Even so, the Group deploys metrics 
and limits to monitor any concentration of funding sources.
Derivative exposures and potential collateral calls
Most derivatives transactions involving Group entities are 
subject to collateral contracts covering the market value of 
the transactions. Liquidity risk relates to the impact of adverse 
market scenarios leading to changes in the market values of 
derivatives, which generate additional liquidity needs due to 
the requirement to post collateral. Group units include 
liquidity risk in their LCR ratios using the historical look-back 
approach, in which the most significant net change in 30 days 
over the preceding 24 months is calculated and then added as 
additional liquidity needs.
Currency mismatch in the LCR
Santander Group prepares its consolidated LCR ratio for each 
of its identified significant currencies, which reflect the 
geographies in which the Group’s units operate: US dollar 
(USD), pound sterling (GBP), Brazilian real (BRL), Mexican 
peso (MXN) and Chilean peso (CLP). Each of the entities draws 
up its own LCR ratio in its significant currency. The main risk 
here comes from the positions held in Latin American 
countries, where the local currencies are not directly 
convertible. Positions held in foreign currencies are therefore 
closely monitored, through currency-specific stress scenarios, 
for example.
Other items in the LCR calculation not captured in the LCR 
disclosure template that the institution considers relevant 
for its liquidity profile.
Santander Group’s consolidated ratio is largely shaped by the 
individual ratios of its three main units: Santander Parent, 
Santander UK and Santander Brazil. These units acquire most 
of their funding from retail deposits, which are much more 
stable liabilities that generate fewer potential outflows from 
the LCR ratio. Most cash outflows from the LCR ratio stem 
from wholesale funding, which is considerably more 
unstable, although the Group typically minimises and 
diversifies the maturities. The Group's stock of liquid assets is 
very high quality. On average, approximately 94% of the 
assets that form part of the LCR numerator are Level 1. This is 
because the units' asset portfolios mainly comprise the public 
debt of the countries in which the Group operates or countries 
with good credit ratings.
For further details, see the Economic and financial report 
chapter (section 3.4) and the Risk Management and Control 
chapter (section 4.6) in the 2020 annual report.
Access 2020 Annual Report available on 
the Santander Group website
8.1.2. Asset Encumbrance
Following the guidelines laid down by the European Banking 
Authority (EBA), the concept of asset encumbrance includes 
both on-balance-sheet assets pledged as collateral in 
transactions to obtain liquidity and off-balance-sheet assets 
that have been received and re-used for similar purposes, in 
addition to other assets associated with liabilities other than 
for funding reasons.
Disclosures on Santander Group required by Commission 
Delegated Regulation (EU) 2017/2295.
The scope used for the disclosures in this report is the same 
as the liquidity management scope on a consolidated basis, as 
regulated in CRR 575/2013.
The value of the exposure shown in the tables below was 
calculated as the median of the values disclosed in the 
regulatory information for the four quarters of the year, in line 
with European Banking Authority guidelines.
As we can see from table 71, the vast majority of 
unencumbered assets are loans that could be pledged as 
collateral.
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Table 71. Encumbered and unencumbered assets (AE1)
Million euros
31 Dec. 2020
Carrying amount
 of encumbered assets
Fair value of encumbered 
assets
Carrying amount 
of unencumbered assets
Fair value of 
unencumbered assets
Of which, 
notionally 
elligible 
EHQLA and 
HQLA
Of which, 
notionally 
elligible 
EHQLA and 
HQLA
Of which, 
EHQLA and 
HQLA
Of which, 
EHQLA and 
HQLA
Assets of the reporting 
institution
 
341,253  
56,040 
 1,178,619  
190,472 
Equity instruments
 
5,090  
3,633 
 
7,816  
2,729 
Debt securities
 
58,068  
51,412  
58,398  
51,487  
97,395  
61,798  
98,480  
61,491 
Of which, covered bonds
 
1,250  
1,099  
1,265  
1,113  
1,905  
1,688  
1,894  
1,728 
Of which, asset-backed 
securities
 
4,642  
3,268  
4,771  
3,346  
672  
427  
461  
293 
Of which, issued by general 
governments
 
49,666  
48,878  
49,803  
48,847  
66,758  
55,586  
67,910  
55,345 
Of which, issued by financial 
corporations
 
6,701  
3,320  
6,768  
3,375  
16,528  
10,632  
16,521  
10,559 
Of which, issued by non-
financial corporations
 
1,093  
528  
1,133  
466  
8,673  
229  
8,613  
231 
Other assets
 
279,485  
858 
 1,078,767  
126,010 
Of which, loans
 
248,377  
858 
 
900,979  
113,882 
Table 72. Collateral received and own debt securities issued (AE2)
Million euros
31 Dec. 2020
Fair value of encumbered collateral 
received or own debt securities 
issued
Unencumbered
Fair value of collateral received or 
own debt securities issued available 
for encumbrance
Of which, 
notionally 
elligible EHQLA 
and HQLA
Of which, EHQLA 
and HQLA
Collateral received by the reporting institution
 
86,827  
83,058  
51,287  
44,876 
Loans on demand
 
—  
—  
—  
— 
Equity instruments
 
4,032  
3,290  
5,431  
3,729 
Debt securities
 
80,948  
78,464  
45,806  
40,924 
Of which, covered bonds
 
931  
903  
1,563  
1,054 
Of which, asset-backed securities
 
3,180  
2,003  
4,476  
2,320 
Of which, issued by general governments
 
73,023  
72,873  
36,402  
35,952 
Of which, issued by financial corporations
 
8,133  
6,066  
7,003  
3,712 
Of which, issued by non-financial corporations
 
488  
342  
412  
247 
Loans and advances other than loans on demand
 
—  
—  
3  
— 
Other collateral received
 
982  
952  
43  
— 
Own debt securities issued other than own covered bonds or asset-
backed securities
 
4  
—  
898  
— 
Own covered bonds and asset-backed securities issued and not yet 
pledged
 
7,717  
— 
Total assets, collateral received and own debt securities issued 
 
427,332  
142,518 
Where our own covered bonds and asset-backed securities 
are retained and used, the pledged asset is included in table 
71 under loans and the related liability in table 73.
The main sources and types of encumbrances and the level of 
over-collateralisation are set out in the following table:
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Table 73. Sources of encumbrance (AE3)
Million euros
31 Dec. 2020
Matching liabilities, contingent 
liabilities or securities lent
Assets, collateral received and own
debt securities issued other than 
covered bonds and ABSs 
encumbered
Carrying amount of selected financial liabilities
 
273,268  
381,015 
Derivatives
 
23,400  
22,413 
Of which, Over-The-Counter
 
17,804  
16,172 
Deposits
 
167,835  
242,490 
Of which, Repurchase agreements
 
72,566  
113,123 
Of which, central banks
 
7,090  
7,549 
Of which, Collateralised deposits other than repurchase agreements
 
99,502  
131,671 
Of which, central banks
 
90,517  
117,216 
Of which, Debt securities issued
 
83,933  
113,617 
Of which, covered bonds issued
 
52,121  
65,242 
Of which, asset-backed securities issued
 
30,851  
48,369 
Other sources of encumbrance
 
40,405  
48,841 
Nominal of loan commitments received
 
3,884  
5,107 
Nominal of financial guarantees received
 
481  
598 
Fair value of securities borrowed with non cash-collateral
 
18,681  
20,148 
Other 
 
18,063  
24,023 
Total sources of encumbrance
 
311,368  
427,332 
The table below shows the amount of own covered bonds and 
asset-backed securities retained and not used as collateral 
and the value of the related underlying assets
Table 74. Own covered bonds and asset-backed securities issued
Million euros
31 Dec. 2020
Non-encumbered
Carrying amount of the underlying 
pool of assets
Fair value of debt securities issued 
available for encumbrance
Own covered bonds and asset-backed securities issued
 
12,235  
7,717 
Retained covered bonds issued
 
4,610  
1,256 
Retained asset-backed securities issued
 
8,060  
6,756 
The contribution to the Group’s level of asset encumbrance on 
a consolidated basis by the various units is uneven across 
geographies. The assets of the United States unit are 
relatively more encumbered, due to the high weight of the 
consumer business (Santander Consumer USA). In the units 
operating in the Eurozone and the United Kingdom, where 
covered bonds and securitisations are highly developed, the 
level of asset encumbrance is similar and close to the group 
average. Asset encumbrance is also significant in Mexico, 
which is very active in asset repurchase agreements. The Latin 
American and Poland units have a relatively low level of asset 
encumbrance. Intra-group asset encumbrance is not material.
In each unit, the encumbered assets are denominated in the 
same currency as the encumbrance, normally the unit’s 
functional currency.
For further details on unencumbered assets (article 443 of the 
CRR), see the Economic and financial report chapter (section 
3.4: Liquidity and funding management) of the 2020 annual 
report
Access 2020 Annual Report available on 
the Santander Group website
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2020 Pillar 3 Disclosures Report

8.2. Compliance and conduct 
Under the current configuration of the three lines of defence, 
Compliance and Conduct is a second independent line of 
defence, reporting organisationally to the Group Chief Risk 
Officer (CRO). It reports directly and regularly to the board of 
directors and its committees, through the Group Chief 
Compliance Officer (GCCO).
The Compliance and Conduct function covers all matters 
related to regulatory compliance, financial crime compliance 
(FCC), product governance and consumer protection, and 
reputational risk.
The primary responsibility for management of compliance 
and conduct risk lies with the first lines of defence, jointly 
with the business units that directly originate such risks and 
the Compliance and Conduct function, by assigning 
compliance activities or tasks to the first line or directly by the 
Compliance and Conduct function itself.
The Compliance function fosters adherence by Santander 
Group to rules, supervisory requirements and principles and 
values of good conduct by setting standards, discussing, 
advising and reporting in the interests of employees, 
customers, shareholders and society in general.
Santander Group’s risk appetite in this area essentially takes 
the form of a declaration of zero appetite for risks of this type, 
with the clear objective of minimising any economic, 
regulatory or reputational impact on Santander Group. To 
ensure this, Compliance and Conduct Risk performs consistent 
management of this area, using a common methodology and 
taxonomy, which is fully aligned with the Risk function's 
principles and establishes a series of compliance and conduct 
risk indicators, assessment matrices and qualitative 
statements. 
In 2020, as in previous years, the annual process of preparing 
the risk appetite was completed towards the end of the year, 
with the aim of verifying that the current model is appropriate 
for measuring the function’s risk appetite and aligned with 
the Group's risk appetite.
The composition of the indicators has been reviewed and 
some of their corporate thresholds have been adjusted, to 
provide a more accurate view and to ensure proper alignment 
with the function’s strategy and risk tolerance. These 
adjustments were approved by the relevant committees and 
passed on to the units concerned.
For more information on compliance and conduct risk, see the 
chapter on Risk management (section 7) of the 2020 annual 
report.
Access 2020 Annual Report available on 
the Santander Group website
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8.3. Capital risk
Capital risk oversight and control revolves around the capital 
management model in place at Santander Group. This 
involves a range of processes such as capital planning and 
adequacy and the resulting implementation and monitoring 
of the budget, along with continuous measurement of capital 
and reporting and disclosure of information on capital, as 
shown below:
This oversight and control is carried out independently, 
mainly through the following processes:
• Supervision of capital planning and adequacy to ensure that 
capital levels are adequate and consistent with the Group's 
strategy.
• Ongoing supervision of the measurement of the Group’s 
regulatory capital by identifying the key metrics for the 
calculation, setting tolerance levels and reviewing 
significant variations and the consistency of the 
calculations, including individual transactions that impact 
capital. The performance of capital initiatives is also 
reviewed and challenged, in line with the risk appetite and 
planning.
• Monitoring of securitisations that could involve Significant 
Risk Transfer (SRT) and, therefore, generate a reduction in 
risk-weighted assets under current prudential regulations.
The function aims to provide complete and regular monitoring 
of capital risk by verifying that capital coverage and adequacy 
reflect Santander Group's risk profile.
For further details of capital risk, see the Risk management 
chapter (section 5) of the 2020 annual report.
Access 2020 Annual Report available on 
the Santander Group website
OTHER RISKS 2020 Pillar 3 Disclosures Report
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9
Remuneration 
policies

9.1.   Relevant information contained in other documents
159
9.2.   Remuneration policy applicable to categories of staff 
that may have a material impact on the risk profile of 
Santander Group
159
9.3.   Main characteristics of the criteria for identifying 
categories of staff that may have a material impact on 
the risk profile of Santander Group
160
9.4.   Specific features of the remuneration policy 
applicable to Identified Staff members
161
9.5.   Application of the remuneration policy for the 
Identified Staff in 2019
161
9.6.   Total remuneration of the Identified Staff in 2019
163
9.7.   Remuneration policy for 2020 and following years
166

9. Remuneration 
policies
9.1.Relevant information 
contained in other documents
The corporate governance chapter in the 2020 annual report, 
which was published together with the call to the 2021 
General Shareholders’ Meeting, describes:
• The functions of the remuneration committee regarding the 
remuneration of directors, members of senior management 
and other executives whose work could have a material 
impact on Santander Group’s risk profile.
• The composition of the remuneration committee, directors’ 
attendance at meetings, the involvement of board 
members on other committees, the approximate time 
dedicated to each task and how the committee operates.
• The principles of the remuneration policy of directors, in 
their capacity as such or for their performance of executive 
duties, and the corporate governance principles regulating 
remuneration.
• The 2020 remuneration policy for directors and senior 
management, focusing especially on variable remuneration 
and how it was applied in the year.
• The remuneration measures adopted on 23 March 2020 
applying to the Group executive chairman, the chief 
executive officer and the other members of the board of 
directors, as a sign of their commitment in the context of 
the covid-19 health crisis.
The board of directors is responsible for approving the 
remuneration of directors and senior management, as well as 
the core payment terms of other executives and employees 
who, while not belonging to senior management, take on 
risks, carry out control functions (i.e. Internal Audit, Risk 
Management and Compliance) or receive total remuneration 
that places them in the same remuneration bracket as senior 
management, and employees who take on risk and whose 
professional activities may have a material impact on 
Santander Group’s risk profile. All of these, together with the 
senior management and the Company’s board of directors, 
are known as "identified staff" or "material risk takers".
The corporate governance chapter of the annual report also 
includes the following Pillar 3 disclosures:
• The decision-making process for setting the remuneration 
policy of directors, senior management and the core 
elements of the remuneration of identified staff.
• The basic features of the remuneration components.
• Information on the criteria applied for assessing the metrics 
that determine the variable remuneration of directors and 
senior management and their adjustment according to risk, 
as well as the results of the metrics for directors.
• The basic characteristics of the 2020 digital transformation 
award.
• The deferral policy and other conditions linked to the 
payment of variable remuneration, including the application 
of malus and clawback provisions.
9.2. Remuneration policy 
applicable to categories of staff 
that may have a material impact on 
the risk profile of Santander Group
Santander Group has specific guidelines in its remuneration 
policy for those professionals qualified internally as identified 
staff or material risk takers. These guidelines contain:
• The principles and criteria that determine which people 
have a material impact on Santander Group’s risk profile, 
based on Commission Delegated Regulation (EU) 604/2014 
of 4 March 2014, as explained in the section below.
• The specifics that modify the general remuneration policy 
for its application to this group, taking into account all 
applicable rules and European Banking Authority (EBA) 
guidelines, are described below.
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• The mandate to apply Santander Group’s remuneration 
policy, as adapted in each case so as to comply with local 
regulatory requirements and recommendations issued by 
supervisory bodies.
The remuneration of identified staff in 2020 is in line with the 
criteria in the Group’s remuneration policy, which is reviewed 
annually to ensure that it is aligned with the long-term 
interests of shareholders, the Group’s strategic targets and 
regulatory requirements.
The subsidiaries formally adhere to the Group's corporate 
remuneration policy, which implies the alignment of their 
practices with the principles it contains.
9.3. Main characteristics of the 
criteria for identifying categories of 
staff that may have a material 
impact on the risk profile of 
Santander Group
The identified staff have been defined according to the 
provisions of Law 10/2014, of 26 June, on the restructuring, 
supervision and solvency of credit institutions, (Law 10/2014 
or LOSS), transposing into Spanish law the text of Directive 
2013/36/EU of the European Parliament and Council of 26 
June 2013, on access to the activity of credit institutions and 
the prudential supervision of credit institutions and 
investment firms (CRD IV).
In accordance with the LOSS, people who may have a material 
impact on the Bank’s risk profile are deemed to include senior 
management, employees who assume risks, employees who 
exercise control functions and all employees who receive 
total remuneration that includes them in the same 
remuneration bracket as senior management and employees 
who assume risks. In addition to the previous definition, 
European legislation, through the publication of Commission 
Delegated Regulation (EU) No 604/2014, of 4 March, 
supplementing CRD IV with regard to the regulatory technical 
standards (RTS) on appropriate qualitative and quantitative 
criteria for identifying categories of staff whose professional 
activities have a material impact on an institution’s risk profile 
(Delegated Regulation 604/2014), establishes a closed list of 
specific criteria that entities must consider in the identification 
process.
Santander Group implements the quantitative and qualitative 
criteria in the regulation to determine the members of 
identified staff and has further supplemented these criteria 
with additional internal criteria. The following persons 
generally qualify as identified staff based on these criteria:
• Based on qualitative criteria, staff members who work at a 
material business unit, such as:
◦Members of the management, executive or supervisory 
committees.
◦The first line of the unit.
◦Heads of material business sub-units in that country or 
business and their direct superiors.
◦Heads of Risk, Audit and Compliance and their direct 
superiors, who effectively perform control functions.
◦Heads of legal affairs, finance, taxation, budgeting, 
human resources, remuneration policy, information 
technology and economic analysis.
◦Members of senior risk committees and executives with 
powers to initiate, approve or veto significant credit and 
market risk proposals.
◦Traders who can take major market risk positions.
◦Members of the new products committee.
◦Managers of the directors identified by any of the above 
criteria.
• Based on quantitative criteria:
◦Executives receiving total remuneration of over €500 
thousand in 2019.
◦Executives whose remuneration falls within the top 0.3% 
in Santander Group or their country.
◦Executives who in the past year earned more than the 
member of the identified staff with the lowest 
remuneration, factoring in the business positions 
identified in the qualitative criteria.
• Because of internal criteria:
◦Executives with significant responsibility for representing 
Santander Group at non-material units.
◦Executives with a given level of credit or market risk 
responsibility at certain material units.
◦Heads of business units with a banking licence.
Additional criteria have also been defined to identify and 
classify the units to which the above criteria are applied. 
These criteria are based on simple and widely recognised 
parameters, such as capital and gross income, and reflect the 
relative importance of each identified unit with an impact on 
Santander Group's risk profile.
Current legislation, best practices and market trends are 
taken into account when defining the proportionality 
standards. These apply to both the relative importance of the 
units and the degrees of responsibility of the positions 
occupied by the individuals, to facilitate implementation.
According to these criteria, the identified staff comprised 
1,394 executives across the Group at year-end 2020, 
accounting for approximately 0.73% of the total headcount.
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2020 Pillar 3 Disclosures Report

9.4. Specific features of the 
remuneration policy applicable to 
the identified staff 
In general:
• Fixed remuneration must represent a significant proportion 
of total compensation.
• Variable remuneration for the year shall not exceed 100% 
of the fixed remuneration of the members of the 
independent control functions or, generally, other 
employees who are part of the identified staff, unless the 
General Shareholders’ Meeting has authorised a higher 
percentage for these, which may not exceed 200%.  The 
General Shareholders' Meeting held on 3 April 2020 
authorised an increase in the maximum percentage 
permitted to 200% for a maximum of 1,052 members of the 
identified staff in 2020.
Variable remuneration typically comprises:
• An incentive to be received partly in cash and partly in 
shares or other eligible financial instruments. Payment of 
this incentive is deferred for a period of three to five years 
(up to seven years in the United Kingdom).
• Performance measurement elements in line with the 
strategy and long-term interests of shareholders. These 
elements, consider quantitative and qualitative criteria that 
reflect the entity’s results, returns, capital performance, 
conduct in respect of customers and quality of services 
provided, risk management and compliance with 
legislation.
• Malus and clawback clauses, which are triggered in 
situations in which there is poor financial performance by 
the Bank as a whole, specific divisions or areas, or the 
exposure generated. The following factors must be 
considered:
(i) Significant failures in risk management by the Bank, a 
business or a risk control unit.
(ii) Increases in capital requirements in the Bank or one 
of its business units that were not planned at the time 
that exposure was generated.
(iii) Regulatory penalties or legal convictions for events 
that might be attributable to the unit or staff 
responsible for them. Failure to comply with the Bank’s 
internal codes of conduct.
(iv) Improper conduct, whether individual or collective. 
Negative effects deriving from the marketing of 
unsuitable products and the liability of persons or 
bodies making such decisions is considered especially 
significant.
• Ban on hedging deferred or retained shares or instruments 
and on transferring these in the twelve months following 
their delivery.
For control functions, the total remuneration package must be 
competitive within the market to attract sufficiently qualified 
and experienced employees. The individual objectives of 
these positions must be pegged to the performance of the 
control function rather than business results. Performance of 
the control function must be assessed by staff members who 
are independent of the business units being supervised.
9.5. Application of the 
remuneration policy for the 
identified staff in 2020
The remuneration policy and the essential remuneration 
conditions of individuals belonging to the identified staff have 
been approved by Banco Santander’s board of directors at the 
proposal of the remuneration committee. The human 
resources function and the risk and compliance functions in 
each Group company have duly confirmed that this policy and 
the remuneration practices comply with applicable law and 
regulations. 
This is confirmed by the third independent report issued in 
application of article 33.2 of Act 10/2014 of 26 June on the 
ordering, supervision and solvency of credit institutions. The 
risk supervision, regulation and compliance committee 
supervises the remuneration policy and remuneration 
schemes with the greatest impact to ensure that they are 
suitably aligned with risk management.
The essential elements with regard to variable remuneration 
include:
• The metrics used to determine the variable remuneration of 
senior management and other top executives, which have 
also been used to determine the variable remuneration of 
other members of the identified staff. These metrics are 
described in section 6.3.B (ii) of the corporate governance 
chapter of the 2020 Annual Report.
• Deferral percentages and periods for the identified staff 
based on their category:
REMUNERATION POLICIES 2020 Pillar 3 Disclosures Report
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Percentage for 
immediate 
payment
Deferred
percentage
Deferred
period (*)
Executive directors and members of the material risk takers group with total 
variable remuneration of ≥ EUR 2.7 million
40%
60%
5 years
Senior management and country heads that represent at least 1% of Santander 
Group’s economic capital and other members of the identified staff with total 
target variable remuneration of ≥ EUR 1.7 million and< EUR 2.7 million
50%
50%
5 years
Other members belonging to the material risk takers
60%
40%
3 years
* Up to 7 years in certain jurisdictions.
Note: Variable reference remuneration for standard compliance (100% of objectives).
• Linking part of the deferred amounts to fulfilment of multi-
year objectives for executive directors, senior management 
and other executives based on their category. These metrics 
are described in section 6.3.B (iv) of the corporate 
governance chapter of the 2020 Annual Report.
• The suitability of the financial instruments used for the 
portion of deferred remuneration in financial instruments: 
use of shares in Banco Santander S.A. or in any of its listed 
subsidiaries (such as Brazil, Mexico and Santander 
Consumer USA) or equivalent instruments (Chile and 
Poland) and the ratio between these instruments.
• Defining the events that might trigger the application of 
malus and clawback provisions on the variable 
remuneration accruing in 2020. These events are described 
in the previous section and apply to all the identified staff.
• No discounts are applied to deferred variable remuneration 
when calculating the ratio of variable to fixed components.
In addition to the general scheme of variable remuneration 
metrics, the corporate and investment banking business 
(Santander Corporate & Investment Banking, SCIB) follows 
a model that is widely applied across all geographies where 
the business carries out its activities. The model provides 
remuneration for achieving results using a partial pay-out 
system, pegging variable remuneration to the division’s 
ordinary net profit, including provisions and other 
assimilated costs, and the budget objectives, with 
additional impact from the Group's results, ensuring 
alignment with it. The model includes the same categories 
of metrics – including capital, risks and customers – as used 
for senior management, although they may be adapted for 
the needs and requirements of the individual business.
For further details, see the corporate governance chapter of 
the 2020 Annual Report.
Access 2020 Annual Report available on 
the Santander Group website
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9.6. Total remuneration of the 
identified staff in 2020
The following table shows the total remuneration of the 
identified staff in 2020:
Table 75. Total remuneration
Thousand euros
2020
2019
Identified Staff
Admin. 
Executives
Other senior 
managers 
(5)
Rest of staff 
(6)
Total
Admin. 
Executives
Other senior 
managers 
(5) Rest of staff 
(6)
Total
Number of persons
 
3  
18  
1,373  
1,394 
 
3  
18  
1,363  
1,384 
Total fixed remuneration 
(1)
 
13,539  
33,056  
423,123  
469,718 
 
12,317  
35,533  
442,308  
490,158 
Total variable remuneration 
(2,3)
 
7,697  
24,362  
309,493  
341,552 
 
11,475  
31,116  
380,102  
422,693 
Payable immediately
In cash
 
1,555  
5,976  
90,254  
97,785 
 
2,573  
7,668  
110,962  
121,203 
In instruments 
(4)
 
1,555  
5,976  
92,297  
99,828 
 
2,573  
7,668  
107,951  
118,192 
Deferred payment
in cash
 
1,913  
4,887  
55,346  
62,146 
 
3,165  
6,840  
74,610  
84,614 
in instruments
 (4)
 
2,675  
7,524  
71,595  
81,793 
 
3,165  
8,940  
86,579  
98,683 
Payment for new contracts
Total guaranteed 
remuneration
 
—  
2,495  
7,927  
10,422 
 
—  
—  
6,822  
6,822 
Number of beneficiaries
 
—  
1  
8  
9 
 
—  
—  
8  
8 
(1)Includes fixed salary and supplements, attendance fees and by law-stipulated allotments for executive directors, as well as benefits (including pensions classified 
as fixed in nature).
(2)The variable remuneration includes EUR 1,798 thousand in variable component pensions. Variable remuneration does not include EUR 8,186 thousand in buyouts 
or sign on amounts.
(3)Annual bonus is included at its fair value. Fair value has been determined on the date it was awarded, based on an expert assessment report and taking account of 
different possible scenarios for the performance of the different variables set out in the plan during the measurement periods.
(4)The following charts show the distribution of instruments according to the companies of Santander Group to which they correspond.
(5)This column includes the remuneration of the members of senior management (excluding executive directors) as at 31 December 2020 and 2019, respectively.
(6)This column includes the remuneration of senior management who resigned their duties during 2020.
The following table shows the distribution of deferred 
instruments in qualifying Santander Group companies:
Distribution of deferred instruments according to the Group company to which they correspond
IMMEDIATE PAYMENT
75%
14%
3%
5%
1%
4%
DEFERRED PAYMENT
78%
12%
2%
4%
3%
n Banco Santander, 
S.A.
n Santander Brazil
n Santander Chile
n Santander Mexico
n Santander Poland
n Santander Consumer 
USA
REMUNERATION POLICIES 2020 Pillar 3 Disclosures Report
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The total amount of severance payments and other benefits 
associated with contract termination, including pre-
retirement payments, awarded during the year to members of 
the identified staff amounted to €50.2 million (of which 4.96 
million Euros correspond to three senior executives who held 
the position at some point in 2020, as a result of non-
competition agreements) for a total of 66 people with 
average seniority of 11 years. Out of that total, 16 people 
received an amount corresponding to more than two annual 
fixed remuneration payments, with a total vested value of 
severance payments of €39.1 million. The maximum amount 
of a single award was €4.0 million.
The Investment Banking area includes members of identified 
staff who belong to businesses related to corporate and 
investment banking (Santander Corporate & Investment 
Banking).
The Retail and Commercial Banking area covers all customer 
banking businesses, including all the people who provide 
support in the geographies, whether they are local senior 
executives or other categories.
The breakdown of total remuneration by area of activity is as 
follows:
Table 76. Remuneration by activity area
Thousand euros
31 Dec. 2020
Admin. 
Executives
Non-executive 
directors
Investment 
banking
Commercial 
Banking
Asset 
Management
Corporate 
functions
Independent 
control 
functions
Other
Total
No. Of persons
 
3 
 
14  
273 
 
637 
 
72 
 
100 
 
295 
 
—  
1,394 
Top-Management
 
3 
 
—  
1 
 
1 
 
1 
 
11 
 
4 
 
—  
21 
Rest of Identified Staff
 
— 
 
14  
272 
 
636 
 
71 
 
89 
 
291 
 
—  
1,373 
Total Remuneration
 21,237 
 
4,498  199,178 
 307,321 
 
41,875 
 103,492 
 133,671 
 
—  811,270 
Top-Management
 21,237 
 
—  
4,568 
 
3,704 
 
3,794 
 32,967 
 
12,385 
 
—  78,654 
Rest of Identified Staff
 
— 
 
4,498  194,610 
 303,617 
 
38,081 
 70,525 
 121,286 
 
—  732,615 
Areas' fix/variable 
average ratio
 63 %
0  %
 121 %
 70 %
 71 %
 70 %
 48 %
0  %
 75 %
The Independent Control Functions area includes all functions 
related to risk management, internal audit, compliance, and 
financial accounting and control, as well as others associated 
with control of regulatory capital.
The corporate functions include people belonging to the 
identified staff of the corporate support areas (e.g. Human 
Resources, Technology and Operations, Communication, 
General Secretariat, Strategy and Financial Planning).
The sum of variable components in 2020 for each member of 
the identified staff did not exceed the limit established in each 
case for 2020, which was either 100% or 200%, as authorised 
by the General Shareholders’ Meeting. The ratio of variable 
components of remuneration to fixed components for all the 
identified staff was 75% and the limits prescribed for each 
component were duly observed in all cases.
The following table shows the remuneration schemes for the 
identified staff, in which the right to receive shares originated 
in previous years and for which the vesting targets and/or 
conditions were fulfilled in 2020 or are pending fulfilment.
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Table 77. Vested rights
Thousand euros
31 Dec. 2020
31 Dec. 2019
Other remuneration entitlement 
from previous years: consolidated 
and unpaid (to be consolidated from 
2020)
Admin. 
Executives
Other 
senior 
managers
Rest of staff
Total
Admin. 
Executives
Other 
senior 
managers
Rest of staff
Total
Cash
 
3,215  
6,355  
53,011  
62,581 
 
3,206  
6,298  
84,421  
93,926 
Number of Santander shares
 601,643  1,507,645  9,618,453  11,727,742 
 
673,841  1,356,729  9,508,591  11,539,161 
Number of Santander Brazil shares
 125,686  
—  
956,940  1,082,625 
 
—  
—  1,223,911  1,223,911 
Number of Santander Chile shares
 
—  
—  34,494,169  34,494,169 
 
—  
—  43,873,308  43,873,308 
Number of Santander Mexico 
shares
 
—  
—  2,750,262  2,750,262 
 
—  
—  2,824,468  2,824,468 
Number of Santander Poland 
shares*
 
—  
—  
11,193  
11,193 
 
—  
—  
8,838  
8,838 
Number of Santander Consumer 
USA shares
 
—  
—  
84,470  
84,470 
 
—  
—  
55,888  
55,888 
Number of phantom shares
 
—  
—  
5,575  
5,575 
 
—  
—  
10,832  
10,832 
*An instrument of Santander Poland (Zachodni WBK) has a value equal to one share of the company
Table 78. Unvested rights
Thousand euros
31 Dec. 2020
31 Dec. 2019
Other remuneration entitlement 
from previous years: Non-
consolidated and unpaid (to be 
consolidated from 2020)
Admin. 
Executives
Other 
senior 
managers 
Rest of staff 
Total
Admin. 
Executives
Other 
senior 
managers Rest of staff 
Total
Cash
 
7,102  
16,393  
80,990  
104,486 
 
8,722  
18,773  
141,588  
169,083 
Number of Santander shares
 1,475,757  4,231,814  17,880,009  23,587,580 
 1,813,998  3,942,548  15,040,239  20,796,785 
Number of options over 
Santander shares
 
269  
1,496  8,863,238  10,628,112 
 
—  
—  
—  
— 
Number of Santander Brazil 
shares
 
161  
—  1,254,992  1,416,484 
 
—  
—  1,687,722  1,687,722 
Number of Santander Chile 
shares
 
—  
—  43,204,864  43,204,864 
 
—  
—  47,933,722  47,933,722 
Number of Santander Mexico 
shares
 
—  
—  3,817,397  3,817,397 
 
—  
—  4,076,259  4,076,259 
Number of Santander Polonia 
shares*
 
—  
—  
15,300  
15,300 
 
—  
—  
10,418  
10,418 
Number os Santander Consumer 
USA shares
 
—  
—  
93,159  
93,159 
 
—  
—  
58,659  
58,659 
Number of phantom shares
 
—  
—  
—  
— 
 
—  
—  
5,575  
5,575 
 *An instrument of Santander Poland (Zachodni WBK) has a value equal to one share of the company
The breakdown of the remuneration by salary band of the 
members of the identified staff in the whole of Santander 
Group is shown below:
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Table 79. Remuneration by salary band*
Million euros
2020
Salary band
No. of people
1,0 - 1,5
 
67 
1,5 - 2,0
 
34 
2,0 - 2,5
 
16 
2,5 - 3,0
 
7 
3,0 - 3,5
 
6 
3,5 - 4,0
 
2 
4,0 - 4,5
 
2 
4,5 - 5,0
 
3 
5,0 - 6,0
 
1 
6,0 - 7,0
 
3 
Total
 
141 
* Does not include the deferred part of the 2020 incentive subject to multi-year 
objectives, the performance and attainment of which will be reviewed in 2023. 
Payment will the be made from 2024 onward, but may be zero, depending on 
the extent to which the objectives have been met. Notes 5 and 47 of the Group´s 
annual report contain further information on how the plan works, and amount 
of the deferred remuneration.
9.7. Remuneration policy for 2021 
and following years
The 2021 remuneration policy for directors is described in 
section 6.4 of the corporate governance chapter of the Annual 
Report. The main principles of the policy, along with the fixed 
and variable remuneration components and the variable 
remuneration policy for members of the identified staff, will 
comply with the rules and procedures for executive directors 
set out in the report referred to above. In particular, with 
regard to the variable remuneration policy:
• The existence of a single incentive, which will be 
determined by a set of quantitative and qualitative metrics.
• Short-term metrics, which include customer, capital, risk 
and profitability elements.
• Long-term metrics for senior managers: earnings per share, 
total shareholder return and ESG targets (women in senior 
positions, people financially empowered and green 
finance).
• Part payment in cash and in shares or other instruments.
• Continued-employment, malus and clawback provisions.
• Other conditions, such as the ban on hedging and 
transferring shares in the twelve months following their 
delivery.
In 2021, the board of directors of Banco Santander, S.A. will 
approve the third cycle of the digital transformation incentive, 
as part of the 2021 variable remuneration policy. The 2021 
digital transformation incentive is applicable to up to 250 
employees of Santander Group whose activity is essential for 
the Group's digital transformation and growth, including 
certain members of the identified staff (not including Banco 
Santander directors). This incentive is awarded 50% in Banco 
Santander shares and 50% in Banco Santander share options. 
Its payment is subject to certain objectives in the digital 
transformation process for 2021 being met.
Delivery is conditional on the beneficiary remaining in the 
Group's employment, and is subject to the deferral rules and 
other regulatory restrictions, such as malus and clawback 
provisions.
For further details, see the corporate governance chapter of 
the 2020 Annual Report.
Access 2020 Annual Report available on 
the Santander Group website
Deferral periods for members of the identified staff are as 
follows:
Deferral of the identified collective
31 Dec. 2020
31 Dec. 2019
Percentage
paid
immediately
Deferred
percentage
Deferred
periods’ (*)
Percentage
paid
immediately
Deferred
percentage
Deferred
periods’ (*)
Executive directors and members of the 
material risk takers of the group with total 
target variable remuneration of ≥ EUR 2.7 
million (**)
 40 %
 60 %
5 years
 40 %
 60 %
5 years
Senior management and country heads that 
represent at least 1% of Santander Group’s 
economic capital and other members of the 
identified staff with total target variable 
remuneration of ≥ EUR 1.7 million and< EUR 
2.7 million €.
 (**)
 50 %
 50 %
5 years
 50 %
 50 %
5 years
Other members belonging to the material risk 
takers
 60 %
 40 %
3 years
 60 %
 40 %
3 years
* Up to 7 years in certain jurisdictions.
** Variable remuneration not denominated in Euros is calculated using the average closing exchange rates in the fifteen trading sessions immediately prior to the 
Friday, exclusive, of the week before the date on which the board of directors agrees the variable remuneration of the Bank’s executive directors.
REMUNERATION POLICIES 2020 Pillar 3 Disclosures Report
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10
Appendices

I. Transparency enhancements
169
II. CRR Mapping
171
III. List of tables
180
IV. Glossary
183
Appendices available in the Santander Group website:
V. 
Outline of the differences in the scopes of 
consolidation (Table LI3)
VI. 
Reconciliation: balance under accounting 
consolidation / balance under regulatory 
consolidation
VII. 
Capital instruments main features template
VIII. 
Transitional own funds disclosure template
IX. 
List of specialised management companies within 
the scope of regulatory consolidation - SPVs
X. 
Leverage Ratio
(LRSum, LRCom and LRSpl tables)
XI. 
Countercyclical capital buffer (institution-specific 
amount and geographical distribution)
XII. 
IFRS 9-FL Template: Comparison of institutions’ 
own funds and capital and leverage ratios with 
and without the application of transitional 
arrangements for IFRS 9 or analogous ECLs
XIII. 
Breakdown of exposure by approach to 
calculating capital employed
XIV. 
IRB parameter models by region
XV. 
Backtesting PD - CR9
XVI. 
Backtesting EAD
XVII. Backtesting Expected Loss
XVIII. Prudent Valuation Adjustments (PVA) (PV1)
XIX. 
Comparison of VaR estimates with gains/losses 
(MR4)
XX. 
LCR disclosure template
Access file 2020 Pillar 3 Appendices 
available on the Santander Group 
website

Appendix I - Transparency enhancements
GUIDELINES ON DISCLOSURE REQUIREMENTS - EBA/GL/2016/11
Table
Table title
2020 Pillar 3 Location
OV1
Overview of RWAs
Table 7
LI1
Differences between accounting and regulatory scopes of consolidation and mapping of financial 
statements categories with regulatory risk categories
Table 1
LI2
Main sources of differences between regulatory exposure amounts and carrying amounts in financial 
statements
Table 2
LI3
Outline of the differences in the scopes of consolidation
Appendix V
INS1
Non-deducted participations in insurance undertakings
N/A
CRB-B
Net amount of exposures
Table 33
CRB-C
Geographical breakdown of exposures
Table 34
CRB-D
Concentration of exposures by industry or counterparty type
Table 35
CRB-E
Maturity of exposures
Table 36
CR1-A
Credit quality of exposures by exposure classes and instruments
Table 24
CR1-B
Credit quality of exposures by industry or counterparty type
Table 25
CR1-C
Credit quality of exposures by geography
Table 26
CR2-A
Changes in stock of general and specific credit risk adjustments
Table 31
CR2-B
Changes in stock of defaulted and impaired loans and debt securities
Table 32
CR3
Credit risk mitigation techniques - IRB and SA
Table 38
CR4
Credit risk exposure and CRM effects (IRB & Standardised approach)
Table 11 and 12
CR5
Standardised approach (including a breakdown of exposures post conversion factor and post 
mitigation techniques)
Table 23
CR6
Exposure to Credit risk by porfolio and PD interval
Table 14 to 16
CR7
Effect on RWA of credit derivatives used as CRM techniques
Table 40
CR8
Exposures to central counterparties
Table 13
CR9
Backtesting PD by geography and porfolio
Appendix XV
CR10
Specialised lending & equities
Tables 18 and 19
CCR1
Analysis of the counterparty credit risk (CC) exposure by approach
Table 46
CCR2
Credit valuation adjustment (CVA) capital charge
Table 44
CCR3
Standardised approach – CCE exposures by regulatory portfolio and risk
Table 47
CCR4
IRB approach. CCR exposures by portfolio and PD scale
Table 48
CCR5-A
Impact of netting and collateral held on exposure values
Table 49
CCR5-B
IRB approach. Composition of collateral for exposures to counterparty credit risk
Table 50
CCR6
Credit derivatives exposures
Table 51
CCR7
RWA flow statements of CCR exposures under Internal Model Method (IMM)
N/A
CCR8
Exposures to central counterparties
Table 52
MR1
Market risk under standardised approach
Table 64
MR2-A
Market risk under IMA approach
Table 62
MR2-B
WA flow statements of market risk exposures under IMA
Table 63
MR3
VaR, Stressed VaR and IRC by geography
Table 66
MR4
Comparison of VaR estimates with gains/losses
Appendix  XVIII
REVISED PILLAR 3 DISCLOSURES REQUIREMENTS - BCBS
Table
Table title
2020 Pillar 3 Location
SEC1
Securitisation exposures in the banking book
Table 53
SEC2
Securitisation exposures in the trading book
Table 54
SEC3
Securitisation exposures in the banking book and associated regulatory capital requirements (bank 
acting originator or sponsor)
Table 56
SEC4
Securitisation exposures in the banking book and associated regulatory capital requirements (bank 
acts as an investor)
Table 58
PV1
Prudent Valuation Adjustments (PVA)
Appendix XVIII
IRRBB1
Quantitative information on IRRBB
Table 69
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GUIDELINES ON LCR DISCLOSURE - EBA/GL/2017/01
Table
Table title
2020 Pillar 3 Location
LCR
LCR disclosure template
Appendix XX
GUIDELINES ON DISCLOSURE OF ENCUMBERED AND UNENCUMBERED ASSETS - EBA/GL/2014/03
Table
Table title
2020 Pillar 3 Location
AE1
Encumbered and unencumbered assets
Table 71
AE2
Collateral received
Table 72
AE3
Sources of encumbrance
Table 73
LEVERAGE RATIO - COMMISSION IMPLEMENTING REGULATION (UE) 2016/200
Table
Table title
2020 Pillar 3 Location
LRSum
Summary reconciliation of accounting assets and leverage ratio exposures
Appendix X
LRCom
Leverage ratio common disclosure
Appendix X
LRSpl
Split-up of on balance sheet exposures (excluding derivatives and SFTs)
Appendix X
OWN FUNDS REQUIREMENTS - COMMISSION IMPLEMENTING REGULATION (UE) 1423/2013
Table
Table title
2020 Pillar 3 Location
Template 1
Capital instruments’f main features
Appendix VII
Template 2
Transitional own funds disclosure template
Appendix VIII
COUNTERCYCLICAL CAPITAL BUFFER - COMMISSION IMPLEMENTING REGULATION (UE) 2015/1555
Table
Table title
2020 Pillar 3 Location
Frame 1
Geographical distribution of credit exposures relevant for the calculation of the countercyclical capital 
buffer
Appendix XI
Frame 2
Amount of institution-specific countercyclical capital buffer
Appendix XI
GUIDELINES ON UNIFORM DISCLOSURES UNDER ARTICLE 473A OF REGULATION (EU) NO 575/2013 AS REGARDS THE 
TRANSITIONAL PERIOD FOR MITIGATING THE IMPACT OF THE INTRODUCTION OF IFRS 9 ON OWN FUNDS - EBA/GL/2018/01
Table
Table title
2020 Pillar 3 Location
IFRS 9-FL 
Template
Comparison of equity, capital ratios and leverage of entities with or with out the application of the 
transitional arrangements of IFRS 9 or analog ECL
Appendix XII
GUIDELINES ON DISCLOSURE OF NON-PERFORMING AND FORBORNE EXPOSURES - EBA/GL/2018/10
Table
Table title
2020 Pillar 3 Location
Template 1
Credit quality of forborne exposures
Table 27
Template 3
Credit quality of performing and non-performing exposures by past due days
Table 28
Template 4
Performing and non-performing exposures and related provisions
Table 29
Template 9
Collateral obtained by taking possession and execution processes
Table 30
GUIDELINES ON COVID -19 MEASURES REPORTING AND DISCLOSURE - EBA/GL/2018/10
Table
Table title
2020 Pillar 3 Location
Template 1
Information on loans and advances subject to legislative and non-legislative moratoria
Table 41
Template 2
Breakdown of loans and advances subject to legislative and non-legislative moratoria by residual 
maturity of moratoria
Table 42
Template 3
Information on newly originated loans and advances provided under newly applicable public 
guarantee schemes introduced in response to covid-19 crisis
Table 43
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2020 Pillar 3 Disclosures Report

Appendix II -CRR Mapping
The following table links the CRR’s articles on divulging 
information (Part 8) to the various sections of the document 
that provide the information required. The ‘Location’ column 
specifies the section of Pillar 3 or other public document in 
which the information is dealt with, in whole or in part. This 
information may be distributed throughout the document on 
a piecemeal basis.
Article
Brief Description
2020 P3DR Location
Tables
2020 Annual
Report Location
431. Scope of disclosures requirements
431.1
Requirement to publish Pillar 3 disclosures.
Pillar 3 Disclosures 
Report (Santander 
corporate website)
431.2
Permission granted by the competent authorities 
under Part Three for the instruments and 
methodologies referred to in Title III shall be 
subject to the public disclosure by institutions of 
the information laid down therein. 
Section 2.2.2.1.
431.3
Institution must have a policy covering the 
frequency of disclosures, their verification, 
comprehensiveness and appropriateness, as well 
as policies for assuring the overall comprehension 
of their risk profile by market participants.
Sections 1.2.2. and 1.2.3.
431.4
Explanation of SMEs ratings decision upon 
request.
Section 3.4.
432. Non-material, proprietary or confidential information
432.1
Institutions may omit information that is not 
material if certain conditions are respected.
Sections 1.2.1. and 1.2.2.
432.2
Institutions may omit information that is 
proprietary or confidential if certain conditions are 
respected.
Section 1.2.2.
432.3
Where 432.2 applies this must be stated in the 
disclosures, and more general information must 
be disclosed.
N/A
432.4
Use of 432.1, 432.2 or 432.3 is without prejudice 
to scope of liability for failure to disclose material 
information.
N/A
433. Frequency of disclosure
433
Disclosures must be published on an annual basis 
at a minimum, and more frequently if necessary.
Section  1.2.2.
434. Means of disclosure
434.1
To include all disclosures in one appropriate 
medium, or provide clear cross-references to the 
synonymus information in the other media.
Section 1.2.1.
434.2
Disclosures made under other requirements (e.g. 
accounting, listing) can be used to satisfy Pillar 3 
requirements, if appropriate.
Section 1.2.1.
435. Risk management objectives and policies
435.1
Disclose information for each separate category of 
risk:
435.1.a
The strategies and processes to manage risks.
Chapters 3 to 8
Risk Management 
Chapter
2. Risk Management 
and Control Model
435.1.b
Structure and organization of the risk 
management function.
Chapters 3 to 8
Risk Management 
Chapter
2. Risk Management 
and Control Model
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Article
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Tables
2020 Annual
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435.1.c
Risk reporting and measurement systems.
Chapters 3 to 8
Risk Management 
Chapter
2. Risk Management 
and Control Model
435.1.d
Hedging and mitigating risk - policies, strategies 
and processes.
Chapters 2 to 8
Risk Management 
Chapter
3.2. Credit risk 
management
3.5. Other credit risk 
aspects
4. Trading market 
risk, structural and 
liquidity risk
5. Capital risk
6. Operational risk
7. Compliance and 
conduct risk
8. Model risk
9. Strategic risk
435.1.e
A declaration of adequacy of risk management 
arrangements approved by the Board.
Section 1.2.2.
Risk Management 
Chapter
2. Risk Management 
and Control Model
435.1.f
Inclusion of a concise risk statement approved by 
the Board.
Section 1.2.2.
Risk Management 
Chapter
2. Risk Management 
and Control Model
435.2
Information on governance arrangements, 
including information on Board composition and 
recruitment, and risk committees.
435.2.a
Number of directorships held by Board members.
Corporate Governance 
Chapter
435.2.b
Recruitment policy for the selection of Board 
members, their actual knowledge, skills and 
expertise.
Corporate Governance 
Chapter
435.2.c
Policy on diversity of Board membership, 
objectives, and achievement status.
Corporate Governance 
Chapter
435.2.d
Existence of a dedicated risk committee, and 
number of meetings during the year.
Section 2.1.1.2.
Corporate Governance 
Chapter
Risk Management 
Chapter
435.2.e
Description of the information flow on risk to the 
Board.
Section 2.1.1.2.
Corporate Governance 
Chapter
Risk Management 
Chapter
436. Scope of application of the requirements
436
Institutions shall disclose the following 
information regarding the scope of application of 
the requirements of this Regulation in accordance 
with Directive 2013/36/EU:
436.a
Name of institution to which the requirements of 
this Regulation applies.
Section 1.2.1.
436.b
Difference in the basis of consolidation for 
accounting and prudential purposes, briefly 
describing entities that are:
(i) fully consolidated
(ii) proportionally consolidated
(iii) deducted from own funds
(iv) neither consolidated nor deducted
Sections 1.2.1. and 1.3.
Table 1 (LI1)
Table 2 (LI2)
Appendix V (LI3)
Appendix VI
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436.c
Impediments to transfer of own funds between 
parent and subsidiaries.
Section 2.1.3.
436.d
Capital shortfalls in any subsidiaries outside the 
scope of consolidation.
N/A
436.e
The circumstance of making use of articles on 
derogations from:
a) Prudential requirements
b) Liquidity requirements for individual 
subsidiaries/entities.
Section 1.2.1.
437. Own funds
437.1
Institutions shall disclose the following 
information regarding their own funds:
437.1.a
A full reconciliation of Common Equity Tier 1 
items, Additional Tier 1 items, Tier 2 items and 
filters and deductions applied pursuant to Articles 
32 to 35, 36, 56, 66 and 79 to own funds of the 
institution and the balance sheet in the audited 
financial statements of the institution.
Section 2.2.1.
Tables 4 and 5
Appendix VI 
Appendix VIII
437.1.b
Description of the main features of the Common 
Equity Tier 1 and Additional Tier 1 instruments and 
Tier 2 instruments issued by the institution.
Section 2.2.1.
Appendix VII 
Appendix VIII
437.1.c
Dull terms and conditions of all Common Equity 
Tier 1, Additional Tier 1 and Tier 2 instruments.
Section 2.2.1.
Appendix VII 
Appendix VIII
437.1.d
Disclosure of the nature and amounts of the 
following:
437.1.d.i
Each prudential filter applied pursuant to Articles 
32 to 35;
Section 2.2.1.
Appendix VIII
437.1.d.ii
Each deduction made pursuant to Articles 36, 56 
and 66;
Section 2.2.1.
Appendix VIII
437.1.d.iii
Items not deducted in accordance with Articles 47, 
51, 56, 66 and 79.
Section 2.2.1.
Appendix VIII
437.1.e
Description of all restrictions applied to the 
calculation of own funds in accordance with this 
Regulation and the instruments, prudential filters 
and deductions to which those restrictions apply.
Section 2.2.1.
Appendix VIII
437.1.f
Explanation of the calculation basis of the 
disclosed capital ratios estimated using elements 
of own funds determined, on a basis other than 
that laid down in this Regulation.
Section 2.2.1.
Appendix VIII
438. Capital requirements
438
Institutions shall disclose the following 
information regarding the compliance by the 
institution with the requirements laid down in 
Article 92 of this Regulation and in Article 73 of 
Directive 2013/36/EU:
438.a
Summary of the institution's approach to 
assessing adequacy of capital levels.
Sections 2.1., 2.2. and 
2.3.
438.b
Result of ICAAP on demand from authorities.
Sections 2.1.5. and 2.3.
438.c
Capital requirements for each Standardised 
approach credit risk exposure class.
Sections 2.2.2. , 3.2.3. , 
4.7. , 5.3.4,  and 5.4.
Tables 7 (OV1) and 8 
Tables 12 (CR4) and 23 
(CR5)
Tables 56 (SEC3) and 
Table 58 (SEC4)
438.d
Capital requirements for each Internal Ratings 
Based Approach credit risk exposure class.
Sections 2.2.2. , 3.2.3. , 
4.7. , 5.3.4,  and 5.4.
Tables 7 (OV1) and 8 
Tables 11, 13 (CR8), 14 
to 16 (CR6), 17, and 18 
to 19 (CR10)
Tables 56 (SEC3) and 58 
(SEC4)
Appendix XIV
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438.e
Capital requirements for market risk or settlement 
risk.
Sections 2.2.2. and 6.2.
Table 7 (OV1)
Tables 60, 61, 62 (MR2-
A), 63 (MR2-B), 64 
(MR1) and 65
438.f
Capital requirements for operational risk, 
separately for the Basic Indicator Approach, the 
Standardised Approach, and the Advanced 
Measurement Approaches as applicable.
Sections 2.2.2. and 7.2.
Tablas 7 (OV1) y 67
438 last 
paragraph
Requirement to disclose specialised lending 
exposures and equity exposures in the banking 
book falling under the simple risk weight 
approach.
Section 3.2.2.
Tables 18 and 19 (CR10)
439. Exposure to counterparty credit risk
439
Institutions shall disclose the following 
information regarding the institution's exposure to 
counterparty credit risk as referred to in Part 
Three, Title II, Chapter 6:
439.a
Description of process to assign internal capital 
and credit limits to CCR exposures.
Chapter 4
439.b
Discussion of policies for securing collateral and 
establishing credit reserves.
Chapter 4
439.c
Discussion of management of wrong-way risk 
exposures.
Chapter 4
439.d
Disclosure of collateral to be provided (outflows) 
in the event of a ratings downgrade.
Chapter 4
439.e
Derivation of net derivative credit exposure.
Chapter 4
Tables 44 (CCR2), 45 
(CCR8), 46 (CCR1), 49 
(CCR5-A) 
and 50 (CCR5-B)
439.f
Exposure values for mark-to-market, original 
exposure, standardised and internal model 
methods.
Chapter 4
Tables 44 (CCR2), 45 
(CCR8) and 46 (CCR1)
439.g
Notional value of credit derivative hedges and 
distribution of current credit exposure by type of 
exposure.
Chapter 4
Table 51 (CCR6)
439.h
Notional amounts of credit derivative transactions. Chapter 4
Table 51 (CCR6)
439.i
Estimate of alpha, if applicable.
N/A
Table 46 (CCR1)
440. Capital buffers
440
Disclosure of the following information in relation 
to its compliance with the requirement for a 
countercyclical capital buffer referred to in Title VII, 
Chapter 4 of Directive
2013/36/EU:
440.a
Geographical distribution of credit exposures 
relevant for the calculation of countercyclical 
capital buffer.
Section 2.1.5.
Appendix XI
440.b
Amount of the specific countercyclical capital 
b ff
Section 2.1.5.
Appendix XI
441. Indicators of global systemic importance
441
Disclosure of the indicators of global systemic 
importance.
Section 2.1.5.
442. Credit risk adjustments
442
Institutions shall disclose the following 
information regarding the institution's exposure to 
credit risk and dilution risk:
442.a
Definitions, for accounting purposes, of past due 
and impaired exposures.
Section 3.3.
Risk Management 
Chapter
3.3. Credit risk
- Key metrics
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442.b
Description of the approaches adopted for 
calculating specific and general credit risk 
adjustments.
Section 3.3.
Risk Management 
Chapter
3.3. Credit risk
- Key metrics
442.c
Disclosure of pre-CRM EAD by exposure class.
Section 3.3.
Table 24 (CR1-A)
Table 33 (CRB-B)
442.d
Disclosure of pre-CRM EAD by geography and 
exposure class.
Section 3.3.
Table 34 (CRB-C)
Risk Management 
Chapter
3.3. Credit risk
- Key metrics
442.e
Disclosure of pre-CRM EAD by industry and 
exposure class.
Section 3.3.
Table 35 (CRB-D)
Risk Management 
Chapter
3.3. Credit risk
- Key metrics
442.f
Disclosure of pre-CRM EAD by residual maturity 
and exposure class.
Section 3.3.
Table 36 (CRB-E)
442.g. (i-iii) Breakdown of impaired, past due, specific and 
general credit risk adjustments, and impairment 
charges for the period, by industry.
Section 3.3.
Table 24 (CR1-A)
Table 25 (CR1-B)
Table 26 (CR1-C)
Tables 27 to 30
Risk Management 
Chapter
3.3. Credit risk
- Key metrics
442.h
Impaired and past due exposures, broken down by 
geographical area, and the amounts of specific and 
general credit risk adjustments related to each 
geographical area.
Section 3.3.
Table 24 (CR1-A)
Table 25 (CR1-B)
Table 26 (CR1-C)
Risk Management 
Chapter
3.3. Credit risk
- Key metrics
442.i.(i-v)
Reconciliation of changes in specific and general 
credit risk adjustments for impaired exposures.
Section 3.3.
Tables 27 to 30
Table 31 (CR2-A)
Table 32 (CR2-B)
442 last 
paragraph
Specific credit risk adjustments recorded to 
income statement are disclosed separately.
Section 3.3.
Tables 27 to 30
Table 31 (CR2-A)
Table 32 (CR2-B)
443. Unencumbered assets
443
Disclosures of unencumbered assets.
Section 8.1.2.
Table 71 (AE1)
Table 72 (AE2) 
Table 73 (AE3)
Economic and Financial 
Report Chapter
3. Group financial 
performance 
(Liquidity and funding 
management)
444. Use of ECAIs
444
For institutions calculating the risk-weighted 
exposure amounts in accordance with Part Three, 
Title II, Chapter 2, the following information shall 
be disclosed for each of the exposure classes 
specified in Article 112:
444.a
Names of the ECAIs used in the calculation of 
Standardised approach risk-weighted assets and 
reasons for any changes.
Section 3.2.3.
444.b
Exposure classes associated with each ECAI.
Section 3.2.3.
444.c
Description of the process used to transfer credit 
assessments to non-trading book items.
Section 3.2.3.
444.d
Mapping of external rating to credit quality steps 
(CQS).
Section 3.2.1. and 3.2.3.
Tables 14, 15 and 16 
(CR6)
444.e
Exposure value pre and post-credit risk mitigation, 
by CQS.
Section 3.2.1. y 4.7.
Tables 11 (CR4), 23 
(CR5) and 47 (CCR3)
445. Exposure to market risk
445
Disclosure of position risk, large exposures 
exceeding limits, FX, settlement and commodities 
risk.
Section 6.2.
Tables 63 (MR2-B) and 
64 (MR1)
446. Operational risk
446
Scope of approaches used to calculate operational 
risk.
Section 7.2.
447. Exposures in equities not included in the trading book
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447
Institutions shall disclose the following 
information regarding the exposures in equities 
not included in the trading book:
447.a
Differentiation of exposures based on their 
objectives and an overview of accounting 
techniques and valuation methodologies used.
Section 3.2.2.
Tables 19 (CR10) and 20 
to 22
447.b
The balance sheet value, the fair value and, for 
those exchange- traded, a comparison to the 
market price where it is materially different from 
the fair value.
Section 3.2.2.
Tables 19 (CR10) and 20 
to 22
447.c
The types, nature and amounts of exchange-
traded exposures, private equity exposures in 
sufficiently diversified portfolios, and other 
exposures.
Section 3.2.2.
Tables 19 (CR10) and 20 
to 22
447.d
Cumulative realised gains or losses arising from 
sales and liquidations in the period.
Section 3.2.2.
Tables 19 (CR10) and 20 
to 22
447.e
Total unrealised gains or losses, the total latent 
revaluation gains or losses, and any of these 
amounts included in the original or additional own 
funds.
Section 3.2.2.
Tables 19 (CR10) and 20 
to 22
448. Exposure to interest rate risk on positions not included in the trading book
448
Institutions shall disclose the following 
information on their exposure to interest rate risk 
on positions not included in the trading book:
448.a
Nature of the interest rate risk and the key 
assumptions, and frequency of measurement of 
the interest rate risk.
Section 6.4.
Table 69
Risk Management 
Chapter
4.4. Structural 
balance sheet risks 
management
448.b
Variation in earnings, economic value or other 
relevant measure used by the bank for upward 
and downward rate shocks according to the banks 
method for measuring the interest rate risk, 
broken down by currency.
Section 6.4.
Table 69
Risk Management 
Chapter
4.4. Structural 
balance sheet risks 
management
449. Exposure to securitisation positions
449
Institutions calculating risk weighted exposure 
amounts in accordance with Part Three, Title II, 
Chapter 5 or own funds requirements in 
accordance with Article 337 or 338 shall disclose 
the following information, where relevant, 
separately for their trading and non-trading book:
449.a
Objectives in relation to securitisation activity
Section 5.3.1.
449.b
Nature of other risks in securitised assets, 
including liquidity.
Section 5.3.3.
449.c
Risks in re-securitisation activity stemming from 
seniority of underlying securitisations and 
ultimate underlying assets.
Sections 5.3.4. and 5.4.
449.d
Roles played by the institution in the securitisation 
process.
Section 5.3.2.
449.e
Extent of the institution's involvement in each of 
the securitisation roles
Section 5.3.4. and 5.4.
Tables 51, 53 (SEC1), 54 
(SEC2) 57 and 59
449.f
Processes in place to monitor changes in credit 
and market risks of securitisation exposures, and 
how the processes differ for re-securitisation 
exposures.
Section 5.3.4.
449.g
Description of the institution's policies with 
respect to hedging and unfunded protection, and 
identification of material hedge counterparties, by 
relevant type of risk exposure.
N/A
449.h
Approaches to the calculation of risk-weighted 
assets for securitisations mapped to types of 
exposures.
Section 5.4.
Table 55
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449.i
Types of SSPEs used to securitise third-party 
exposures as a sponsor.
Sections 5.3 and 5.4
Appendix IX
449.j
A summary of the institution's accounting policies 
for securitisation activities, including:
449.j.i
whether the transactions are treated as sales or 
financings;
Section 5.2.
449.j.ii
the recognition of gains on sales;
Section 5.2.
449.j.iii
the methods, key assumptions, inputs and 
changes from the previous period for valuing 
securitisation positions;
Section 5.2.
449.j.iv
the treatment of synthetic securitisations if not 
covered by other accounting policies;
Section 5.2.
449.j.v
how assets awaiting securitisation are valued and 
whether they are recorded in the institution's non-
trading book or the trading book;
Section 5.2.
449.j.vi
policies for recognising liabilities on the balance 
sheet for arrangements that could require the 
institution to provide financial support for 
securitised assets.
Section 5.2.
449.k
Names of ECAIs used for securitisations and type.
Section 5.3.4.
449.l
Full description of Internal Assessment Approach.
N/A
449.m
Explanation of significant changes in quantitative 
disclosures, since the last reporting period.
Sections 5.3.4. and 5.4.
449.n
As appropriate, separately for the Banking and 
trading book securitisation exposures:
449.n.i
amount of outstanding exposures securitised;
Sections 5.3.4. and 5.4.
Tables 51, 53 (SEC1), 54 
(SEC2), 55, 56 (SEC3), 
57, 58 (SEC4) y 59
449.n.ii
on balance sheet securitisation retained or 
purchased, and off balance sheet exposures;
Section 5.4.
Tabla 52
449.n.iii
amount of assets awaiting securitisation;
Section 5.3.4.
449.n.iv
early amortisation treatment, aggregate drawn 
exposures and capital requirements for securitised 
facilities;
Section 5.3.3.
449.n.v
Deducted or 1250%-weighted securitisation 
positions;
Sections 5.3.4. and 5.4.
Tables 56 (SEC3) and 58 
(SEC4)
449.n.vi
summary of the securitisation activity of the 
current period.
Sections 5.3.4. and 5.4.
Tables 52, 53 (SEC1), 54 
(SEC2), 55, 56 (SEC3), 
57, 58 (SEC4) y 59
449.o
Banking and trading book securitisations:
449.o.i
Retained and purchased positions and associated 
capital requirements, broken down by risk-weight 
bands;
Sections 5.3.4. and 5.4.
Tables 54 (SEC3) and 58 
(SEC4) 
449.o.ii
Retained and purchased re-securitisation positions 
before and after hedging and insurance; exposure 
to financial guarantors broken down by guarantor 
credit worthiness.
N/A: Sections 5.3.4. and 
5.4.
Tables 56 (SEC3),58 
(SEC4) y 59
449.p
Impaired assets and recognised losses related to 
banking book securitisations, by exposure type.
Section 5.4.
Table 59
449.q
Exposure and capital requirements for trading 
book securitisations, separated into traditional and 
synthetic, and exposure type.
Sections 5.4. and 6.2.
Tables 57 and 64
449.r
Whether the institution has provided non-
contractual financial support to securitisation 
vehicles.
N/A
450. Remuneration policy
450
Remuneration disclosures (Material Risk Takers):
Chapter 9
Tables 75 to 79
Corporate Governance 
Chapter
451. Leverage
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Article
Brief Description
2020 P3DR Location
Tables
2020 Annual
Report Location
451.1. (a,b) Leverage ratio, and breakdown of the total 
exposure measures, including the reconciliation to 
financial statements.
Section 2.2.3.
Tables 9 and 10
Appendix X
451.c
If applicable, the total amount of the derecognized 
fiduciary items.
N/A
451.(d,e)
Description of the processes used to manage the 
risk of excessive leverage, and factors that 
impacted the leverage ratio during the year.
Section 2.2.3.
452. Use of the IRB Approach to credit risk
452
Institutions calculating the risk-weighted exposure 
amounts under the IRB Approach shall disclose the 
following information:
452.a
Permission for use of the IRB approach from the 
competent authority.
Section 2.2.2.1.
452.b
Explanation and review of:
452.b.i
Structure of internal rating systems and relation 
between internal and external ratings;
Sections 3.2.1., 3.4., 3.5., 
3.6., 3.7., 3.8.  and 3.10.
Tables 14 to 16 (CR6), 17 
and 18 to 19 (CR10)
452.b.ii
Use of internal ratings for purposes other than 
capital requirement calculations;
Section 3.6.
452.b.iii
Management and recognition of credit risk 
mitigation process;
Section 3.7.1.
452.b.iv
Controls mechanisms for rating systems;
Section 3.8.
452.c.(i-v)
Description of ratings processes for each IRB asset 
class, provided separately.
Sections 3.2.1. and 3.5.
Tables 14 to 16 (CR6), 17 
and 18 to 19 (CR10)
452.d
Exposure values by IRB exposure class, separately 
for Advanced and Foundation IRB.
Section 3.2.1.
Tables 14 to 16 (CR6), 17 
and 18 to 19 (CR10)
452.e.(i-iii)
For each exposure class, disclosed separately by 
obligor grade, institutions shall disclose: total 
exposure, separating loans and undrawn 
exposures where applicable, and exposure-
weighted average risk weight.
Section 3.2.1. y 4.7.
Tables 14 to 16 (CR6), 17 
and 18 to 19 (CR10)
452.f
For the retail exposure class, the disclosures 
outlined in article 452.e, to allow for a meaningful 
differentiation of credit risk on a pooled basis.
Section 3.2.1.
Table 16 (CR6)
452.g
Actual specific risk adjustments for the period and 
explanation of changes.
Sections 3.2.1. y 3.3.
Tables 14 to 16 (CR6) 
and 24 (CR1-A)
452.h
Description of the factors that impacted on the 
loss experience in the preceding period.
Sections 3.2.1., 3.3., 3.9. 
y 3.10
Appendix XVII
452.i
Analysis of the historical estimates of losses 
against actual losses in each exposure, to help 
assess the performance of the rating system over 
a sufficient period.
Section 3.10.
Appendices XV to XVII
452.j
For all IRB exposure classes:
452.j.(i-ii)
Where applicable, PD and LGD by each country 
where the bank operates.
Section 3.2.1.
Table 17
453. Use of credit risk mitigation techniques
453
Institutions applying credit risk mitigation 
techniques shall disclose the following 
information:
453.a
Use of on and off-balance sheet netting.
Sections 3.7. and 4.7.
Risk Management 
Chapter
3.2. Credit risk 
management
453.b
How collateral valuation is managed.
Sections 3.7. and 4.7.
Risk Management 
Chapter
3.2. Credit risk 
management
APPENDICES 2020 Pillar 3 Disclosures Report
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2020 Pillar 3 Disclosures Report

Article
Brief Description
2020 P3DR Location
Tables
2020 Annual
Report Location
453.c
Description of types of collateral used by the 
institution.
Sections 3.7. and 4.7.
Risk Management 
Chapter
3.2. Credit risk 
management
453.d
Main types of guarantor and credit derivative 
counterparty, creditworthiness.
Sections 3.7. and 4.7.
Risk Management 
Chapter
3.2. Credit risk 
management
453.e
Market or credit risk concentrations within risk 
mitigation exposures.
Sections 3.7. and 4.7.
Table 37
453.f
Standardised or Foundation IRB Approach, 
exposure value covered by eligible collateral.
Sections 3.3. , 3.7.1. and 
4.7.
Tables 11 a 12 (CR4) 
Table 38 (CR3) 
Tables 49 (CCR5-A), 50 
(CCR5-B) and 51 (CCR6)
453.g
Exposures covered by guarantees or credit 
derivatives.
Sections 3.3. , 3.7. and 
4.7.
Tables 11 to 12 (CR4) 
Table 38 (CR3)
Table 40 (CR7)
Tables 49 (CCR5-A), 50 
(CCR5-B) and 51 (CCR6)
454. Use of the Advanced Measurement Approaches to operational risk
454
Description of the use of insurance or other risk 
transfer mechanisms to mitigate operational risk.
N/A
455. Use of Internal Market Risk Models
455
Institutions calculating their capital requirements 
in accordance with Article 363 shall disclose the 
following information:
455.a
For each sub-portfolio covered:
455.a.i
Disclosure of the characteristics of the market risk 
models used;
Sections 2.2.2.1. , 6.2. 
and 6.3.
455.a.ii
Disclosure of the methodologies used to measure 
incremental default and migration risk;
Sections 2.2.2.1. , 6.2. 
and 6.3.
455.a.iii
Descriptions of stress tests applied to the 
f li
Sections 6.2. and 6.3.4.
455.a.iv
Methodology for back-testing and validating the 
models.
Sections 6.2. , 6.3.5. and 
6.3.6.
455.b
Scope of permission for use of the models.
Section 6.2.
455.c
Policies and processes to determine trading book 
classification, and to comply with prudential 
valuation requirements.
Section 6.3.
455.d.(i-iii)
High/Low/Mean values over the year of VaR, SVaR 
and incremental risk charge.
Section 6.3.1.
Table 66 (MR3)
455.e
The elements of the own fund calculation.
Sections 2.2.2. and 6.2
Tables 7 (OV1), 61, 62 
(MR2-A) and 63 (MR2-B)
455.f
Weighted average liquidity horizons for each sub-
portfolio covered by internal models.
Section 6.3.
455.g
Comparison of end-of-day value-at-risk (VaR) 
measures compared with one-day changes in the 
portfolio's value.
Section 6.3.5.
Appendix XIX
APPENDICES 2020 Pillar 3 Disclosures Report
   179

Appendix III - List of tables
Click on the page number corresponding to each table to 
access it.
Num.
Name
Page
CHAPTER 1. INTRODUCTION
Table 1
Differences between accounting and regulatory 
scopes of consolidation and mapping of financial 
statements categories with regulatory risk 
categories (LI1)
17
Table 2
Main sources of differences between regulatory 
exposure amounts and carrying amounts in 
financial statements (LI2)
18
CHAPTER 2. CAPITAL
Table 3
Main capital figures and capital adequacy ratios
25
Table 4
Reconciliation of accounting capital with 
regulatory capital
36
Table 5
Eligible capital
36
Table 6
Regulatory capital. Changes
37
Table 7
Overview of RWAs (OV1)
39
Table 8
Capital requirements by geographical region
40
Table 9
Leverage ratio
45
Table 10 Leverage ratio details
45
CHAPTER 3. CREDIT RISK
Table 11 Credit risk exposure and CRM effects (IRB 
approach) (CR4)
52
Table 12 Credit risk exposure and CRM effects (Standardised 
approach) (CR4)
52
Table 13 RWA flow statement of credit risk exposures under 
IRB (CR8)
53
Table 14 AIRB approach. Credit risk exposures by portfolios 
class and PD range (CR6)
54
Table 15 FIRB approach. Credit risk exposures by portfolios 
class and PD range (CR6)
56
Table 16 AIRB approach. Credit risk exposures by portfolios 
class and PD range. Retail portfolios (CR6)
57
Table 17 Exposures and parameters by segment and 
geography
59
Table 18 Specialised lending (CR10)
59
Table 19 Equities (CR10)
62
Table 20 Equity instruments through other comprehensive 
income
62
Table 21 Equity instruments mandatorily at fair value 
through profit and loss
62
Table 22 Equity instruments through other comprehensive 
income. Consolidated gross valuation adjustments
62
Table 23 Standardised approach (including a breakdown of 
exposures post conversion factor and post 
mitigation techniques) (CR5)
65
Table 24 Credit quality of exposures by exposure classes 
and instruments (CR1-A)
67
Table 25 Credit quality of exposures by industry or 
counterparty type (CR1-B)
68
Table 26 Credit quality of exposures by geography (CR1-C)
69
Table 27  Credit quality of forborne exposures
70
Table 28 Credit quality of performing and non-performing 
exposures by past due days
71
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2020 Pillar 3 Disclosures Report

Num.
Name
Page
Table 29 Performing and non-performing exposures and 
related provisions
72
Table 30 Collateral obtained by taking possession and 
execution processes
73
Table 31 Changes in stock of general and specific credit risk 
adjustments (CR2-A)
73
Table 32 Changes in stock of non-performing loans and 
debt securities (CR2-B)
73
Table 33 Net amount of exposures (CRB-B)
74
Table 34 Geographical breakdown of exposures (CRB-C)
75
Table 35 Concentration of exposures by industry or 
counterparty type (CRB-D)
76
Table 36 Maturity of exposures (CRB-E)
77
Table 37 Guarantees by external rating
82
Table 38 Credit risk mitigation techniques - IRB and SA (CR3)
83
Table 39 IRB approach. Credit risk mitigation techniques: 
credit derivatives and personal guarantees
83
Table 40 Effect on RWA of credit derivatives used as CRM 
techniques (CR7)
84
Table 41 Information on loans and advances subject to 
legislative and non-legislative moratoria
91
Table 42 Breakdown of loans and advances subject to 
legislative and non-legislative moratoria by 
residual maturity of moratoria
93
Table 43 Information on newly originated loans and 
advances provided under newly
applicable public guarantee schemes introduced in 
response to covid-19 crisis
94
CHAPTER 4. COUNTERPARTY CREDIT RISK
Table 44 Credit valuation adjustment (cva) capital charge 
(CCR2)
98
Table 45 Exposures to central counterparties (CCR8)
99
Table 46 Analysis of the counterparty credit risk (CCR) 
exposure by approach (CCR1)
102
Table 47 Standardised approach - CCR exposures by 
regulatory portfolio and risk (CCR3)
102
Table 48 IRB approach. CCR exposures by portfolio and PD 
scale (CCR4)
103
Table 49 Impact of netting and collateral held on exposure 
values (CCR5-A)
104
Table 50 IRB approach. Composition of collateral for 
exposures to counterparty credit risk (CCR5-B)
104
Table 51 Credit derivatives exposures (CCR6)
105
CHAPTER 5. SECURITISATIONS
Table 52 Securitisation positions purchased and retained 
with risk transfer by exposure type in the banking 
book
113
Table 53 Securitisation exposures in the banking book 
(SEC1)
116
Table 54 Securitisation exposures in the trading book (SEC2)
116
Table 55 Breakdown of repurchased positions in SSPE with 
risk transfer, distributed by function and approach 
used
119
Table 56 Securitisation exposures in the banking book and 
associated regulatory capital requirements (bank 
acting originator or sponsor) (SEC3)
121
Table 57 Aggregate amount of securitisation positions 
purchased and retained. Trading book
122
APPENDICES 2020 Pillar 3 Disclosures Report
   181

Num.
Name
Page
Table 58 Securitisation exposures in the banking book and 
associated regulatory capital requirements (bank 
acts as an investor) (SEC4)
123
Table 59 Securitisation structures with risk transfer
124
CHAPTER 6. MARKET RISK
Table 60 Regulatory capital requirements for market risk
128
Table 61 Capital requirements for market risk. Internal 
model
129
Table 62 Market risk under IMA approach (MR2-A)
129
Table 63 RWA flow statements of market risk exposures 
under IMA (MR2-B)
130
Table 64 Market risk under standardised approach (MR1)
130
Table 65 Capital requirements for market risk. Standardised 
approach
130
Table 66 VaR, Stressed VaR and IRC by geography (MR3)
132
Table 67 Stress scenario: Maximum volatility (worst case)
136
Table 68 Exceptions at units with internal model
138
Table 69 Quantitative information on IRRBB (IRRBB1)
142
CHAPTER 7. OPERATIONAL RISK
Table 70 Changes in capital requirements for operational 
risk
CHAPTER 8. OTHER RISKS 
Table 71 Encumbered and unencumbered assets (AE1)
152
Table 72 Collateral received (AE2)
153
Table 73 Sources of encumbrance (AE3)
153
Table 74 Own covered bonds and asset- backed securities 
issued
154
CHAPTER 9. REMUNERATION POLICIES
Table 75 Total remuneration
163
Table 76 Remuneration by activity area
163
Table 77 Vested rights
165
Table 78 Unvested rights
165
Table 79 Remuneration by salary band
165
APPENDICES 2020 Pillar 3 Disclosures Report
182
2020 Pillar 3 Disclosures Report

Appendix IV -Glossary
Advanced IRB approach: all the credit risk parameters are 
estimated internally by the entity, including the CCFs for 
calculating the EAD.
AMA (Advanced Measurement Approach): an operational 
risk measurement technique set forth in Basel capital 
adequacy norms, based on an internal modelling 
methodology.
AQR (Asset Quality Review): asset quality review exercise 
performed by the European Central Bank.
Asset liability management (ALM): a series of techniques and 
procedures to ensure correct decision-making on investments 
and funding at the entity, taking into consideration the 
interrelation between the various on- balance-sheet and off-
balance-sheet items.
Asset securitisation: a financial mechanism that consists of 
converting certain assets into fixed-income securities that can 
be traded on a secondary securities market.
AT1 (Additional Tier 1): capital which consists primarily of 
hybrid instruments.
Backtesting: the use of historical data to monitor the 
performance of the risk models.
Basel III: a set of amendments to the Basel II regulations 
published in December 2010, scheduled to take effect in 
January 2013 and to be gradually implemented until January 
2019.
Basic IRB approach: all the risk parameters are determined by 
the regulator except for the probability of default, which is 
estimated internally by the bank. The CCFs required to 
calculate EAD are determined by the regulator.
BCBS: Basel Committee on Banking Supervision.
BIS: Bank for International Settlements.
BRRD (Bank Recovery and Resolution Directive): approved in 
2014, the BRRD establishes the framework for the recovery 
and resolution of banks with the objective of minimising the 
costs for taxpayers.
CBE 2/2016: Bank of Spain Circular of 2 February 2016 on the 
supervision and solvency of credit institutions, which 
completes the adaptation to Spanish law of Directive 
2013/36/EU and Regulation (EU) No 575/2013. The new 
Circular repeals Bank of Spain Circular 3/2008 to credit 
institutions on the determination and control of minimum 
own funds (except the parts referred to in Circular 5/2008 
regarding the regime established therein) and section 11 of 
Bank of Spain Circular 2/2014.
CBE 3/2008: Bank of Spain Circular of 22 May 2008 on the 
calculation and control of minimum capital requirements.
CBE 4/2004: Bank of Spain Circular of 22 December 2004 on 
public and confidential financial reporting standards and 
model financial statement forms.
CBE 9/2010: Bank of Spain Circular of 22 December 2010 
amending Circular 3/2008.
CCAR (Comprehensive Capital Analysis Review): a 
framework introduced by the Federal Reserve to review the 
capital planning and adaptation processes of the main US 
financial institutions.
CCF (Credit conversion factor): a conversion factor used for 
converting off-balance-sheet credit risk balances into credit 
exposure equivalents. Under the AIRB approach Santander 
Group applies the CCFs in order to calculate the EAD value of 
the items representing contingent liabilities and 
commitments.
CCoB (Conservation Buffer): a capital buffer equal to 2.5% of 
risk-weighted assets (and comprised fully of high-quality 
liquid assets) to absorb losses generated from the business.
CCP (Central Counterparty Clearing House): entity defined in 
article 2.1 of Regulation (EU) no. 648/2012.
CCyB (Counter Cyclical Buffer): a buffer whose objective is to 
mitigate or prevent cyclical risks arising from excessive credit 
growth at aggregate level. Accordingly, the CCB is designed to 
build up capital buffers during expansionary phases with a 
dual objective: to enhance the solvency of the banking system 
and to stabilise the credit cycle.
CET1 (Common Equity Tier 1): the highest quality capital of a 
bank.
CoCos (Contingent Convertible Bonds): debt securities that 
are convertible into capital if a specified event occurs.
Common equity: a capital measure that considers, among 
other components, ordinary shares, the share premium and 
retained profits. It does not include preference shares. 
Concentration risk: the risk of loss due to large exposures to a 
small number of debtors to which the entity has lent money.
Confidence level: in the context of value at risk (VaR) and 
economic capital, this is the level of probability that the actual 
loss will not exceed the potential loss estimated by value at 
risk or economic capital.
Counterparty credit risk: the risk that a counterparty will 
default on a derivatives contract before its maturity. The risk 
could arise from derivatives transactions in the trading 
portfolio or the banking portfolio and, as with other credit 
exposures, it is subject to a credit limit.
APPENDICES 2020 Pillar 3 Disclosures Report
   183

Credit default swap: a derivatives contract that transfers the 
credit risk of a financial instrument from the buyer (who 
receives the credit protection) to the seller (who guarantees 
the solvency of the instrument).
Credit risk: the risk that customers are unable to meet their 
contractual payment obligations. Credit risk includes default, 
country and settlement risk.
Credit risk mitigation: a technique for reducing the credit risk 
of a transaction by applying coverage such as personal 
guarantees or collateral.
CRM (Comprehensive Risk Measure): the estimate of risk in 
the correlation trading portfolio.
CRR (Capital Requirements Regulation) and CRD IV (Capital 
Requirements Directive): directive and regulation transposing 
the Basel II framework into European Union law.
CSP: Commercial strategic plan.
CVA (Credit Valuation Adjustment): the difference between 
the value of the risk-free portfolio and the true portfolio 
value, taking into account counterparty credit risk.
DEBA: European Banking Authority. Created in 2010, it 
entered into operation in 2011. The EBA acts as a coordinator 
between the national entities responsible for safeguarding 
values such as the stability of the financial system, 
transparency of markets and financial products, and the 
protection of bank customers and investors.
Default risk: the risk that counterparties will not meet their 
contractual payment obligations. 
Derivatives: financial instruments that derive their value from 
one or more underlying assets, e.g. bonds or currencies.
DLGD (Downturn LGD): the LGD estimated in adverse 
economic conditions.
DTA: deferred tax assets.
D-SIIs: Domestic Systemically Important Institutions.
EAD (Exposure at Default): the amount that the entity could 
lose in the event of counterparty default.
ECAI: External Credit Assessment Institution, such as Moody’s 
Investors Service, Standard & Poor’s Ratings Group and Fitch 
Group.
ECB Governing Council: the main decision-making body of 
the ECB, consisting of all members of the Executive Board and 
the governors of the national central banks of the Euro area 
countries.
ECB Supervisory Board: the body which undertakes the 
planning and execution of the ECB’s supervisory tasks, 
carrying out preparatory work and making proposals for 
decisions for approval by the ECB Governing Board.
Economic capital: the figure that demonstrates to a high 
degree of certainty the quantity of capital resources that 
Santander Group needs at a given point in time to absorb 
unexpected losses arising from its current exposure.
EDTF (Enhanced Disclosure Task Force): task force that 
issues recommendations to enhance the transparency of 
financial institution disclosures to the market.
EL (Expected loss): a regulatory calculation of the average 
amount expected to be lost on an exposure, using a 12-month 
time horizon. EL is calculated by multiplying probability of 
default (a percentage) by exposure at default (an amount) 
and LGD (a percentage).
EPS (earnings per share): an indicator used to measure a 
company’s profitability over a specified period of time. EPS is 
calculated by dividing the company’s profit for the period by 
the number of shares comprising its share capital.
ESRB (European Systemic Risk Board): the body that has 
been charged with macroprudential supervision of the 
financial system in the European Union in order to contribute 
to preventing or mitigating to systemic risks to financial 
stability.
Exposure: the gross amount that the entity could lose if the 
counterparty is unable to meet its contractual payment 
obligations, without taking into consideration any guarantees, 
credit enhancements or credit risk mitigation transactions.
FSB (Financial Stability Board): international institution that 
monitors and makes recommendations on the global el 
financial system.
Fully-Loaded: denotes full compliance with Basel III solvency 
requirements (which become mandatory in 2019).
GHOS (Group of Governors and Heads of Supervision): 
supervisory body of the Basel Committee.
Global rating tools: these assign a rating to each customer 
using a quantitative or automatic module.
G-SIB (Global Systemically Important Bank) or SIFI 
(Systemically Important Financial Institution): financial 
institutions which, because of their size, complexity and 
systemic interconnectedness, if allowed to fail could cause 
major disruptions to the financial system and economic 
activity.
HQLA: High Quality Liquid Assets.
HVCRE: High Volatility Commercial Real Estate.
APPENDICES 2020 Pillar 3 Disclosures Report
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2020 Pillar 3 Disclosures Report

ICAAP: internal capital adequacy assessment process.
IFRS: International Financial Reporting Standards.
ILAAP (Internal Liquidity Adequacy Assessment Process): 
process for the identification, measurement, management 
and control of liquidity implemented by the entity in 
compliance with article 86 of Directive 2013/36/EU.
Implicit LGD: this is used to back-test the regulatory LGD 
estimates. It is based on taking NPLMV as proxy for the 
Observed Loss, and then dividing the Observed Loss by the PD 
gives an implicit or observed LGD that can be compared to the 
regulatory LGD.
Interest rate risk: exposure of the bank’s financial position to 
adverse movements in interest rates. Acceptance of this risk is 
a normal part of the banking business and can be a source of 
significant returns and creation of shareholder value.
Internal ratings-based approach (IRB): an approach based on 
internal ratings for the calculation of risk-weighted 
exposures.
Internal validation: a pre-requisite for the supervisory 
validation process. A sufficiently independent specialised unit 
of the entity obtains an expert opinion on the adequacy of the 
internal models for the relevant internal and regulatory 
purposes, and issues a conclusion on their usefulness and 
effectiveness.
IRC (Incremental Risk Charge): an estimate of the credit risk 
associated with unsecuritised positions in the trading book.
IRP: This report, titled Pillar III Disclosures in the English 
version. (the acronym is for the Spanish Informe de 
Relevancia Prudencial).
IRRBB: Interest Rate Risk in the Banking Book.
ISDA (International Swaps and Derivatives Association): OTC 
derivative transactions between financial institutions are 
usually carried out under a master agreement established by 
this organisation which details the definitions and general 
terms and conditions of the contract.
ITS: Implementing Technical Standards.
JST (Joint Supervisory Team): one of the main forms of 
cooperation between the ECB and the national supervisors.
LCR (Liquidity Coverage Ratio): a ratio that ensures that a 
bank has an adequate stock of unencumbered high quality 
liquid assets that can be converted, easily and immediately, 
into cash in private markets, to meet its liquidity needs for a 
30 calendar day liquidity stress scenario.
LDP: low-default portfolio.
Leverage Ratio: a complementary (non-risk based) regulatory 
capital measure that attempts to guarantee banks’ financial 
resilience. The ratio is calculated by dividing eligible Tier 1 
capital by exposure.
LGD (Loss Given Default): the portion of EAD not recovered at 
the end of the loan recovery process. It is equal to 1 minus the 
recovery rate (i.e.: LGD = 1 - recovery rate). The definition of 
loss used to estimate LGD must be a definition of economic 
loss, not an accounting loss.
Liquidity risk: the risk that Santander Group might be unable 
to meet all its payment obligations when they fall due or 
might only be able to meet them at an excessive cost.
LTV (Loan to value): amount of credit extended / value of 
guarantees and collateral.
Mark-to-market approach: in regulatory terms, an approach 
for calculating the value of the credit risk exposure of 
counterparty derivatives (present market value plus a margin, 
i.e. the amount that takes into consideration the potential 
future increase in market value).
Market risk: the risk arising from uncertainty regarding 
changes in market prices and rates (including interest rates, 
share prices, exchange rates and commodity prices), the 
correlations between them and their levels of volatility.
MDA: Maximum Distributable Amount.
Model validation: the process of assessing the effectiveness 
of a credit risk model using a pre-defined set of criteria, such 
as the model’s discriminatory power, the appropriateness of 
the inputs and expert opinions.
MPE (Multiple Point of Entry): a resolution approach based 
on multiple points of entry.
MREL (Minimum Requirement of Eligible Liabilities): the 
final loss absorption requirement established in European 
legislation for institutions based on an assessment of their 
resolution plans.
Netting: a bank’s ability to reduce its credit risk exposure by 
setting off the value of its rights against its obligations with 
the same counterparty.
Non-standardised customers: customers who have been 
assigned a risk analyst due to the risk assumed. This category 
includes wholesale banking customers, financial institutions 
and certain enterprises in retail banking.
NSFR (Net Stable Funding Ratio): a ratio designed to ensure a 
bank has a balanced balance sheet structure, in which stable 
funding requirements are funded by stable liabilities.
Operational risk: the risk of incurring losses with regard to 
employees, contractual specifications and documentation, 
technology, infrastructure failures and disasters, projects, 
external influences and customer relations. This definition 
includes legal and regulatory risk but does not include 
business and reputational risk.
Over-the-counter (OTC): off-exchange, that is, trading done 
between two parties (in derivatives, for example) without the 
supervision of an organised exchange.
Phased-in: refers to compliance with current solvency 
requirements bearing in mind the transitional period for Basel 
III implementation.
Pillar 1 – Minimum Capital Requirements: the part of the 
New Basel Capital Accord that establishes the minimum 
regulatory capital requirements for credit, market and 
operational risk.
Pillar 2 - Supervisory Review Process: an internal capital 
adequacy assessment process reviewed by the supervisor 
with possible additional capital requirements for risk that are 
not included in Pillar I and the use of more sophisticated 
methodologies than Pillar I.
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Pillar 3 - Market Discipline: this pillar is designed to 
complete the minimum capital requirements and the 
supervisory review process and, accordingly, enhance market 
discipline through the regulation of public disclosure by the 
entities.
Point-in-time (PIT) PD: the probability of default at a 
particular point in time or in particular state of the economic 
cycle.
Probability of default (PD): this represents the likelihood that 
a customer or a transaction will fall into default. It is the 
probability that an event (the default) will occur within a 
given time horizon.
QIS (Quantitative Impact Study): ad-hoc requests by the EBA 
for studies analysing and calibrating the impact of new 
changes in regulation.
Qualifying central counterparty (QCCP): a central 
counterparty that has either been authorised under article 14 
of Regulation (EU) no. 648/2012, or been recognised under 
article 25 of said Regulation.
Rating: the result of the objective assessment of the 
counterparties’ future economic situation based on current 
characteristics and assumptions. The methodology for 
assigning the ratings depends largely on the type of customer 
and the available data. A wide range of methodologies for 
assessing credit risk is applied, such as expert systems and 
econometric methods.
RDL: Royal Decree Law.
Risk appetite: the amount and type of risks considered 
reasonable to assume in the execution of its business 
strategy, so that Santander Group can maintain its ordinary 
activity in the event of unexpected circumstances. Severe 
scenarios are taken into account that could have a negative 
impact on the levels of capital, liquidity, profitability and/or 
the share price.
Risk limits: approval tools for certain risk types and levels.
Risk-weighted assets (RWA): calculated by assigning a level 
of risk, expressed as a percentage (risk weighting), to an 
exposure in accordance with the relevant rules under the 
standardised approach or the IRB approach.
RoRAC: Return on Risk Adjusted Capital.
RoRWA: Return on Risk-Weighted Assets.
RTS: Regulatory Technical Standards.
RWA density: ratio that compares institutions’ total weighted 
assets and their total balance sheet, and can be interpreted as 
an average relative risk measure -according to regulatory 
criteria- of a bank’s overall operations.
SFT (Securities Financing Transactions): any transaction 
where securities are used to borrow cash, or vice versa. They 
mostly include repurchase agreements (repos), securities 
lending activities and sell/buy-back transactions.
Slotting Criteria: an approach used for calculating risk 
weights for specialised lending exposures, which consists of 
mapping the internal ratings to five supervisory categories, 
each with its own specific risk weight.
Special-purpose vehicle (SPV): a company created for the 
sole purpose of acquiring certain assets or derivative 
exposures and of issuing liabilities that are associated solely 
with these assets or exposures.
SRB (Single Resolution Board): the single resolution 
authority, which is the second pillar of the Banking Union 
after the Single Supervisory Mechanism.
SRB: Systemic Risk Buffer.
SREP (Supervisory Review and Evaluation Process): a review 
of the systems, strategies, processes and mechanisms applied 
by credit institutions and of their risks.
SRF: Single Resolution Fund.
SRM: Single Resolution Mechanism.
SSM (Single Supervisory System): the system of banking 
supervision in Europe. It comprises the ECB and the 
competent supervisory authorities of the participating EU 
countries.
Standardised approach: an approach for calculating credit 
risk capital requirements under Pillar I of Basel II. Under this 
approach, the risk weightings used in the capital calculation 
are determined by the regulator.
Standardised customers: customers which have not been 
expressly assigned a risk analyst. This category generally 
includes individuals, individual entrepreneurs and retail 
banking enterprises not classified as non-standardised 
customers.
Stress testing: used to describe various techniques for 
measuring the potential vulnerability to exceptional but 
plausible events.
Stressed VaR: measures the level of risk in stressed historical 
or simulated market situations.
Synthetic securitisation: transactions that involve a basket of 
credit swap agreements and bonds serving as collateral. They 
are called synthetic as rather than containing physical bonds, 
they carry credit derivatives, also known as synthetic 
contracts.
Through-the-cycle (TTC) PD: probability of default adjusted 
to a full economic cycle. It may be taken as a long-term 
average of the point-in-time PD.
Tier 1: core capital less hybrid instruments.
Tier 2: supplementary capital instruments, mainly 
subordinated debt and general loan loss allowances, which 
contribute to the robustness of financial institutions.
TLAC (Total Loss Absorbency Capacity): an additional 
requirement to the minimum capital requirements set out in 
the Basel III framework for the absorption of total losses and 
effecting a recapitalisation that minimises any impact on 
financial stability, ensures the continuity of critical functions 
and avoids exposing taxpayers to losses. This requirement is 
applicable to all G-SIBs.
TLTRO: Targeted Longer-Term Refinancing Operations.
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2020 Pillar 3 Disclosures Report

TRIM: Targeted Review of Internal Models.
TSR (Total Shareholder Return): relative performance of total 
shareholder returns. An indicator of the returns obtained by 
owners of a company over a period of one year on capital 
provided to the company.
Unexpected loss: unexpected losses (not covered by 
allowances) must be covered by capital.
VaR (Value at Risk): estimate of the potential losses that 
could arise in risk positions as a result of movements in 
market risk factors within a given time horizon and for a 
specific confidence level.
ESG: Environmental, Social and Governance
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