Company: BCDRF
Filing Date: 2025-03-03
Form Type: 6-K
Source: 0000891478-25-000057
Chunk: 114

Company: Banco Santander, S.A.
Filing Date: 2025-03-03
Form: 6-K
Chunk 114
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 also calculated, which measures the maximum potential gain at a certain level of confidence and time horizon, applying the same methodology as for VaR. The 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.

2024 Pillar 3 Disclosures Report 187

| Index |     | Introduction |     | Capital |     | Risks |     | Risk taker's remunerations |     | Appendices |

In relation to the VaR, the Expected Shortfal l (ES) is also calculated by estimating the expected value of the potential loss when this is greater than the level set by the VaR. Unlike VaR, the ES has the advantage of being able at capturing the risk of large losses with low probability (tail risk) and of being a sub-additive metric. The BCBS 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. Santander 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 at the end of December 2024. The total regulatory capital figures based on the internal model are calculated as the linear sum of the individual regulatory capital of the units that have received internal model approval; i.e. without considering diversification. Moreover, for those Grupo Santander entities without approval for calculating regulatory capital based on the internal model, capital will be calculated based on the standard model. 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 strategy for Santander trading activity was to remain focused on customer business, minimising any exposure to directional risk as much as possible and maintaining geographic and risk factor diversification. The level of risk in the trading portfolio remained low, despite the war in Ukraine, and its impact in the energy price and inflation. Additionally, during 2024, there have been interest rate cuts by some of the major central banks. This is reflected in the VaR of the trading portfolio, which, despite market volatility, especially in relation to interest rates and exchange rates, mostly stayed below the trend of the last four