Company: BCDRF
Filing Date: 2025-03-03
Form Type: 6-K
Source: 0000891478-25-000057
Chunk: 72

Company: Banco Santander, S.A.
Filing Date: 2025-03-03
Form: 6-K
Chunk 72
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 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, the RoRWA (return on risk-weighted assets), stress testing and scenario analyses. These results are reported to senior management through various internal committees. 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) and nominal CAP. 4 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 linking economic capital to financial results, it is possible to calculate the risk-adjusted return (RoRAC) to be compared to the cost of capital to determine each units contributing to value creation in the Group. The use of economic capital figures in determining management compensation and setting capital and RoRAC-related targets for the business units reinforces the integration of economic capital in 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, to assess potential risk levels in stress situations. For further details on IFRS 9, see the Risk management chapter (section 3.4) of the 2024 Annual report.

4 Maximum nominal amount of a risk transaction, excluding market transactions and with maximum terms according to the type of transaction.

124 2024 Pillar 3 Disclosures Report

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

#### 4.7. Credit risk mitigation techniques
This section covers the CRC requirements - Qualitative disclosure requirements related to credit risk mitigation techniques.