Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 829

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 829
---
 Mexican portfolio. • South America: the NPL ratio decreased 30bp from 2023 to 5.42%, due to the positive performance of Brazil. • DCB Europe: the NPL ratio climbed 38bps to 2.50%, due to an increase in impaired loans (mainly in Germany) on the back of a delay in classifying write-offs due to a policy change and growth in used car business . Information on the estimation of impairment losses The calculation of provisions for credit risk losses is performed at financial asset level, estimating potential credit losses through the difference between the contractual cash flows and the expected cash flows, ensuring that the results are adequate considering the status of the transaction, economic conditions and available forward-looking information. The IFRS 9 impairment model applies to financial assets valued at amortized cost; debt instruments valued at fair value with changes in other comprehensive income; leasing receivables; and commitments and guarantees not valued at fair value. The portfolio of financial instruments subject to IFRS 9 has threecredit risk categories (or stages) according to the status of each instrument in relation to its level of credit risk: • Stage 1: financial instruments with no significant increase in risk since initial recognition – the impairment provision reflects expected credit losses from defaults over the 12 months from the reporting date. • Stage 2: financial instruments with a significant credit risk increase since initial recognition but no materialized impairment event – the impairment provision reflects expected losses from defaults over the financial instrument’s residual life. • Stage 3: financial instruments with true signs of impairment as a result of one or more events resulting in a loss – the impairment provision reflects expected losses for credit risk over the instrument’s expected residual life. The classification of financial instrument in the IFRS 9 stages is carried out in accordance with the guidelines through the risk management policies of the subsidiaries, which are consistent with the Group's policies. Estimation of expected loss Grupo Santander calculates impairment losses using parameters (mainly EAD, PD, LGD, and discount rate) based on the internal models infrastructure used for the calculation of regulatory capital and the experience acquired from regulatory and management fields, as well as the stages in which each financial asset is classified. However, far from being a simple adaptation, Santander built and validated them under the specific requirements of IFRS 9, as well as other guidelines issued by regulators, supervisors, and other international bodies (EBA, NCA, BIS, GPPC, etc.), which