Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 529

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 529
---
 plan’s financial and macroeconomic stress scenarios have various levels of severity, plus idiosyncratic and/or systemic events; and • risk appetite, with stressed metrics to determine how much risk we want to expose ourselves to. • Recurrent risk management also uses scenario analyses for: • provisions estimates, which involve adjusting the value of credit operations due to existing or prospective risk factors that have not been considered in the initial approval and rating process, both for individual customers and for the portfolio as a whole; and • regular credit and market risk stress tests that simulate changes in expected losses to estimate required capital and absorb unexpected losses.

| For more details on scenario analysis, see sections3.2 ‘Market risk management’and 3.6 'Liquidity risk management'and section'Expected loss estimation'in Note 54 to the consolidated financial statement. |

• Climate change scenario analysis , for which we have embedded the scenarios defined by the Network for Greening the Financial System (NGFS), by Representative Concentration Pathways (RCP) and by the Intergovernmental Panel on Climate Change (IPCC), which our Research department integrates and expands by adjusting them to more specific variables by country and sector to offer a more complete and tailored view of our portfolios. This enables us to boost our forward-looking capabilities to quantify the impact on our customers of a transition to a lower greenhouse gas emissions economic model, as well as potential physical risk events. To make stress testing more consistent and robust: • Our three lines of defence and senior management are involved in scenario analysis governance and oversight. • The models we develop estimate future metric values (e.g. credit losses). • Our backtesting and reverse stress exercises challenge model outcomes regularly. • Our teams contribute expert opinions and a vast understanding of portfolios. • And we thoroughly monitor models, scenarios, assumptions, results and mitigating management measures.

Annual report 2024 510

| Contents |     | Business model and strategy |     | Sustainability statement |     | Corporate governance |     | Economic and financial review |     | Riskmanagementandcompliance |

Amid an economic 'soft landing', where falling inflation is paving the way for central banks to cut interest rates; the unfolding of armed conflicts; election outcomes; early signs of GDP weakness in some economies; and the effects of floods in Brazil, hurricanes in the US, flash floods in Spain and other climate events, scenario analysis proved vital in 2024 to identify and manage correctly the potential impacts of these events on our portfolios.

We boosted our management and forecasting capacity