Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 550

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 550
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 in the annual limits plan prepared by senior management and extended to all subsidiaries.

We take a prudent approach to manage market risk activity from multiple perspectives and to establish appetite limits on different metrics including:

• value at risk (VaR) and stressed VaR (sVaR) limits;

• equivalent and/or nominal position limits;

• interest rate sensitivity limits;

• vega limits;

• limits for risk of delivery of short sales (bonds and equities);

• limits to reduce effective losses or protect profits during the year (loss trigger and stop loss);

• credit limits (limits for total exposure and jump-to-default by issuer); and

• origination limits.

Those general limits have sub-limits that make the structure granular enough to control market risks from trading. We monitor subsidiaries’ positions every day.

We set global approval and control limits, global approval limits with subsidiary-run control and subsidiary-level approval and control limits. Each subsidiary’s business unit manager requests limits based on business particulars and budgetary targets so that they will match the risk-reward ratio. Risk bodies approve limits according to established governance.

Subsidiaries must adhere to approved limits. The day a limit breach occurs, subsidiary business managers must provide a written explanation with an action plan to correct it.

Market risk-related capital requirements

We use internal and standard models to determine market risk-related capital requirements. We also use internal models to calculate regulatory capital for the trading books of our subsidiaries in Chile, Mexico and Spain (Santander España’s trading book includes Santander London Branch, which helps diversify its positions).

In 2024, we continued to work on enhancing the calculation of market risk-related capital, most notably to adapt our infrastructure to new FRTB requirements. Moreover, we worked to enrich internal regulation and reporting on market risk-related capital to meet supervisory expectations.

We rolled out all these enhancements in our core markets through corporate tools, enabling us to automate processes and reduce the use of expert judgement significantly.

Our internal market risk model calculates the Group's consolidated regulatory capital as subsidiaries’ total regulatory capital that the ECB has approved. Because it does not consider capital savings owing to geographical diversification, our model is conservative.

It uses advanced methods with VaR, stressed VaR, Incremental Risk Charge (IRC) and Risk Not in Model (RNIM) as fundamental metrics to calculate ECB-approved regulatory capital in trading consistently with the CRR.

Methodologies and key aspects

a) Value at Risk (VaR)

Value at risk (VaR), our standard methodology for managing