Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 547

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 547
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 In credit risk, country risk involves transactions with customers residing in a particular country with unusual business risk. It includes sovereign risk and transfer risk, as well as war, natural disaster, balance of payments crisis and other things that can disrupt international finance. To cover potential losses arising from these types of events, we integrate country risk into our models and provisioning processes in accordance with applicable regulation. We assume country risk very selectively in transactions that enhance our global relations with customers. And we follow highly cautious standards to manage it. Sovereign risk and risk with government agencies Sovereign risk arises from central bank transactions (including regulatory cash reserves), government bonds (public debt) and transactions with non-commercial government institutions funded exclusively by a state’s budget revenue. Our standard for sovereign risk differs somewhat from the EBA's standard for regular stress testing. In particular, the EBA does not consider deposits with central banks, exposures with insurance companies or indirect exposures from guarantees and other financial instruments. However, its standard does generally include entities run by regional, local and central governments. We continue to track and manage transactions with sovereign risk based on available information, such as reports by rating agencies and international organizations. We monitor each country where we have cross-border 4 and sovereign risk. We analyse events that could affect the country’s political or institutional stability and assign its government or central bank a credit rating. This helps us set limits for transactions with sovereign risk. In recent years, total sovereign risk exposure has remained within regulatory requirements and strategy defined for its management. Because exposure spans several countries, each with its distinct macroeconomic outlook and growth scenario, it varies due to our liquidity management strategy and our interest and FX rate coverage, which apply limits based on each country’s credit rating. At the end of December 2024, total sovereign risk exposure was EUR 198,627 million, which was 23% higher than 2023.

| For more details on sovereign risk exposure, see section'4.Other credit risk aspects'in Note 54 to the consolidated financial statement. |

Our exposure to local sovereign risk not in the issuer country’s currency at the end of December 2024 was minor (EUR 4,459 million or 1.1% of total sovereign risk), based on our management criteria. Exposure to non-local sovereign issuers with cross-border risk was also minor 5 (EUR 11,494 million or 2.8% of total sovereign risk). The sovereign debt we hold in Latin America, which is recorded in local ledgers, is predominantly in local currency and