Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 557

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 557
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 regulatory requirements or market expectations.

Limits management and control systems

The internal policies set by senior management dictate mechanisms to monitor and control structural risk according to regulatory requirements and our risk appetite. These mechanisms consider sub-types of structural risk and their implications, contingencies and interrelations.

The Structural risk area’s role in the second line of defence is to oversee that structural risks are understood, controlled and reported to senior management according to established governance:

• It sets interest rate risk metrics and reviews and challenges the structural risk appetite and limits proposed by the first line of defence.

• It oversees the first line of defence’s structural risk management and checks compliance with set limits.

• It regularly reports on our risk profile to senior management and issues guidelines to business lines about measures it deems necessary.

• It reviews and challenges business proposals and helps senior management and business units understand the interest rate risk of the Group’s businesses and operations.

• It develops and revises models and policy, and checks that structural risk procedures are fit and proper.

Like market risk, structural risk also has an annual plan framework to set structural balance sheet risk limits according to risk appetite.

Annual report 2024 530

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

These are the main limits we use:

• Structural interest risk in the banking book:

• Net interest income (NII) sensitivity limit over a one-year horizon.

• Economic value of equity (EVE) sensitivity limit.

• Limit of the negative impact on shareholder equity of changes to the value of assets carried at fair value in the bankin g book stemming from adverse movements in the market.

• Structural FX risk:

• Limit on the net permanent position of the core capital ratio.

• Limit on the individual hedge required for each currency.

We supplement these limits with other alerts and triggers that monitor certain aspects of such risks and complement the metrics described above.

Business lines’ risk managers must provide explanations for potential limit and sub-limit breaches as well as an action plan to correct them.

Methodologies and other key details

a) Structural interest rate risk

As part of structural risk, interest rate risk in the banking book (IRRBB) is a key balance sheet risk.

Santander measures the potential impact of interest rate movements on EVE and NII. Because of the effect of changing rates, we must manage and control many subtypes of interest rate risk, such as repricing risk, yield curve risk, basis