Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 540

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 540
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 up to five future scenarios that could affect our ability to collect contractual cash flows. They consider the time-value of money, information from past events, and current conditions and projections of GDP, house prices, unemployment, interest rates, and other important macroeconomic factors. We calculated impairment losses using parameters (mainly EAD 1 , PD 2 , LGD 3 and discount rate) based on internal models and regulatory and management expertise. As they are far from a simple adaptation, we define, update and validate them according to IFRS 9 guidelines.

| For more details on financial asset impairment and the calculation of provisions under IFRS 9, see section'2.Main aggregates and variations'in Note 54 to the consolidated financial statement. |

IFRS 9 classifies financial assets in stages according to changes in the level of credit risk from the time of approval to the date of analysis to establish transaction prices and with varying criteria to calculate expected loss. Transactions with contrasting likelihood of default should be pegged to different interest rates or spreads that cover each transaction’s expected losses. If a transaction’s risk increases significantly compared to when it was approved, the original interest rate will no longer cover the potential risk, which calls for greater provisions. Under IFRS 9, transactions are split according to three stages: • Stage 1 includes financial assets with no significant increase in credit risk since initial approval or registration. Thus, the impairment provision reflects expected credit losses from defaults over the next 12 months from the reporting date.

1 Exposure at Default.

2 Probability of Default.

3 Loss Given Default.

Annual report 2024 517

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

• Stage 2 include financial assets that show a significant credit risk increase since initial registration or the time for approval but no materialized impairment event. Thus, the impairment provision reflects expected losses from defaults over the transaction’s lifetime.

• Stage 3 includes financial assets with true signs of credit risk impairment as a result of one or more events resulting in a loss. Thus, the impairment provision reflects expected losses for credit risk over the instrument’s expected lifetime.

| .+.            
 Credit quality |     |   |     | Stage 1                                                                                     |     | Stage 2                                                                                         |     | Stage 3                |     | .-.            
 Credit quality |
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