Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 542

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 542
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 to the counterparty increases. Santander has specific models to measure this risk. Regarding settlement risk, this occurs when the settlement of a transaction involves a bilateral exchange of flows or assets between two counterparties. For example, when a counterparty buys dollars in exchange for euros, the settlement of the transaction involves one party delivering euros and receiving an equivalent amount of dollars from the other. Settlement risk is the risk that one of the parties fails to meet their settlement

obligations. We have also developed a global infrastructure and specific models to measure this risk. To manage and control counterparty risk, it is essential to have an infrastructure that allows measuring current and potential exposure at different levels of aggregation and granularity in an agile and dynamic way, ensuring the generation of reports with sufficient detail to facilitate the understanding of exposures and the decision-making process. To measure exposure, we follow two methodologies: mark-to-market (MtM or replacement value in derivatives) plus potential future exposure (add-on), and Monte Carlo simulation for calculating exposure for some countries and products. Additionally, we calculate capital at risk or unexpected loss, which is the loss that constitutes economic capital net of guarantees and recoveries, after deducting the expected loss. After market close, we recalculate exposures by adjusting all operations to their new time horizon, adapting the potential future exposure and applying mitigation measures (netting, collateral, among others), so that exposures can be controlled daily against the limits approved by senior management within the risk appetite. We perform risk control through a real-time integrated system, which allows us to know at any moment the available exposure limit with any counterparty, in any product and term, and across all subsidiaries. Counterparty risk exposures: over-the-counter (OTC) transactions and organized markets (OM) As at December 2024, the positive market value of total exposure (under management criteria) with netting and collateral agreements for counterparty risk was 15,855 million euros (net credit risk equivalent of 52,604 million euros). Despite the environment in which we operate, the 9% increase in exposure compared to the previous year is driven by the 26% increase in the Group's trading volume in notional terms over this period.

| Counterparty risk: exposure in terms of market value and 
 credit risk equivalent, including the mitigation effectA |     |        |      |     |        |      |     |        |      |
| EUR million                                              |     |        |      |     |        |      |     |        |      |
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