Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 459

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 459
---
 destroying value. To try to ensure that all customer relationships add value, we regularly monitor and actively manage low performing customers through specific action plans.

Both approvals and profitability monitoring have a robust approval and review governance which i) ensures the consideration of minimum pricing thresholds are properly integrated into capital processes; ii) establishes a timely scaling/authorizing process; and iii) that detailed follow-ups are carried out for operations approved below the minimum threshold.

Capital planning and stress tests

Capital stress test exercises are a key tool in banks' dynamic assessments of their risks and solvency. These forward-looking reviews are based on unlikely-but-plausible macroeconomic and idiosyncratic scenarios. They require robust planning models that can translate the effects defined in the projected scenarios to elements that affect solvency.

The ultimate aim of these exercises is to assess risks and solvency thoroughly to determine capital requirements if a bank fails to meet its regulatory and internal capital objectives.

Santander has an internal capital stress and planning process to respond to various regulatory exercises and is a key tool integrated within management and strategy. They aim to ensure sufficient current and future capital, even in unlikely-but-plausible economic scenarios. We estimate results in various business environments (including severe recessions as well as expected macroeconomic environments), based on our initial situation (defined using financial statements, capital base, risk parameters and regulatory and economic ratios) to determine our solvency ratios, usually for a three-year period.

Planning offers a comprehensive view of our capital for the analysed period and in each of the defined scenarios based on regulatory capital and economic capital metrics.

This chart describes the structure in place :

| 1 |     | Macroeconomicscenario                       |     |                                                                                        |     | •Central and recession                                  
 •Idiosyncratic:based on specific risks the entity faces 
 •Multi-yearhorizon                                      
 •Reverse stress tests                                   |
| 2 |     | Balance sheetand income statement forecasts |     | •Projection ofvolumes. Businessstrategy                                                
 •Marginsandfunding costs                                                               
 •Feesand operatingexpenses                                                             
 •Marketshocks andoperationallosses                                                     
 •Credit losses andprovisions. PIT LGD and PD models                                    
 •IFRS 9 models and migration among stages                                              |     |                                                         |
| 3 |     | Capital requirements                        
 forecasts                                   |     | •Consistentwith projectedbalance sheet                                                 
 •Regulatory and economic risk parameters(PD, LGD and EAD)                              |     |                                                         |
| 4 |