Company: BCDRF
Filing Date: 2025-01-02
Form Type: 6-K
Source: 0000891478-25-000002
Chunk: 55

Company: Banco Santander, S.A.
Filing Date: 2025-01-02
Form: 6-K
Chunk 55
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• Illiquid equity instruments in non-trading portfolios, classified at fair value through profit or loss and at fair value through equity.

• Instruments in Santander UK’s portfolio (loans, debt instruments and derivatives) linked to the House Price Index (HPI). Even if the valuation techniques used for these instruments may be the same as those used to value similar products (present value in the case of loans and debt instruments, and the Black-Scholes model for derivatives), the main factors used in the valuation of these instruments are the HPI spot rate, the growth and volatility thereof, and the mortality rates, which are not always observable in the market and, accordingly, these instruments are considered illiquid.

• Callable interest rate derivatives (Bermudan-style options) where the main unobservable input is mean reversion of interest rates.

• Trading derivatives on interest rates, taking as an underlying asset titling and with the amortization rate (CPR, Conditional prepayment rate) as unobservable main entry.

• Derivatives from trading on inflation in Spain, where volatility is not observable in the market.

• Equity volatility derivatives, specifically indices and equities, where volatility is not observable in the long term.

• Derivatives on long-term interest rate and FX in some units (mainly South America) where for certain underlyings it is not possible to demonstrate observability to these terms.

• Debt instruments referenced to certain illiquid interest rates, for which there is no reasonable market observability.

The measurements obtained using the internal models might have been different if other methods or assumptions had been used with respect to interest rate risk, to credit risk, market risk and foreign currency risk spreads, or to their related correlations and volatilities. Nevertheless, the Bank’s directors consider that the fair value of the financial assets and liabilities recognised in the interim condensed consolidated balance sheet and the gains and losses arising from these financial instruments are reasonable.

The net amount recorded in the results of the first nine months of 2024 arising from models whose significant inputs are unobservable market data (level 3) amounted to EUR 158 million profit (EUR 315 million of profit in the first nine months of 2023).

| January - September 2024 |     | 45 |

The table below shows the effect, at 30 September 2024 and 31 December 2023, on the fair value of the main financial instruments classified as Level 3 of a reasonable change in the assumptions used in the valuation. This effect was determined by