Company: BCDRF
Filing Date: 2025-07-31
Form Type: 6-K
Source: 0000891478-25-000113
Chunk: 178

Company: Banco Santander, S.A.
Filing Date: 2025-07-31
Form: 6-K
Chunk 178
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 Credit limits:

• Total exposure limit

• Jump to default limit by issuer

• Others

• Limits for origination transactions

Those general limits include sub-limits that make the structure granular enough to control market risks from Santander's trading operations. We monitor subsidiaries' positions daily, checking changes in portfolios and at trading desks in order to detect events that may necessitate immediate mitigation.

The Group establishes global approval and control limits, global approval limits with local control, and local approval and local control limits. They are requested by each subsidiary's business manager in consideration of particular circumstances of the business, budgetary targets and the risk/reward ratio. Limits are then approved by risk bodies according to internal governance processes.

Subsidiaries must comply with the approved limits. On the day a limit breach occurs, subsidiary business managers must provide a written explanation with an action plan and corrective measures, such as reducing the position within the limits or formulating a strategy that justifies raising limits.

#### Methodologies
a) Value at Risk (VaR)

Value at Risk (VaR), our standard methodology for managing and controlling market risk, measures maximum expected loss with a certain confidence level over a given time.

For standard historical simulation, the confidence level is 99% and the time horizon is one day. We also make statistical adjustments efficiently to incorporate recent developments affecting our levels of risk. Our time frame is two years or at least 520 days from the reference date of the VaR calculation. We report the higher of two VaR figures we calculate daily. One applies an exponential decay factor that allocates less weight to the oldest observations; the other has the same weight for all observations.

We also simultaneously calculate Value at Earnings (VaE). It measures the maximum potential gain with a certain level of confidence and specific time frame under the same methodology for VaR.

VaR by historic simulation has many advantages as a risk metric. It states a portfolio's market risk in a single figure according to market movements, without assumptions about functions, forms or correlations between market factors.

However, the VaR metric has some limitations, regardless of the methodology to calculate it. In particular:

• As VaR calculation has a certain confidence level, it does not indicate the levels of possible losses beyond it.

• The liquidity horizon of some products in the portfolio is longer than that of the VaR model.

• VaR is a static measure of risk subject to significant (albeit unlikely) changes in the following day.

Historical simulation methodology also has limitations:

• High