Company: BCDRF
Filing Date: 2025-03-03
Form Type: 6-K
Source: 0000891478-25-000057
Chunk: 124

Company: Banco Santander, S.A.
Filing Date: 2025-03-03
Form: 6-K
Chunk 124
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4 |
|                                                  |     | Exceptions |     |   | Model Status |     |      |
| Spain & SLB                                      |     |            |     | 0 |              |     |   OK |
| Chile                                            |     |            |     | 1 |              |     |   OK |
| Mexico                                           |     |            |     | 3 |              |     |   OK |

During 2024, there have been three exceptions in Mexico and one in Chile. Such exceptions were mainly driven by the volatility in the interest rates as long as movements in the FX market. The fair value of a financial instrument is calculated using quoted market prices or appropriate valuation models, duly validated and approved. This may cause a degree of uncertainty in the valuation of less liquid financial instruments, which are not traded on a regular basis or which use valuation models. These uncertainty factors are incorporated into the fair value of positions through valuation adjustments. Valuation adjustments are designed to ensure the fair valuation of positions, by including variables in the market value that are not considered in the valuation models or for which there is sufficient uncertainty to significantly affect the valuation. The valuation adjustment categories used at the Group include: • Market liquidity valuation adjustments (close out cost): adjustments arising from the use of average prices when valuing portfolio positions, where accounting rules require valuation based on the exit price. • Valuation adjustments are included due to the existence of spreads between buy and sell prices. • These adjustments are calculated taking into account the spread between market buy and sell prices and are estimated independently for each risk factor, distinguishing between: interest rate curves, prices, dividends, volatilities and correlation.

2024 Pillar 3 Disclosures Report 193

| Index |     | Introduction |     | Capital |     | Risks |     | Risk taker's remunerations |     | Appendices |

• Valuation adjustments due to uncertainty in market prices (market price uncertainty): these are warranted because of considerable uncertainty in the market data used for the calculation of fair value, distinguishing between:

◦ Observable market data

◦ Unobservable market data

• Valuation adjustments due to model risk: these are warranted when there is a high degree of uncertainty in the valuation models or in the parameters used by these models. This uncertainty may be caused by: adding certain assumptions that may be erroneous, models whose results cannot be calibrated because there are no alternatives or because of dependence on parameters that are subject to possible estimation errors.

• Other valuation adjustments: adjustments for limitations in valuation systems