Company: BCDRF
Filing Date: 2025-03-03
Form Type: 6-K
Source: 0000891478-25-000057
Chunk: 126

Company: Banco Santander, S.A.
Filing Date: 2025-03-03
Form: 6-K
Chunk 126
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 and economic losses arising from management of assets and liabilities carried at amortised cost in the banking book positions. Within structural risk, interest rate risk in the banking book (IRRBB) is considered the main source of balance sheet risk. There are three sources of IRRBB: mismatch risk (or gap risk), basis risk and option risk (automatic and behavioural). The management of IRRBB measures aims to ensure the stability of net interest margin and the economic value within the Group's defined risk appetite. Additionally, within the structural risks is the credit spread risk in the banking book (hereinafter CSRBB), which measures the risk of changes in the market price due to credit risk, liquidity or other characteristics of the instruments with credit risk, which is not captured by other existing risk frameworks such as IRRBB or the expected default risk. These activities are based on the following principles, which take into account internal policy, regulatory and market best practice requirements: • Independence of risk management and control functions following the group's established lines of defence model. • Involvement of senior management , ensuring that it has the necessary relevant information on these risks. • Holistic approach to risk : IRRBB and CSRBB control and monitoring must take into account all potential sources of risk and the fact that risks can arise due to factors related to subsidiaries or for reasons not related to them, such that local risk events may have an impact on the Group. Furthermore, the approach should be forward-looking and analyse trends over different time periods and scenarios. • Robust systems and high-quality internal data , with adequate traceability of information. • Use of methodologies and models that are standardised and documented ensuring consistency in risk measurement. • Establishment and adaptability of limits for adequate control of these risks.

For more information, see the 'Compliance and conduct risk' management chapter of the 2024 Annual report.

| Access 2024 Annual Report available on the Santander Group website |

The financial area of each group subsidiary manages interest rate risk originated by retail and commercial banking and is responsible for management of the structural risk generated by interest rate fluctuations. Mitigation strategies are used to manage the IRRBB risk profile by using interest rate instruments such as fixed income bond portfolios (usually government bonds) or derivative instruments with high credit quality, high liquidity and low capital consumption that complement the natural hedges provided by the balance sheet itself. They are always carried out taking into account the market environment. For more information, see the Risk compliance & conduct chapter of the 2024 Annual report.