Company: BCDRF
Filing Date: 2025-03-03
Form Type: 6-K
Source: 0000891478-25-000057
Chunk: 65

Company: Banco Santander, S.A.
Filing Date: 2025-03-03
Form: 6-K
Chunk 65
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 5%.

120 2024 Pillar 3 Disclosures Report

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

4.4. Internal rating systems Santander has been using its own internal rating and scoring models to measure the credit quality of customers and transactions since 1993. Each rating or score indicates a probability of default, measured on the basis of the bank’s historical default experience (except in the case of low default portfolios). More than 400 internal rating models are used in the Group’s credit approval and risk monitoring process. The global rating tools are used for certain CIB segments: corporates, financial institutions, sovereigns and specialised funding, which are managed centrally in Santander, in terms of both allocating the rating and risk monitoring. The rating these tools assign to each customer is obtained using a model which relies on an analyst’s judgement, supported by a quantitative or automatic module based on balance sheet ratios or macroeconomic variables. This quantitative module is created by applying a structured technique for dealing with complex decisions based on two-by-two comparisons to evaluate priorities. Starting from an expert selection of variables/ratios to be considered in the model, this method yields the relative weight of each variable in the overall model. The analyst considers information as a reference for the decision, but has the ability adjusts it, to obtain the final rating, which is therefore heavily based on expert judgement. Occasionally, ratings are also adjusted in case of the company belonging to a group receiving explicit support, as in the case of Corporate CIB. For the Corporate and Institutional segment (including SMEs with the highest turnover), Grupo Santander's parent company has defined a single methodology for the construction of a rating in each country. The aim is to incorporate all available information (internal behaviour, external sources, etc.) in a structured way, statistically weighting the weight of the objective (automatic) assessment and the subjective (expert) assessment according to the client's characteristics. The analyst can modify the resulting score by a limited number of rating points. Customer ratings are reviewed regularly to take into account new information. Ratings are reviewed more frequently when certain automatic alerts are triggered and for customers placed on special watch. The rating tools are also reviewed in order to refine the ratings they generate. Santander has scoring tools that automatically assign a score to transactions submitted for approval for the r etail segment (individuals and SMEs). These credit approval systems are supplemented by behavioural rating models, which