Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 975

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 975
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 sectors or regions, we fail to comply with internal or regulatory concentration limits, or if one or more of our largest borrowers fail to service their loans, our operating results, financial condition and prospects could be adversely affected.

Failure to effectively implement, consistently monitor or continuously improve our credit risk management system may result in an increase in the level of non-performing loans and a higher risk exposure for us, which could have a material adverse effect on us.

In addition, failure to successfully execute any of our decisions and actions affecting or changing our practices, operations, priorities, strategies, policies, procedures, or frameworks, could have a material adverse effect on us.

Our board of directors is responsible for the approval of the Group’s general policies and strategies, in particular for the corporate risk framework, and for defining the risk appetite. In addition to the executive committee, which maintains a special focus on risk, the board has a specific risk supervision, regulation and compliance committee. See more information in section 2.3 ‘Risk and Compliance governance’ in the 'Risk management and compliance' chapter and in section 4 'Board of directors ' in the 'Corporate governance' chapter in Part 1 of this annual report on Form 20-F.

2.8 Model risk

2.8.1 We rely on models for many of our decisions. Their inaccurate or incorrect use could have a material adverse effect on us.

We use models for admission (scoring and rating) and behavioural credit processes, for the definition of credit limits, for the calculation of capital, provisions, market and structural risk, operational, compliance and liquidity risk. A model is a

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system, approach or quantitative method that applies statistical, economic, financial or mathematical theories, techniques or hypotheses to transform input data into quantitative estimates and forecasts. It involves simplified representations of real world relationships between characteristics, values and observed assumptions that allows us to focus on specific aspects.

Model risk is the negative consequence of decisions based on inaccurate, improper or incorrect use of models. Sources of model risk include (i) incorrect or incomplete data in the model itself or the modelling method used in systems; and (ii) incorrect use or implementation of the model.

Model risk can cause financial loss, erroneous commercial and strategic decision-making or damage to our transactions any of which could have a material adverse effect on our operating results, financial condition and prospects