Company: BCDRF
Filing Date: 2025-03-03
Form Type: 6-K
Source: 0000891478-25-000057
Chunk: 68

Company: Banco Santander, S.A.
Filing Date: 2025-03-03
Form: 6-K
Chunk 68
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 Solvency Regulation 3 , which considers defaults to be defined for a customer/contract when at least one of the following circumstances arises:

• The entity considers reasonable doubts regarding the obligors ability to fulfil their credit obligations in full.

• The customer/contract is past due by more than 90 days on any material credit obligation.

The definition of default has been adopted recently in accordance with the “Guidelines on the application of the definition of default” and the materiality thresholds set by the competent authorities.

For either portfolios managed at the customer level or portfolios managed on the contract level, in both cases the probability of the customer defaults has to be modelled.

The calculation of the PD is based on the institution's internal experience, i.e. historical observations of defaults by rating or scoring level. The level at which it is estimated (contract or customer) is agreed with the management.

The

#### LGD (loss given default)
is the mathematical expectation of the percentage loss in the event of a default event. The LGD is calculated using internal data on the income and expenses incurred by the institution during the recovery process once the default event has arisen, discounted to the start date of the default.

The LGD is calculated to determine the regulatory capital for the case of a “downturn”, i.e. considered for a worst-case scenario in the economic cycle.

In addition to the estimation of the downturn LGD that will be used for normal operations, a specific loss estimate is made for operations in default. This is determined using LGD and ELBE (expected loss best estimate) parameters. The ELBE attempts to provide the best estimate of economic loss at a particular time based mainly on the time during which the operation has been at default, with due regard to the prevailing economic situation, while the LGD for transactions in default is increased by any further unexpected losses that may be reported during the recovery period.

Finally, the

#### EAD (exposure at default)
is calculated. It is defined as the value of the debt at the time of default. For lending products or any product with no off-balance-sheet amount, the EAD equals the balance of the transaction plus any interest accrued but not yet paid. For products providing facilities it is necessary to estimate any future drawings that will be made between the present time and any possible future default event. The

#### CCF (credit conversion factor)
is calculated, in order to show the percentage of the balance not currently utilised (off-balance-sheet amount) which would be utilised