Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 824

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 824
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 rating Risk approval generally depends on the applicant’s ability to repay the debt. Grupo Santander reviews their regular sources of income, including funds and net cash flows from any businesses. The risk function monitors credit rating drivers to calibrate the decisions and ratings that the Group's credit quality assessment models determine. Risk management uses these ratings for many things like underwriting process (application of limits and pre-approvals), risk monitoring and credit pricing policies. Grupo Santander then uses rating models to measure ability to pay. Depending on each segment, credit rating drivers can be: • Rating: from mathematical algorithms that have a quantitative model based on balance sheet ratios or macroeconomic variables, and a qualitative module supplemented by the credit analyst’s expert judgement. It is used for large corporates, corporates, institutional and SME segments (with individualised treatment). • Scoring: system of automatic evaluation of loan applications. It automatically assigns customers an individual score retail on which the subsequent decision is based. It is used for individual customers and SME segments without an assigned analyst. Grupo Santander's parameter estimation models, based on econometric models of past defaults and losses, calculate economic and regulatory capital as well as IFRS 9 provisions for each portfolio or customer. Grupo Santander regularly monitors and evaluates models' suitability, predictive capacity, performance, granularity, and compliance with policies, among other factors. In addition, ratings are reviewed with the latest available financial information and other relevant data. Grupo Santander has also increased reviews of customers who are subject to more in-depth monitoring or who have early warnings in risk management systems, enhancing proactive credit risk management. This allows Grupo Santander to align credit portfolios management and control with Group´s credit risk appetite and its target risk profile. Grupo Santander uses SCPs to define limits for each portfolio, counterparty and for new originations up to a level deemed acceptable. Grupo Santander´s limits, pre-classifications and pre-approvals processes, which are highly automated and digitalized, determine the risk Grupo Santander can assume with each customer. Limits are approved by the executive risk committee (or delegated committees) and should reflect a transaction’s expected risk-return. Santander also uses risk-based pricing tools to make sure portfolio growth is sustainable. Grupo Santander applies various limits models to each segment: • Large corporate groups are subject to a pre-classification model based on a system for measuring and monitoring economic capital. Pre-classification models express the level of risk Grupo Santander is willing to assume in transactions with customers/groups. • Corporates and institutions