Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 790

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 790
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    212 |            |     |  40,056 |          |     |  40,268 |       |
| Hedging derivatives (liabilities)                                             |     |      |      — |            |     |   4,752 |          |     |   4,752 |       |      |      — |            |     |   7,656 |          |     |   7,656 |       |      |      — |            |     |   9,228 |          |     |   9,228 |       |
| Liabilities under insurance contracts                                         |     |      |      — |            |     |  17,829 |          |     |  17,829 |       |      |      — |            |     |  17,799 |          |     |  17,799 |       |      |      — |            |     |  16,426 |          |     |  16,426 |       |

Grupo Santander has developed a formal process for the systematic valuation and management of financial instruments, which has been implemented worldwide across all the Group’s units. The governance scheme for this process distributes responsibilities between twoindependent divisions: Treasury (development, marketing and daily management of financial products) and Risk (on a periodic basis, validation of pricing models and daily risk certification of market data, computation of risk metrics, new transaction approval policies, management control of market risk and implementation of fair value adjustment policies). The approval of new products follows a sequence of steps (request, development, validation, integration in corporate systems and quality assurance) before the product is brought into production. This process ensures that pricing systems have been properly reviewed and are stable before they are used. The following subsections set forth the most important products and families of derivatives, and the related valuation techniques and inputs, by asset class:

Annual report 2024 742

| Contents |     | Auditor's report |     | Consolidated financial statements |     | Notes to the consolidated financial statements |     | Appendix |

Interest rate and inflation

The fixed income asset class includes basic instruments such as interest rate forwards, interest rate swaps and cross currency swaps, which are valued using the net present value of the estimated future cash flows discounted taking into account basis (swap and cross currency spreads) determined on the basis of the payment frequency and currency of each leg of the derivative. Vanilla options, including caps, floors and swaptions, are priced using the Black-S