Company: BCDRF
Filing Date: 2025-03-03
Form Type: 6-K
Source: 0000891478-25-000057
Chunk: 67

Company: Banco Santander, S.A.
Filing Date: 2025-03-03
Form: 6-K
Chunk 67
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, whether or not past due, for which the circumstances for classification as write-offs have not arisen, however, there are reasonable doubts with regarding to their total repayment (principal and interest) by the obligor as set out in the contract. It also includes off-balance-sheet exposures where payment by the entity is likely, but recovery is doubtful. Transactions are classified as Phase 3/Default based on the total value of the risk.

• Write-off risk: This includes debt instruments, whether or not past due, in relation to which an individual analysis considers that recovery is unlikely, due to severe or irretrievable impairment of the solvency of the transaction or the obligor. This is an accounting classification only, hence there is no equivalent in the prudential criteria.

The accounting and prudential definitions were aligned Since 2022 by incorporating core regulation aspects that better capture the economic downturn, such as day count and materiality thresholds. Only certain criteria that capture an exclusively prudential assessment have been excluded from the definition, thus avoiding excessive conservatism in the accounting perspective.

Additionally, the Group's Customer Forborne Loans Debt Policy defines forbearance as the modification of the payment conditions of a transaction, which allows a customer experiencing financial difficulties (current or foreseeable) to fulfil his/her payment obligations, on the basis that if this modification were not made, it would be reasonably certain that the customer would not be able to meet his/her financial obligations.

The modification may be made to the original transaction or through a new transaction which replaces it and is accompanied with concessions by the bank.

The modification may be made to the original transaction or through a new transaction which replaces it and is accompanied with concessions by the bank.

Measuring the credit risk of a transaction involves calculating both the expected and the unexpected loss on the transaction. Unexpected loss is the basis for the calculation of both regulatory and economic capital. It refers to a very high, though improbable, level of loss that is not considered a recurring cost and has to be absorbed by capital. Measuring risk involves two separate steps: estimating the risk and then assigning the credit risk parameters: PD, LGD and EAD.

The

#### PD (probability of default)
estimates the likelihood of a customer or a contract to default within 12 months. The PD is used for regulatory capital in the long run, or TTC (through-the-cycle) PD, not dependent on a specific point in the cycle.

The default event being modelled is based on the definition in article 178 of the European Central Bank