Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 544

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 544
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 the credit risk we assume with each counterparty, we apply credit valuation adjustments (CVA) to over-the-counter (OTC) derivatives when calculating the results of trading portfolios.

A CVA is a change to the market value of OTC derivatives that accounts for counterparty credit risk throughout the contract life. A counterparty’s CVA adds up to the CVA on all maturity dates. It discounts the value of a derivative offered by a buyer based on the chance that the counterparty will default. We calculate it with exposure at default, probability of default, loss given default, the discount curve and other inputs.

We also apply debt valuation adjustments (DVA), which are similar to CVA but result from credit risk assumed by OTC counterparties trading with Grupo Santander. Both CVA and DVA are done within the potential period of exposure.

As of December 2024, CVA adjustments amounted to EUR 272 million (representing a 7.2% decrease compared to December 2023) and DVA adjustments were EUR 317 million (3.9% decrease vs December 2023). These decreases are mainly due to drops in interest rate markets in EUR and USD, a decrease in inflation, and movements in credit markets where spread levels have moderately decreased compared to those in December 2023.

Counterparty risk, organized markets and clearing houses

Santander’s policies promote early action according to regulation on OTC derivatives, repurchase agreements and securities lending (whether settled through clearing houses or bilaterally). In recent years, we have been standardizing OTC transactions to settle and clear new contracts through clearing houses according to current regulation, in addition to promoting internal use of electronic execution systems.

We actively manage contracts not settled by clearing houses to optimize volume, in accordance with regulation on margins and capital.

While our counterparty risk management does not contemplate credit risk in such transactions, we have been calculating regulatory credit exposure for organized market exchanges since the Basel principles on capital calculation.

The table below shows the weight of contracts settled by CCP versus total counterparty risk as of December 2024:

| Counterparty risk: Notional values by settlement channel and productA |     |           |           |     |   |      |   |     |         |           |     |   |      |   |     |                    |         |     |   |      |   |     |       |            |
| Nominal in EUR million                                                |     |           |           |     |   |      |   |