Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 586

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 586
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 a founding member of the Wolfsberg Group (association of 12 global banks that aims to develop financial services industry standards for financial crime) and is actively involved in its activities and initiatives. |

| For more details on FCC, see section4.2.3 'Financial Crime Compliance (FCC)'in 'Sustainability statement'. |

Annual report 2024 548

| Contents |     | Business model and strategy |     | Sustainability statement |     | Corporate governance |     | Economic and financial review |     | Riskmanagementandcompliance |

#### 7. MODEL RISK
7.1 Introduction

A model is a system, approach or a quantitative method that applies statistical, economic, financial or mathematical theories, techniques and assumptions to transform data into quantitative estimates.

We use models mainly for credit scoring/rating, performance, capital and provisioning, market and structural risk, operational, compliance and liquidity risk, and financial accounting and control, among others.

The use of models entails model risk, which is defined as the potential negative consequences of decisions based on poorly developed, poorly implemented or incorrectly used models. Model risk can lead to financial losses, inappropriate business or strategic decisions or damage to the Group's operations.

7.2 Model risk management

At Grupo Santander we have been measuring, managing and controlling model risk for years. The Model Risk area, which extends to both the corporation and the main subsidiaries, seeks to manage and supervise this risk.

For the proper management of model risk, we have clear internal regulations that establish the principles, responsibilities and processes to organise, approve, manage and govern models through their entire life cycle.

The intensity of model risk management and monitoring is relative to the importance of each model for Santander Group. Through the tiering process, we summarize and classify the level of importance of non-regulatory models. The regulatory models, given their particular relevance for the Group, follow the most intense control and management standards.

At Grupo Santander we define the following phases of the model's life cycle:

1. Identification

The identified models must be included in the scope of model risk control and, consequently, in the Group centralised inventory, a single platform based on an uniform taxonomy for all models used in the business units. This inventory is key for sound management, as it contains all relevant information of each model, enabling to closely monitor them according to their relevance and the tiering criteria.

2. Planning

An internal annual exercise approved by our subsidiaries’ governance bodies 15 and reviewed in an aggregated form, which formulates strategic