Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 830

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 830
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 includes forward-looking information, point-in-time (PiT) vision, multiple scenarios, calculation of losses for the entire life of the transaction through lifetime PD, among others. Determination of significant increase in credit risk In order to determine the classification in stage 2, the Group assesses whether there has been a significant increase in credit risk (SICR) since the initial recognition of the transactions, considering a series of common principles throughout the Group to assess all financial instruments are subject to it, which considers the particularities of each portfolio and type of product on the basis of various quantitative and qualitative indicators. Furthermore, transactions are subject to the expert judgement of the analysts, who set the thresholds under an effective integration in management and implemented according to the approved governance. The criteria thresholds used by the Group are based on a series of principles, and develop a set of techniques. The principles are as follows: • Universality: all financial instruments subject to a credit rating must be assessed for their possible SICR. • Proportionality: the definition of the SICR must take into account the particularities of each portfolio. • Materiality: its implementation must be also consistent with the relevance of each portfolio so as not to incur in unnecessary costs or efforts. • Holistic vision: the approach selected must be a combination of the most relevant credit risk aspects (e.g. quantitative and qualitative). • Application of IFRS 9: the approach must take into consideration IFRS 9 characteristics, focusing on a comparison with credit risk at initial recognition, as well as considering forward-looking information. • Risk management integration: the criteria must be consistent with those metrics considered in the day-to-day risk management. • Documentation: appropriate documentation must be prepared.

Annual report 2024 794

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

The techniques are summarised below: • Stability of stage 2: in the absence of significant changes in the portfolios credit quality, the volume of assets in stage 2 should maintain a certain stability as a whole. • Economic reasonableness: at transaction level, stage 2 is expected to be a transitional rating for exposures that could eventually move to a deteriorating credit status at some point or stage 3, as well as for exposures that have suffered credit deterioration and whose credit quality is improving and returns to stage 1. • Predictive power: it is expected that the SICR definition avoids, as far