Company: BCDRF
Filing Date: 2025-02-28
Form Type: 20-F
Source: 0000891478-25-000054
Chunk: 460

Company: Banco Santander, S.A.
Filing Date: 2025-02-28
Form: 20-F
Chunk 460
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     | Solvency analysis                           |     | •Availablecapital base. Profits and dividends                                          
 •Regulatory and legislative impacts                                                    
 •Capital and solvency ratios                                                           
 •Compliancewith capitalobjectives                                                      
 •Regulatory and economic view                                                          |     |                                                         |
| 5 |     | Action plan                                 |     | •In the event of failure to comply with internal objectives or regulatory requirements |     |                                                         |

Annual report 2024 431

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

This structure supports the ultimate objective of capital planning, by making it an important strategic component that:

• ensures current and future solvency, even in adverse economic scenarios;

• facilitates communication with the market and supervisors;

• ensures comprehensive capital management, analyses specific effects and integrates them into strategic planning;

• enables a more efficient use of capital; and

• helps formulate our capital management strategy.

Senior managers are fully involved in and closely oversee capital planning under a framework that ensures proper governance and is subject to the robust challenge, review and analysis.

In capital planning and stress analysis exercises, calculating the required provisions under stress scenarios is key, especially to cover losses on credit portfolios. It is particularly important for income statement forecasts under adverse scenarios.

To calculate loan-loss provisions of the credit portfolio, we use a methodology that ensures provisions cover loan losses projected by internal expected loss models, based on exposure at default (EAD), probability of default (PD) and loss given default (LGD) parameters, at all times.

In 2018, we adapted this methodology to incorporate changes brought in by the new IFRS 9 regulations, with models to calculate balances by stages (S1, S2, S3) as well as the movements between them and the loan-loss provisions in accordance with the new standards.

Our capital planning and stress analysis culminate in an analysis of solvency under various scenarios over a set period to measure capital adequacy and ensure we meet all internal capital and regulatory requirements.

Should we fail to meet our capital objectives, we would draw up an action plan with the measures needed to attain the minimum capital desired. We analyse and quantify those measures as part of internal exercises even if we don't need to use them as we exceed the minimum capital thresholds.

Santander carries out its internal stress and capital planning transversally throughout the Group, at the consolidated and local level.