Company: BCDRF
Filing Date: 2025-03-03
Form Type: 6-K
Source: 0000891478-25-000057
Chunk: 130

Company: Banco Santander, S.A.
Filing Date: 2025-03-03
Form: 6-K
Chunk 130
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 changes in the fair value of the portfolios due to changes in interest rates.

Cash flow hedges hedge the exposure of future flows subject to changes in interest rates. The purpose of these hedges is to actively manage the interest rate risk of variable rate balance

5 EBA/GL/ 2018/02.

198 2024 Pillar 3 Disclosures Report

| Index |     | Introduction |     | Capital |     | Risks |     | Risk taker's remunerations |     | Appendices |

sheet items by using interest rate derivatives the bank swaps variable rate flows for fixed rate flows. Both types of hedging are used in the Group. The financial management divisions of each subsidiary are responsible for designing and implementing the transactions according to their balance sheet structure, risk exposure and markets. These hedges are usually carried out through interest rate derivatives. Derivatives that do not meet the conditions for consideration as hedging instruments are treated as trading derivatives for accounting purposes. For further details, see the 'Risk, compliance & conduct' management chapter of the 2024 Annual report.

| Access 2024 Annual Report available on the Santander Group website |

Methodologies There are three elements necessary to calculate the IRRBB metrics in Santander: • Yield curves for capitalisation and discounting. • Behavioural models that enable the cash flows of certain instruments to be determined. • Assumptions about future changes in the entity's balance sheet and its various items. Of these three elements, the behavioural element is the main one subject to modelling. The Group develops methodological standards that establish best practises and criteria to be followed for the successful development and implementation of IRRBB models. Models may be based on quantitative approaches and methods using statistical or other mathematical techniques or on assumptions and hypotheses assessed by experts. All models are managed within the framework of the Model Risk framework, which defines the principles and processes (including planning, development, validation, etc.) required to ensure adequate control of the models used in the group. The main models used in the management and control of IRRBB are described below, by product type: a. Treatment of non-maturity deposits (NMD) Accounts with no contractual maturity are subject to two types of optionality. The customer's option to withdraw their money without prior notice and/or the bank's option to review the interest paid. The NMD corporate model models the product as a synthetic bond, with callable nominal and a periodic coupon. The callable nominal is determined by the stable balance and the estimated run-off